Recommendation
Staff recommends that the Mayor and Council adopt the attached ordinance. If the Mayor and Council find the changes to the ordinance acceptable a motion to amend the ordinance as modified should be made, seconded and passed and then the ordinance as so amended may proceed to adoption.

Discussion
Under Maryland law, the City of Rockville may grant a real property tax credit that offsets increased income tax revenue. Increased income tax revenue is defined as revenue above what would be collected if the income tax rate were 2.6 percent. The income tax rate for Montgomery County is 3.2 percent allowing for a maximum credit of approximately $113 per owner-occupied residential property in the City of Rockville (assuming total revenue of $9.3 million).

The FY 2010 General Fund Budget was proposed with a credit of $42.00 per owner-occupied property. During the FY 2010 budget process, staff was directed to analyze the General Fund in order to provide a higher credit of $100.00 per owner-occupied property in FY 2010. At the second Mayor and Council worksession on April 27, 2009, the Mayor and Council unanimously agreed to provide a $100.00 credit for FY 2010. With the recommended $100.00 credit per owner-occupied residential property, the City will be providing approximately $1.54 million in this type of tax relief for FY 2010.

There are several advantages to the City providing tax relief through the income tax offset program. First, this method is progressive, proportionally worth more to lower income residents than to those with higher incomes, as it is the same flat amount for all residential units. Second, it provides more flexibility to the Mayor and Council to target residential rather than commercial property owners. Third, it allows the Mayor and Council to review the program annually and make decisions based on current City finances and priorities for resource allocation. Finally, it does not impact future revenue growth and the provision of future services.

Mayor and Council History
October 27, 2008: FY 2010 Budget Preview / Worksession - Part I
November 3, 2008: FY 2010 Budget Preview / Worksession - Part II
February 23, 2009: Final FY 2010 Budget Preview
March 23, 2009: Fiscal Year 2010 Proposed Operating Budget and Capital Improvements Program
Introduction of Ordinance to Appropriate Funds and Levy Taxes for Fiscal Year 2010
Introduction of a Resolution to Establish the Service Charge Rate for Municipal Refuse Collection
Introduction of Ordinance to establish a $42 Tax Credit through the Income Tax Offset Program
Introduction of Resolution to establish the Equivalent Residential Unit Rate for the Stormwater Utility Fee
March 30, 2009: Public Hearing on the Fiscal Year 2010 Constant Yield Tax Rate
First General Budget Public Hearing on the Fiscal Year 2010 Proposed Operating Budget and Capital Improvements Program
April 13, 2009: Second General Public Hearing on the Fiscal Year 2010 Proposed Operating Budget and Capital Improvements Program
April 20, 2009: First Mayor and Council Budget Worksession - Operating Budget
April 27, 2009: Second Mayor and Council Budget Worksession - CIP Budget, Other
May 4, 2009: Final FY 2010 General Budget Public Hearing on the Fiscal Year 2010 Proposed Operating Budget and Capital Improvements Program

Public Notification and Engagement
The FY 2010 Proposed Operating and Capital Improvements Program budgets are available on the City's Web site, and hard copies are available at City Hall and the Twinbrook and Rockville libraries. Public hearings were held on March 30, April 13, and May 4, 2009. FY 2010 Adopted Operating and Capital Improvements budgets will be available to the public in July 2009.

Fiscal Impact
With a $100.00 credit per owner-occupied residential property, the City will receive approximately $1.54 million less in real property tax revenue for FY 2010.

Next Steps
Budget staff will submit the income tax offset credit information to Montgomery County for inclusion on the July 1, 2009 tax bills.

Attachments
Attachment A - Ordinance

Department Head:



Gavin Cohen, Director of Finance
Approved on: 05/05/2009

City Manager:

Scott Ullery, City Manager
Approved on: 05/06/2009