MacRo LTD Blog

The Camel’s Back: Taxes and Leadership

This is an edited version of a post in the dated July 26, 2010 by Rocky Mackintosh

How Many Straws can a Camel Take

One of the below the fold front page headlines in the Frederick News-Post last week was an article that caught my eye:  “.”  Seems that a couple of the Frederick City Aldermen threw out some “preliminary ideas, including a hotel/motel tax, a property recordation tax and an excise tax on construction … to raise tax revenue for the City”according to Patti Borda’s article of July 20th.

Of late I have been a big fan new Mayor and Board of Aldermen and the general direction that they have been going in the area of fiscal responsibility.  I am also very impressed with the fact that they continue to support the efforts of Gabrielle Dunn’s Land Management Code (LMC) Workgroup Committee to unravel some of the inconsistencies and unrealistic expectations found in that 700 plus page manual.  Many of the suggestions, if addressed properly, will aid in spurring on economic development, which is the true catalyst to increase tax revenue.

These movements to revise portions of the LMC are more than commendable.  But these initiatives by the City stand in stark contrast to the efforts that our current Board of Frederick County Commissioners has taken in continuing to tighten the screws on all aspects of stimulating economic development through real estate.

While I know that county and municipal operational budgets are very tight right now, and significant cuts have been made in staffing and elsewhere, elected officials always seem to gravitate to the idea of imposing more taxes and fees on the use of, transfer of, or construction upon real estate.

The MacRo Report Blog posted on July 1, 2010, an article entitled “Seeking a ‘Normal’ Real Estate Market: Using Housing as the Barometer”.  It offers a graph displaying the boom and bust cycles of the housing industry since 1890.  The startling part is to look at the size of the latest spike and its subsequent fall compared to all previous cycles.  The point that’s clear is that while there has been much talk about the recession being over and certain elements of the residential market “finding its bottom,” most segments still have a long way to go to a true recovery… especially with commercial, retail and industrial real estate.

With all that said, when I see that elected officials talk about imposing more taxes on a beaten industry like real estate, I have to ask … “What ARE they thinking?”

The News-Post referenced three “new tax options”:  First, a hotel/motel tax on a local industry is not doing well.  Secondly, an increase in the real estate property transfer tax which in Frederick County is already has one of the highest rates in the state.  And the final one is to place an excise tax on new construction.  Each new tax is like laying more straws on the proverbial camel”s back of a beleaguered industry.

So, what is our City government (and County government for that matter) to do about finding revenue?  While I truly applaud our Aldermen for the very thorough approach they took in dissecting and slicing the City budget this past year, but trying to help the revenue side of the equation with just another tax on real estate is no longer the answer.

In recent blog posts I have suggested the out of the box approach of combing inter-government related services as a means to resolving budgetary woes, and even go as far as suggesting merging the City and County Government — published in the News-Post on May 16th entitled “Time to Lower Real Estate Taxes and Consolidate City, County Governments?”.

Now some have said the ideas go too far.  But why not look at the idea of these two huge tax eating machines coming together to combine certain overlapping services? There are so many!  This is not about cutting government services.  That is for another discussion.

So why hasn’t at least one of the elected officials from the City or the County even thrown the idea out to start a conversation?  Could it be the fact that there is animosity between the two jurisdictions?  Or are our respective fathers and mothers concerned about holding on the sacred turf over which they rule?  Or is rocking the boat just not their thing?

Whatever the answer, these are truly unconventional times in all sectors of government and the economy.  And it’s time for our leaders to find real courage to break the mold of tradition and think out of the box … even if it means taking a risk that could challenge their incumbency.  While I am optimistic about the future, I am also realistic that our current economic situation is not going to change overnight.

So I challenge just one of our elected officials from either camp to step up and push the envelop!  You might be surprised where it goes … and you may be startled find out what true leadership is all about!

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The author: Rocky Mackintosh, President, MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland.

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