Frederick City Budget Committee Meeting – March 2, 2026
Frederick City Budget Committee Meeting – March 2, 2026
The Budget and Finance Committee met to review the city's taxing authority, discuss a proposed budget monitoring work plan, and receive an update on the implementation of OpenGov budget software. The committee heard a detailed presentation from Chief Financial Officer Katie Barkdow on the city's property tax, tax setoff, income tax, admission and amusement tax, and tax credits. Members then discussed a framework for ongoing budget oversight, including performance metrics and priority tracking, and agreed to forward the work plan to the full council. No formal votes were taken.
Discussion Items
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Taxing Authority Overview: CFO Katie Barkdow explained that the city's power to levy taxes and grant tax credits must be authorized by state law. She outlined the property tax rate-setting process, noting that while state law requires a rate set by June 20 and city code says July 1, in practice the rate must be set by the end of May to coordinate with Frederick County's billing cycle. The city uses a single tax rate for all property except habitually vacant properties.
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Tax Setoff (Tax Differential): Barkdow described the tax setoff agreement between the city and county, which reduces the county tax rate for city residents in exchange for duplicate services (police, planning, parks, roads). Prior to 2013, the city received a direct rebate of $5-6 million annually. In 2013, the city switched to a tax differential, lowering the county rate by 12 cents and raising the city rate by 8 cents, leaving 4 cents with taxpayers. The current county tax rate is just over $1.00 for city residents and $1.11 for residents outside the city. The county has sole authority to change the calculation. Councilmember Atkins noted a desire to reevaluate the formula and approach the county. Committee members expressed frustration that the city is compared to smaller municipalities and asked Barkdow to provide historical records from 1981.
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Business Personal Property Tax: Barkdow noted that the city has phased out assessments for business personal property except for utilities and railroads, effectively taxing those at zero. She stated that reinstating a broader tax would require state law changes or a full reinstitution. The county is pursuing a legislative change this year.
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Income Tax: The city receives a passive share of resident income tax – the greater of 17% of the county income tax liability or 0.37% of Maryland taxable income. Corporate income tax is not shared with local governments.
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Admission and Amusement Tax: The city levies a 10% tax on gross receipts from admissions and amusements, 5% from horse-drawn carriage operations and concerts, and 0.5% on merchandise sold with entertainment. Annual revenue is between $600,000 and $700,000. Exemptions include recreational sports, health classes, and arts/entertainment district activities. Committee members questioned whether the tax should be streamlined, but Barkdow noted it is state-administered.
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Hotel Tax and Short-Term Rentals: Barkdow explained that the city cannot levy a hotel tax because the county already does so for tourism funding. Committee members expressed interest in exploring a tax on short-term rentals (Airbnb-type properties) due to housing impacts, though the legality is uncertain.
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Tax Credits: Barkdow presented a chart of available tax credits under state law. The city currently offers credits that mirror the county's. Two new credits were introduced in October and will be voted on Thursday (March 5):
- Child care center improvement credit (max $10,000 per state law).
- Surviving spouse of fallen law enforcement/fire/EMS workers credit (100% of city tax for five years). The county administers these credits for the city. Barkdow also discussed the city's use of Payment in Lieu of Taxes (PILOT) agreements for affordable housing. Councilmember Kelly asked about the process for adding new credits; Barkdow said it depends on the credit's state authorization and revenue impact.
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Budget Monitoring Work Plan: Council Vice President Nash presented a draft schedule for ongoing budget oversight beyond the March-April budget review. The plan includes tracking council priorities, measuring program outputs using performance metrics, and creating a reporting cadence. Members suggested adding sections on budget transfers (within and between departments) and year-over-year comparisons by line item. They also requested including bond capacity analysis and studies like the parks master plan and sidewalk study. The committee agreed to have Nash send a letter to the mayor and CFO to alert departments of the discussion, then bring the refined work plan to the full council.
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OpenGov Implementation: CFO Barkdow announced that the city is implementing OpenGov budget software, which will automate CIP project spending reports and other templates. The software is about 50% ready for the upcoming budget presentation and will be fully launched by July 1. She invited council members to participate in building the reporting templates. The committee expressed support and agreed to coordinate meetings starting in April.
Key Outcomes
- The committee requested CFO Barkdow to provide the 1981 tax setoff agreement and historical tax equity files.
- The committee intends to schedule a conversation with the county to discuss potential changes to the tax setoff formula.
- The committee expressed interest in exploring a short-term rental tax, pending further legal research.
- The budget monitoring work plan will be revised to include line-item transfers, year-over-year comparisons, bond capacity, and department input, then presented to the full council.
- Councilmembers will work with CFO Barkdow and her team on OpenGov template design beginning in April.
- Two tax credit ordinances (child care and surviving spouse) will go to a formal vote on March 5, 2026.
Meeting Transcript
Well, I'm not going to be able to We have among us greatness, but not just any greatness, female greatness. Happy beginning of what I guess is women's history. Are we just celebrating women all together this whole month and every month? I think we're just always celebrating women. But um Katie Barkdow, thank you for joining us. Um Director Barkdale had previously given this presentation or something, I didn't I didn't do it side by side, but a general sort of presentation to the last council. We had begun to have somewhat broad conversation about our taxing authority. Uh and yay. And um we just asked to, as we were beginning to consider the work of this committee and really how we wanted to move forward with discussing taxes, it made sense to kind of start from the base, the beginning. So I appreciate you doing this. I know it was kind of a repeat, but um, it was very good information last time. So take it away. Sure, thank you. I'm happy to be here. Good afternoon. Um, as uh Council Vice President Nash said, I'm Katie Bark, I'm the chief financial officer for the City of Frederick. And I was invited by council leadership to come and um talk to you a little bit about our taxing authority. Um this is a very broad topic, as um, Council Vice President Nash said. We're gonna go kind of an inch deep and a mile wide today. Uming that each one of these areas we could probably do an entire conversation around. So, you know, we're willing to come back and do that um based on you know your feedback and and requests. Um here we go. So our taxing authority. So the first thing about that is that's important to know is that our authority to levy taxes and provide tax credits must be authorized under state law. If it doesn't exist in state law somewhere, then we can't do it. Um we do pass local ordinances that provide the structure around implementation of any tax that we would levy and um any tax credits that we would provide. And that authority comes from the tax property article um six-three oh three. Um, and City Code Article Um five, section eight-13. Um as you are familiar, or you will be very familiar soon. Um we set this tax um we set a tax rate annually via ordinance as part of the budget process. Setting this rate is required under state law, but the deadlines are really strange. State law requires that we set our tax rate by June 20th. Our code says July 1st which needs to be updated and then for all intents and purposes we actually need to pass our tax rate by the end of May. Because what happens is the um the county who is an excellent partner with us as far as our Treasury services regarding um property tax they have to send they collect all the property tax rates from every municipality in Frederick County and they send it off to STAT by their deadline and and STET for people watching that don't know is the State Department of Assessment and Taxation. They require that that information to be sent to them usually by June 1st um depending on how the calendar falls so take that information they will calculate everybody's homestead tax credit send the file back to the county in the middle of June and then the county can print and mail everybody's tax bills so they're in their mailbox by July 1st so hitting that date is really important. If we were to miss that then the county would have to mail our a separate billing on our behalf our taxes bills would be late and we would likely have to reimburse the county for that. So not impossible but with a situation we'd like to avoid. Could I just jump in really quick because I think that's come up before in the context of the budget conversation and it's a really important sort of the way it's always been maybe even though in city code because I find myself even getting oh we have we have more time than we actually do but it's more of a we want to set it we want to go ahead and set it earlier because it just doesn't really make sense from a good government's perspective to make life harder for our partners is that a nice is that a nice way to say that sure absolutely even though the date is the date it actually is much sooner. Yeah and it makes it somewhat more complicated because we give a discount on our on your taxes if you pay within 30 days so our clock would start ticking at a different time period than the counties would but yeah to to council vice president Nash's point it does make us a better partner with the county who does actually provide that service to us in every municipality in the county um for free they don't charge us for these services the last thing on this is the state does allow we we could ask we get asked this often if we could set different rates based on classes of property that is allowable under state law we have to define what a class is our code says that a single tax rate will be will apply to all property except for habitually vacant properties and when you get the um ordinance to look at for to set the tax rate there'll be a chart in that ordinance that lays out what that tax rate is for habitually vacant properties. Any questions about that before I move on so the concept for tax setoff is provided in the tax property article of the state code 6-305.1 this provision is specific to Frederick County and tax set off you'll hear it called a couple names you'll hear it called tax set off tax differential tax equity we use all these terms kind of talking about the same thing and basically it requires the county to reduce the tax rate or provide a direct rebate to a municipality for duplicate services. So a duplicate service is a service that is provided by both the city and the county and I'm just I'm bringing that up because oftentimes we talk about this and this is a very hot button topic when we talk about this the the concept of our department of housing and human services will come up and on the county side they'll bring up transit right we we our HHS provides services countywide and transit provided by the county is not only in the city but it's predominantly in the city neither one of these things are a tax setoff issue. They're very important issues without a doubt but a tax setoff is solely services that are provided by both the municipality and the county so what is included in the calculation that we use was agreed upon in 1981 and it includes planning police parks and roads prior to 2013 the city received a rebate from the county it was around five to six million dollars a year is what we received from the county in a direct rebate for tax set off. It was around five to six million dollars a year is what we received from the county in a direct rebate for tax set off. Um starting in 2013, the city elected to go to a tax differential, which means essentially for city residents, the county lowers their tax rate. Um and effectively that first year we raised our tax rate. The county lowered their tax rate 12 cents, we raised ours eight cents, leaving four cents with the taxpayer. Um right now, the county tax rate for city residents is just over a dollar. Um it's a dollar eleven for residents that live outside of the city. The ordinance or the um statute in State Code does require the county to discuss the formula with municipalities annually, which they do usually part of an MML chapter meeting.
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