Sales slump contributes to county budget shortage

Decline in real estate transfer taxes and recordation fees adds to cuts throughout county government

Johnson doesn’t expect the impact on residents to be significant.

‘‘They are not going to see a shift in services,” Johnson said. ‘‘But we are going to slow down the rate by which we are providing those services.”

When the fiscal 2008 budget was formulated in the spring, officials banked on getting about $193 million in real estate transfer taxes and recordation fees — fees paid to the county whenever a home is sold. However, recent housing figures show that declining home sales over the last year have gotten worse since the fiscal year began July 1. In August and September, sales in Prince George’s County were only half what they were during those months in 2006.

Officials had already scaled back their expectations in home sales by about 15 percent from the previous year, but revenue from real estate taxes has actually dropped by about 25 percent, Johnson said.

‘‘It’s shifted quite a bit over the last year,” he said. ‘‘We expect a substantial decline.”

Lost real estate taxes and recordation fees have caused about $17 million less in revenue, and officials are expecting about $8 million less in county income tax revenue and about $5.5 million in other losses.

The cuts are expected to be enough to last through the fiscal year, which ends in June, and lower revenue amounts will likely have to be accounted for in next year’s budget as well.

‘‘Short-term trends turn into long-term trends,” said Jim Keary, a spokesman for the county executive’s office.

Exacerbating the problem is the loss of an additional $17 million that Johnson allocated for the county school budget, which he had expected to come from an increase in the county telecommunications tax. The tax request spurred debate earlier this year as residents argued the tax violated TRIM, a voter-imposed tax cap that requires any new taxes imposed by the county government to be voted on by residents. Johnson argued the measure did not need to go to referendum because the telecommunications tax is authorized by state regulations. The County Council decided in July to put the question in a voter referendum next November.

Johnson said he has asked the school system to absorb the lost revenue by reducing its reserve fund, which had been more than $90 million. Reducing its backup fund will allow the school not to cut any services, he said.

‘‘The schools will still have the money,” he said.

The entire shortfall amounts to nearly 2 percent of the total $2.6 billion county budget. More than 20 percent of the county’s revenue comes from property taxes on homes and businesses, while fees from home sales account for 6 percent of county revenue.

Keary said the county is making strides on expanding its commercial property tax base to help with future budgets. According to the Washington Council of Governments, Prince George’s County is leading all counties in the Washington region in commercial construction starts for the last two years, Keary said.

County schools spokesman John White said the executive’s proposal is being studied.

The county’s central services department is reducing the amount of janitorial work done at county government buildings by 14 percent, a move that will save about $814,000.

Vacant civilian positions in corrections, public works, environmental resources, homeland security and other areas will not be filled to save several million, Keary said.

In these cases, someone else in the department can do that job for a few more months, he said. Officials are also cutting several school purchases that would have come from the county’s overall budget and shifting them to the county’s school surcharge fund, an account paid for by fees charged developers for new home construction.

The county also delayed a $1.2 million payment to Prince George’s Community College for new computers, reduced its contribution to the community college by $1.5 million and shifted the funding source for $1.9 million in new bus equipment, Keary said. Instead of paying for buses with the county’s general fund, the county will use money from transit taxes.

E-mail Daniel Valentine atdvalentine@gazette.net.