County remains cautious in FY17 despite flurry of income taxes
Projects $12 million surplus
The Charles County Board of Commissioners passed a $374 million budget, and some would argue that figure is a conservative one.
But with the county’s March 31 budget statement painting a positive picture with a surplus, the county may have wiggle room for the future.
As of March 31, the county has gathered in 86 percent of its projected revenues for the fiscal year and have spent just 73 percent of its projected expenditures. The county has a current net operating gain of $48.1 million and a projected surplus by the end of the fiscal year of just over $12 million after $2 million is paid out in bond premium reserves.
The county’s projected surplus comes from income taxes revenues flowing in higher than projected as well as property taxes, recordation taxes and transfer taxes.
Jenifer Ellin, Charles County’s chief of budget, said property taxes are the county’s largest source of revenue this year with a year-end projection of $207 million — $1.8 million more than budgeted for.
But income taxes, Ellin said, are projected to finish with a $10 million surplus over what the county budgeted for at $122 million.
“We’re showing a year end estimate of $122.5 million which is actually $10 million greater than the adjusted budget,” Ellin said.
But Ellin did caution the board of commissioners that just $71.7 million of that $122.5 million projection has been collected at this point. The county needs $50.8 million more to meet its mark.
“The income tax is always a wild card,” Ellin said. “It is performing better, so we’re hoping that we reach that $122.5 million this year.”
David Eicholtz, the county’s director of fiscal and administrative services, consistently said during the budget process that while the county does have a surplus and has a better outlook than it has in years, there is still a possibility that this year’s fiscal fortune is simply a bubble received from state income tax allocations.
It remains to be seen whether that is the case and an answer likely will not come until the next fiscal year, but the county’s March budget statements indicate that things are still continuing to trend upward.
County Commissioners’ Vice President Debra Davis (D) said the county is three quarters of the way through the fiscal year and was concerned that there were revenue sources that were not close to completion in collection.
Eicholtz said the county still has a ways to go on collection with some revenue sources, but everything will eventually roll in.
“That’s not how we get our revenues. For instance, property taxes come in by the end of September. The state distributes the income tax revenues based on quarterly distributions and withholdings,” Eicholtz said. “It doesn’t always time up exactly to the days of the fiscal year. As you can see, we’re at 100 percent on property taxes but a quarter of the way through on income taxes.”
Income taxes will still continue to grow, Eicholtz said. There are four income tax distributions left for the county to finish collecting in. But the county has to keep in mind that the $122 million is “an estimate.”
“We only have 64 percent in at this point in time so we do need to get another $50 million,” Eicholtz said. But based on historical trends, he said, the county does believe they will be able to get to that point.
County Commissioner Ken Robinson (D) said the county is more well off this fiscal year than originally anticipated.
“Every single one of the economic indicators that you present are projecting a lot higher than you anticipated,” Robinson said. “Charles County always shows up as one of the most affluent counties in the country and I was wondering why we weren’t seeing that but now it appears we are seeing that.”
Eicholtz said the reasons why are “interesting.” After reading an economic perspective article from Prudential, he said, conditions have improved as far as demand for labor, output for spending and household revenues.
But at the same time, Eicholtz said, investors have fears of recession despite recessive preconditions do not apply to the current fiscal state of the country.
“That’s bad,” Eicholtz said. “It’s the impression that investors would have on the stock market. They would sometimes pull back. That would depress your capital gains.”
But inflation continues to rise around the country, Eicholtz said, and wages are increasing at a 2.5 percent annual rate nationally. But at the same time, he said, that does “not reinforce” the $10 million surplus the county has.
Consumer spending also expanded early on in this fiscal year, Eicholtz said. Real disposable income is expanding and personal savings are at the highest levels in nearly three years.
“All of those things affect our income tax. Economists don’t know what exactly is going on and the state is the same way,” Eicholtz said. “There’s plenty of good news to go along with bad news. We remain cautious about FY 17.”