In October of 1774, Annapolis shipping merchant Anthony Stewart’s brigantine Peggy Stewart arrived in the Annapolis harbor with a cargo of tea, and he paid the tax due under the Tea Act, as he planned to sell it at tidy profit. The citizens of Annapolis protested the tax policy by boycotting the importation of tea and an angry mob of colonists, enforcing the boycott, insisted Stewart burn his ship … or he’d be “tarred and feathered”! Given the alternative, Stewart set fire to the Peggy Stewart, and the incident was known thereafter as “the Burning of the Peggy Stewart.”
Today, the taxation issue in Annapolis is the unwillingness of the City Council to deal with the higher tax bills Annapolis residents must pay for municipal services. For example, if you live in an “average-priced house” ($545,500) in Annapolis and you were told you could save $2,055 annually ($171 per month) would you listen? I think you would … but you would have to convince the Mayor and Council to take action to get those savings. In the next few minutes, I will explain “how and why” significant changes are needed in the city’s fiscal policy to keep Annapolis “affordable” for those who live here and for those we hope to attract.
Annapolis and Anne Arundel County provide “overlapping services.” That is, both jurisdictions provide fire, police, public works, recreation and parks, to name just a few. These are services we want and need for everyday life and are included in the annual property taxes we pay. But you may be surprised to learn that city residents pay a whopping 104% MORE in property tax than county residents, just across the county line, for similar services. Let me explain.
To understand “how and why” the amount of taxes you pay are so much more, let’s look at the tax bill equation: Tax Bill = (Tax Rate1) X (Assessed property value). There are three parts to your property tax bill: state tax, county tax, and (for city residents only) city tax. Let’s look at the first variable: Tax Rates.
Focusing on the county and city taxes, the county has two county tax rates. A County-wide rate for the county as a whole, which pays for services delivered to everyone in the county (Board of Education, Community College, Libraries, Health Department, Detention Center, etc.). In FY2024, the “County-wide rate” was $0.586. A second separate rate applies for those county services delivered outside the City of Annapolis, the Non-City rate. In FY2024, the Non-City rate was $0.394 and does not apply to Annapolis properties. For FY2024, the combined tax rate for (non-Annapolis) county residents was $0.980.
By contrast, in FY2024, City of Annapolis residents paid $0.738 for those same overlapping services for which county residents paid $0.394! A city property owner will also pay the additional County-wide rate of $0.586, for the county services provided in all of Anne Arundel County, including the City of Annapolis. That produces a city taxpayer’s total tax rate for FY2024 of $1.324. Table 1 summarizes the tax rates applied by the city and county.
But there’s even more to the story! The Tax Bill equation also considers the Assessment to which the tax rate applies. Under Maryland law, the State of Maryland limits the annual increase in assessments to 10% for owner-occupied homes under the Homestead Property Tax Credit program. Each municipal taxing authority can set its preferred growth factor for assessment purposes. Anne Arundel County uses a 2% rate, while Annapolis uses a 10% rate, (the maximum rate allowed).
Over the past four decades, property values in Anne Arundel County have increased substantially … that’s the “good news”. But the huge difference in the taxable assessable base between what the county and city use (2% for county vs 10% for city) causes a compounding of the different assessment growth rates. In many cases, a long-time Annapolis resident may have a city assessment that is TWICE the assessment the county uses for the county portion of the tax bill due to the compounding of the higher growth factor used by the city.
In FY2024, Anne Arundel County utilized a total “assessable base” (the value of all residential and commercial property) in the City of Annapolis of $7.04 billion, compared to the assessable base utilized by the city, of $7.68 billion, which is 9.1% greater. To make a true comparison of tax bills, the city home’s assessment must be adjusted UP to reflect the +9.1% difference. Therefore, because of differing Homestead Credit percentages used by the two jurisdictions, a similarly priced home of $500,000 in the county, would have an assessment of $545,500 in the city. Table 2 shows the impact of this calculation and how it affects the HIGHER property tax bill for city residents.
The bottom line is: Annapolitans pay TWICE as much for city services compared to those same (overlapping) services provided to county residents. As a result, the same home in Annapolis pays $2,055 more in property taxes than if that same home were in the County. It’s because of the “double-whammy” of a higher tax rate applied to a larger assessment. Now that you know “why” your property taxes are so high, let Mayor Buckley and the Council know that it is time for a change! And keep this in mind, too, as you evaluate candidates for mayor and council in this Fall’s election! Ask what THEY would do, if elected. Without sensible elected officials in control of the City’s fiscal policy, nothing will change and neither will your taxes! To learn more about city governance and fiscal policy please go to ABCAnnapolis.org
John Hammond served 16 years as an alderman for Ward 1, followed by a 25-year tenure as budget director for Anne Arundel County. He has served on numerous boards and commissions, most recently as chairman of the Finance Committee for the City Dock Action Committee. He is part of Annapolitans for a Better Community, advocating for a change in city governing and fiscal structure.
