It’s Free Real Estate! Local State Legislators Make Run at Repealing Country Club Tax Cuts

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Thousands of acres of private land in Montgomery County goes undervalued each year, while the public reads about budget cuts in the Washington Post. Delegate David Moon (D20, above) is looking to change that.

Montgomery County’s most elite private country clubs hold a privileged status in the eyes of the law. Over the years, dozens of private clubs received sweetheart tax cut deals from the state that allow them greater profits.

A statewide tax exemption passed in 2002 expanded the right of private country clubs to have their land assessed at $1,000 per acre. These private clubs must only agree to conditions which include not discriminating in their membership and not developing the property to receive the privileged land assessment rates. This is a gift by corrupt politicians of tailor-made deals that cut property assessment rates for the club owners.

In 2010, local blogger Adam Pagnucco reported that there are agreements stretching back to the 80s. In at least one case, it doesn’t appear that the club entering into such privileged negotiations even met the legal requirements to qualify for the tax cuts. This raises serious questions about not only the equity of the tax cuts, but their transparency and legality.

According to Andrew Metcalf (formerly of Bethesda Beat), fifteen private golf courses in Montgomery County have entered into tax exemption agreements with the State of Maryland. Metcalf reports that these deals “significantly cut [country club] property tax payments to Montgomery County—sometimes more than $100,000 per year when compared to neighboring properties’ assessment rates.” Adam Pagnucco’s 2010 article on the tax breaks provides a view of the benefits country clubs receive:

How much money can a country club save? Let’s look at one example: the Columbia Country Club in Chevy Chase. Its 44.01-acre property has a land assessment of $44,000. Curiously, this club’s property falls below the 50-acre threshold in state law. Legally, it may not even be eligible for an agreement with SDAT. Due to the undervaluation of its land, the club’s total property assessment is now $7,147,266. It owes $73,574.06 in county and state property taxes this year.

The National 4-H Council is right down Connecticut Avenue from the Columbia Country Club. Its 12.28-acre commercial property has a land assessment of $9,628,500 – or $784,079.80 per acre. [ie: no preferential tax agreements — EOW]

If we applied the same per-acre assessment value to the Columbia Country Club, its 44.01-acre land parcel would be assessed at $34,507,352. Its total property value including its $7,129,800 in improvements would be $41,593,152. At its current state property tax rate of 0.112 and its current county property tax rate of 0.916, the club would be paying $427,577.60 in property taxes – about six times its current amount. So the Columbia Country Club’s agreement with SDAT (which may not even be allowed by state law) is cutting 83% off its property tax bill. And the club’s agreement enables it to realize those savings as long as it does not sell its land for subdivision.

Tl;dr: a private club owning 44.0 acres of property is paying less than 25% of the tax they should be paying.

During a period of time when local governments are doing everything possible to curtail spending and dredge up revenue from any source, there are at least a dozen prime targets for tax revenue that are left untouched. Are the luxuries of the rich to be left whole while the rest of us are fleeced?

It’s worth noting that Columbia Country Club still, almost ten years after Pagnucco’s post, does not meet the standard set in Maryland law to enter into these tax cut deals with the state. Below is the standard set in Maryland Code §8-212 and a copy of Columbia Country Club’s SDAT property assessment data as evidence:

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This January, a team of legislators is taking aim at these Montgomery County mini-Mar-a-lagos and will attempt to claw back desperately needed tax revenue for Montgomery County.

Del. David Moon (D20), Senator Will Smith (D20) & Delegates-Elect Julie Palakovich Carr (D17)*, Lorig Charkoudian(D20), and Vaughn Stewart (D19) have a strategy.

There is Bill 27-19, a straightforward proposal to carve out an exception for a separate, simple, tax procedure for Montgomery County Country Clubs:

Then Bill 11-19, requiring Montgomery County Country Clubs to comply with costly pesticide use regulations before being allowed to enter into tax exemption agreements with the State.

Don’t blame me for the relevant text falling right on a page break. Read both Bill 27-19 and Bill 11-19 yourself

Both bills, in some way, close off the avenue of future tax exemptions while allowing existing agreements to last until their agreed-upon expiration. This is a respectful compromise that results in a more equitable tax system.

But what’s good for the public is often antithetical to the interests of money and capital.

David Moon submitted one similar bill last legislation and it was mercilessly killed by the Montgomery County Delegation. However, political newcomers and the general populace widely embraced the proposal.

Country clubs were vehement in their criticism of Moon’s bill in 2017 and are likely mobilizing at this very moment to re-launch their criticisms of Moon’s bill. The Maryland Coalition of Concerned Clubs, a gang of country club owners and landowners, hired former state senator-turned lobbyist P.J. Hogan to represent their odious opinions.

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Tale as old as time: PJ Hogan turned from state senator to big money lobbyist

Hogan was the sponsor of the previously mentioned 2002 bill that widened the exemption for country clubs; he is their puppet through and through. Hogan rationalized that private clubs owning thousands of acres of under-taxed land ”…really was about open space… In Montgomery County alone, we’re talking about 3,300 acres of land—that is a lot of land—that is being kept open, that is not being developed. This is not land that’s out in underdeveloped areas. This is some prime land, in densely populated, very congested areas.”

In Montgomery County, the words “development” and “sprawl” are oft-cited critical buzzwords. The phrases typically upper-middle class NIMBYs and other misguided politically active residents.

To further gain sympathy among left-leaning — yet gullible — legislators, country clubs encouraged their workers to lobby against the initiative. The premise concocted was that closing the tax cuts would result in firing staff.

But both of these claims were entirely based on fear and “slippery slope” arguments.

Sure, when capital faces a reduction in profits, they move first to cut their labor expenses, and this danger should not be overlooked. But in the end there is no definite proof that country clubs, if they were required to pay a slightly higher land tax, would be forced out of business or be forced to lay of staff. It’s also unfounded that their going out of business would necessarily lead to development sprawl.

Del. Moon pointed out in 2017 that he doubted wealthy clubs like Columbia Country Club in Chevy Chase, which reported more than $15 million in annual revenue on federal tax forms as a nonprofit 501(c)7, would close if faced with higher tax bills.

Nevertheless, Delegates like Eric Luedtke repeated Hogan’s viewpoint that country club taxes leads to suburban sprawl nearly verbatim when confronted with his vote.

He further insinuated that closing the tax exemptions would have negative effects on the Montgomery County Agricultural Reserve — despite a clear majority of the club property to be taxed residing *inside* the Beltway.

Del. Kiril Reznick followed suit by raising the false dilemma that organizing a coalition to pass Moon’s bill would deplete “political capital” necessary to get state funds for schools. Nevermind that the County’s recent budget slashes school funding already.

The obvious reaction is that Montgomery County sends the largest delegation to Annapolis and the Democrats hold a super-majority in both houses. If Del. Reznick can’t organize a coalition under such conditions, his utility as a delegate is called into serious question. Resnick dismissed the benefits of taxing country clubs saying, “the juice was not worth the squeeze.”

These delegates, along with the other 15 who voted against the 2017 bill to tax country club land,need to be reminded now that the County is facing a $120,000,000.00 budget shortfall.

Facing the shortfall, the County Council implemented an austerity budget, cutting nearly $35,000,000.00 from Education, Health and Human Services, and Fire and Rescue services.

Any “juice,” such as the $10,000,000.00/year taxing country clubs is expected to bring in, should be measured carefully against the “squeeze” of representing your constituents and not wealthy club owners. How many flu shot clinics could that money fund? How many school supplies for students? It’s the public that pays for these tax agreements.

There will be a public hearing before the County’s state delegation to Annapolis on December 17th 2018. This will be an opportunity to voice the need for a more equitable Montgomery County. Don’t let lobbyists, or the delegates who listen to them, ruin our chances.

by Erik O. Write 

*Delegate-Elect Palakovich Carr is currently only cosponsoring MC 27-19.

 

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