OPENPUBLICA · PUBLIC MEETING RECORD
Record of Proceedings

Montgomery County Council FY27 Budget Worksession - May 8, 2026

County Council & Committees — Friday, May 8, 2026
BodyMontgomery County, Maryland
SessionCounty Council & Committees
DateFriday, May 8, 2026
StatusFILED
Video Record
Meeting Thumbnail
⇩ GET FROM SOURCE

STREAMING COPY IN PREPARATION — RECORDING AVAILABLE FROM THE ORIGINAL SOURCE

Transcript — Verbatim
0:02

Good morning, everyone.

0:03

Today's Friday, May 8th, the council is meeting today to continue the work sessions on the work on the FY27 operating budget and FY27-32 Capital Improvements Program.

0:17

Councilmember Sales is attending a conference during the week and she is joining us virtually.

0:34

Chair Stewart.

0:36

Thank you, Madam President.

0:37

The government operations and fiscal policy committee met on April 29th.

0:42

We were joined by the council president and the vice president.

0:45

Thank you for joining us.

0:47

We looked at a number of items on the 29th.

0:51

And this morning, Mr.

0:52

Smith will go over the income tax rate recommendation and the ITOC, the income tax offset credit, and then we'll look at the working families income supplement later this morning.

1:05

The other thing that we did discuss at committee was the property tax rate, which the council already took up on Monday.

1:12

And as a reminder, the committee's recommendation, which the full council supported with Councilmember Mink abstaining, was to reject the executive's recommended property tax increase of 6.3% for uh si 6.3 cents for FY27.

1:27

Our goal on the April 29th committee was to make sure everyone was fully informed of the impacts that uh and to whom uh they would uh occur on changing anything with our income tax um or our ITOC.

1:43

And I want to say our staff did an incredible job of walking us through all that.

1:47

We will have a shortened presentation of that discussion.

1:52

Um, but I wanted to make sure, regardless of where we end up as a body next week that everyone understood all the polls and takes and how changing our income tax is also related to other pieces of uh our budget.

2:07

So what we recommended um during that uh discussion to the full council on the income tax rate was we rejected the executives recommended income tax rate of 3.3 percent on all taxable income starting on January 1st, 2027.

2:24

Uh what we did recommend was the creation of a progressive income tax structure starting on January 1st, 2027.

2:32

The new brackets uh recommended by the committee are in your packet.

2:37

Um the first 50,000 of taxable income, the new income tax rate would be 2.5%.

2:43

On the next uh fifth over 50,000 to 150,000 taxable income, the rate would be 2.8%, and anything greater than 150,000 taxable income, the rate would be a 3.3 uh percent.

2:59

We also recommended setting the income tax offset credit, the ITOC to zero to offset the loss of revenue from the recommended progressive income tax structure.

3:09

I just want to underscore that moving to a progressive income tax actually means we have uh a loss of revenue.

3:17

And so the in order to be able to move us in that direction and be able to work on this budget.

3:25

We did the committee looked for how could we offset um that loss of revenue.

3:31

Um, and that is why we're recommending to have the income tax credit offset credit set at zero.

3:36

As a reminder, the ITOC is a property tax credit, and it is only available to eligible owner-occupied households.

3:45

So those are folks who own a home.

3:47

Um and I just want to note, and I know this will be part of the presentation that about 35 to 40 percent of our residents are renters and not able to receive uh that tax credit.

3:58

Uh in doing the offset of the um the ITOC in addition to covering the loss of revenue for uh the progressive income tax structure.

4:10

We also have $50 million in one-time savings from that reduction in the FY27 budget, and it was the committee's recommendation because it is one-time saving that that money go into our capital budget to offset um costs there.

4:25

Um and as I said, we'll we also discuss the working families income supplement, but we will get to that uh after we discuss the income tax rate and the ITOC, and that is the committee readout.

4:36

And I know Mr.

4:37

Smith has presentation.

4:40

Thank you, Chair Stewart.

4:42

Um, want to acknowledge our colleagues from finance in the in the audience who can join me if they wish or not.

4:47

But as always, um we work collaboratively and they did the the yeoman's work um on doing the estimated revenues for various progressive income tax rates as they do for all of our revenues throughout the year, and so much appreciated to their their help and work on that.

5:00

And so much appreciated to their their help and work on that.

5:02

I will be as brief as possible, but given the complexities of our income tax structure, the income tax offset credit, thought it'd be helpful if some of the government operations fiscal policy committee presentation was also shared for the full council and for the millions watching at home again.

5:16

So I'm gonna be as brief as I can, but we're gonna maybe 1.1 million now.

5:23

Um go ahead and look at some of the basics of our income tax structure.

5:26

What is a progressive income tax structure look like?

5:28

Talk a little bit more about the income tax offset credit and why that was used and recommended by the government operations and fiscal policy committee, and then provide some specific examples looking at what the county executive proposed, what the GO committee has proposed, and how that would impact specific residents.

5:43

So the first thing to note is whether you use tax software, an accountant or you do it yourself, you file one tax return with the state.

5:51

You pay your local income taxes, and if you live in a municipality such as the city of Rockville or City of Gatesburg or those, you also pay that through your one filing.

5:59

Um I'm sorry, you you do that all through one filing.

6:02

Um and then the state takes that one return and provides either you make one payment to the state to cover any um taxes you owe, um, or you get one refund back.

6:13

Uh and that that is how all of our residents experience income taxes.

6:16

Certainly, if they want to get into the minutiae, they can see where the current 3.2% is going and how that's happening.

6:22

Um, but because the state collects all of the county or all the income taxes for counties, they end up distributing those revenues to the counties throughout the year.

6:30

Um and so there are three types of res uh distributions the county counties receive based on specific types of payments taxpayers are making.

6:39

But the most important thing to note is that each fiscal year we get about three tax years worth of revenues from the state.

6:45

And for fiscal 26, the current fiscal year we're in, most of our income tax revenue for this year is coming from tax year 2025.

6:52

So it's a year behind.

6:54

Um and certainly as we look forward and we talk about the progressive income tax structure, that's why offsetting revenues or offsetting resources from such as the ITOC is important because it'll take three years for a progressive income tax structure to phase in.

7:07

So finally, the currently the county has a flat tax rate.

7:10

It's 3.2% for every taxable dollar someone earns.

7:13

Um and I'll I noted during the GEO committee, the top 4% of our county filers, which is about 36.1% of I'm sorry, contribute about 36.1% of the county's tax revenue based on 2024.

7:25

So I just wanted to be able to help so show kind of what our tax base looked like.

Discussion Breakdown — Share of Meeting
Economic Development██████████████████████████████████34%
Budget Equity Analysis█████████████████17%
Fiscal Sustainability██████████10%
Environmental Protection████████8%
Procedural███████7%
Public Education█████5%
Affordable Housing█████5%
Animal Welfare████4%
Arts And Culture████4%
Summary of Proceedings

Montgomery County Council Worksession: FY27 Operating Budget and FY27-32 Capital Improvements Program

On Friday, May 8, 2026, the Montgomery County Council convened at 9:30 a.m. and again at 1:30 p.m. to continue worksessions on the FY27 Operating Budget and FY27-32 Capital Improvements Program. The Council considered 22 agenda items including tax policy, departmental budgets, and non-departmental accounts (NDAs), taking straw votes and making amendments. Key decisions included adopting a progressive income tax structure, adjusting the property tax credit for income tax offset (ITOC), and approving numerous department budgets with modifications.

Consent Calendar

  • Income Tax Rate (Item 1): Approved as amended (straw vote 7-4). The amendment, moved by Council Vice President Balcombe, set rates at 2.7% for taxable income $0–$50,000, 3.0% for $50,001–$150,000, and 3.3% for over $150,000, effective January 1, 2027. This replaced the County Executive's proposed flat 3.3% rate and the GO Committee's recommendation of 2.5%/2.8%/3.3%. The amendment lowers the cost of the progressive structure by $27.4 million and creates $77.8 million in additional resources in FY27, including $44 million in one-time savings for the capital budget. The ITOC will be set to zero to offset revenue loss.
  • FY27 Property Tax Credit for Income Tax Offset (Item 2): Approved as recommended by the GO Committee (straw vote 11-0). Sets the ITOC to zero for FY27, consistent with the income tax changes.
  • Working Families Income Supplement NDA (Item 3): Approved as recommended by the GO Committee (straw vote 11-0). Includes $1.7 million increase due to actual billing and a $3 million reduction in the state match based on the progressive income tax structure.
  • Office of Animal Services (Item 4): Approved as recommended by the PS Committee (straw vote 11-0). Adds five animal care attendant positions (three in one tranche at $215,619, two in another at $143,624) to the Reconciliation List due to shelter overcapacity (104 dogs, 35% over capacity of 77) and staff caring for 43 animals per day (target 20–25).
  • Green Bank NDA (Item 5): Approved as amended (straw vote 11-0). Motion by Councilmember Balcombe to place $2 million of the $2,485,474 County Executive recommended increase on the Reconciliation List (supported without objection). The Green Bank leverages $4 of private capital for every $1 of county investment, catalyzing about $350 million in transactions.
  • Arts and Humanities Council NDA (Item 6): Approved as recommended by the EC Committee (straw vote 11-0). $7,230,304, a 2.5% increase (standard inflationary adjustment).
  • Payments to Municipalities NDA (Item 7): Approved as recommended by the GO Committee (straw vote 11-0). Continues the formula for tax duplication reimbursements to municipalities.
  • Housing Opportunities Commission NDA (Item 8): Approved as amended (straw vote 11-0). Motion by Councilmember Friedson to add language allowing HOC to grant short-term extensions (6 months to 1 year) for Housing Production Fund loans to remain outstanding beyond five years when there is a funding gap. Also includes $200,000 for parking offset for HOC employees at new headquarters.
  • Sheriff’s Office (Item 9): Approved as recommended by the PS Committee (straw vote 11-0). Includes $178,043 on Reconciliation List for rebalancing workloads (1.31 FTEs) and $10,483 reduction for taser/body camera contract.
  • Montgomery County Economic Development Corporation NDA (Item 10): Approved as amended (straw vote 11-0). Motion by Councilmember Jawando (seconded by Councilmember Mink) to split the $338,924 for expanded marketing into two tranches on the Reconciliation List (supported without objection). Includes budget language that the appropriation ($5,731,527) must not be used for County Executive travel in calendar year 2026.
  • Worksource Montgomery NDA (Item 11): Approved as recommended by the ECON Committee (straw vote 11-0). Reduced the enhancement for two positions from $170,000 to $85,000, funding only the career advisor.
  • Department of Permitting Services (Item 12): Approved as amended (straw vote 11-0). Motion by Councilmember Stewart to add one FTE ($157,858) for fire code enforcement to implement Emergency Safety Plans for Multifamily Apartment Buildings (supported without objection).
  • Economic Development Fund (Item 13): Approved as amended (straw vote 10-1, Sayles opposed). Motion by Councilmember Balcombe, amended by Councilmember Friedson, to revert $2.3 million from the EDF to the General Fund. This leaves $4 million as an annual appropriation for the Job Creation Fund, while the Founders Fund ($2.2 million remaining) and Technology/Innovation Fund remain as one-time programs.
  • Incubator Programs NDA (Item 15): Approved as amended (straw vote 11-0). Motion by Councilmember Jawando to remove $2 million in funding for a third-party contractor to manage the incubator network, pausing the initiative until after a new County Executive and MCEDC strategic plan.
  • Small Business Support Services NDA (Item 14): Approved as amended (straw vote 11-0). Motion by Councilmember Balcombe to add one FTE to the Incubator Programs (supported without objection). Motion by Councilmember Stewart to reject the ECON Committee recommendation to shift positions from incubators to business support, keeping them in the incubators NDA (supported without objection).
  • Montgomery Coalition for Adult English Literacy NDA (Item 16): Approved as recommended by the EC Committee (straw vote 11-0). $2,652,078, a 2.5% increase over last year.
  • Kid Museum NDA (Item 17): Approved as recommended by the EC Committee (straw vote 11-0). $2,496,945, a 2.5% increase. Served over 21,000 students since FY23, 60% Black or Latino, 50% from under-resourced communities.
  • Climate Change Planning NDA (Item 18): Approved as recommended by the TE Committee (straw vote 11-0). $488,344 (same as prior year budget). 68% of FY26 budget went to climate resilience.
  • Department of Finance (Item 19): Approved as recommended by the GO Committee (straw vote 11-0). Removed 3 FTEs and implementation costs for the special tax district that was not taken up.
  • Office of the County Executive (Item 20): Approved as recommended by the GO Committee (straw vote 11-0). Included an OBET score of 7 out of 11. Technical update: $777,836 of $222,853 in community-based contracts moved to Small Business Support Services NDA on Reconciliation List.
  • Board of Elections (Item 21): Approved as recommended by the GO Committee (straw vote 11-0). All increases are same-service levels not requiring Reconciliation List.
  • Device Client Management NDA (Item 22): Approved as recommended by the GO Committee (straw vote 11-0). $1.148 million increase (6.4%) tied to existing contracts; not on Reconciliation List.

Discussion Items

  • Income Tax Rate and ITOC: Extensive debate on progressive income tax structure. Councilmember Jawando expressed concern about raising taxes on those earning $150,000–$500,000, preferring a bracket for $500,000+. Council President Fani-González emphasized the progressive nature and benefits for renters (35–40% of residents who cannot claim ITOC). Councilmember Mink sought to add a worksession on Tuesday, May 12 to revisit revenue options, but the motion was withdrawn after clarification that amendments can be made on Wednesday, May 13 prior to final vote.
  • Office of Animal Services: Director Harefield testified that the shelter has 325 total animals, 104 dogs (35% over capacity), 15 animal care attendants (below best practice of 24), and noted a 41% increase in owner surrenders due to housing and food insecurity. Councilmember Mink highlighted the trauma of families forced to give up pets.
  • Green Bank NDA: Councilmember Friedson expressed deep concern over the $2 million reduction, noting the Green Bank is central to the county's climate strategy and leverages private capital. He called the adjustment

Meeting Transcript

Good morning, everyone. Today's Friday, May 8th, the council is meeting today to continue the work sessions on the work on the FY27 operating budget and FY27-32 Capital Improvements Program. Councilmember Sales is attending a conference during the week and she is joining us virtually. Chair Stewart. Thank you, Madam President. The government operations and fiscal policy committee met on April 29th. We were joined by the council president and the vice president. Thank you for joining us. We looked at a number of items on the 29th. And this morning, Mr. Smith will go over the income tax rate recommendation and the ITOC, the income tax offset credit, and then we'll look at the working families income supplement later this morning. The other thing that we did discuss at committee was the property tax rate, which the council already took up on Monday. And as a reminder, the committee's recommendation, which the full council supported with Councilmember Mink abstaining, was to reject the executive's recommended property tax increase of 6.3% for uh si 6.3 cents for FY27. Our goal on the April 29th committee was to make sure everyone was fully informed of the impacts that uh and to whom uh they would uh occur on changing anything with our income tax um or our ITOC. And I want to say our staff did an incredible job of walking us through all that. We will have a shortened presentation of that discussion. Um, but I wanted to make sure, regardless of where we end up as a body next week that everyone understood all the polls and takes and how changing our income tax is also related to other pieces of uh our budget. So what we recommended um during that uh discussion to the full council on the income tax rate was we rejected the executives recommended income tax rate of 3.3 percent on all taxable income starting on January 1st, 2027. Uh what we did recommend was the creation of a progressive income tax structure starting on January 1st, 2027. The new brackets uh recommended by the committee are in your packet. Um the first 50,000 of taxable income, the new income tax rate would be 2.5%. On the next uh fifth over 50,000 to 150,000 taxable income, the rate would be 2.8%, and anything greater than 150,000 taxable income, the rate would be a 3.3 uh percent. We also recommended setting the income tax offset credit, the ITOC to zero to offset the loss of revenue from the recommended progressive income tax structure. I just want to underscore that moving to a progressive income tax actually means we have uh a loss of revenue. And so the in order to be able to move us in that direction and be able to work on this budget. We did the committee looked for how could we offset um that loss of revenue. Um, and that is why we're recommending to have the income tax credit offset credit set at zero. As a reminder, the ITOC is a property tax credit, and it is only available to eligible owner-occupied households. So those are folks who own a home. Um and I just want to note, and I know this will be part of the presentation that about 35 to 40 percent of our residents are renters and not able to receive uh that tax credit. Uh in doing the offset of the um the ITOC in addition to covering the loss of revenue for uh the progressive income tax structure. We also have $50 million in one-time savings from that reduction in the FY27 budget, and it was the committee's recommendation because it is one-time saving that that money go into our capital budget to offset um costs there. Um and as I said, we'll we also discuss the working families income supplement, but we will get to that uh after we discuss the income tax rate and the ITOC, and that is the committee readout. And I know Mr. Smith has presentation. Thank you, Chair Stewart. Um, want to acknowledge our colleagues from finance in the in the audience who can join me if they wish or not. But as always, um we work collaboratively and they did the the yeoman's work um on doing the estimated revenues for various progressive income tax rates as they do for all of our revenues throughout the year, and so much appreciated to their their help and work on that. And so much appreciated to their their help and work on that. I will be as brief as possible, but given the complexities of our income tax structure, the income tax offset credit, thought it'd be helpful if some of the government operations fiscal policy committee presentation was also shared for the full council and for the millions watching at home again. So I'm gonna be as brief as I can, but we're gonna maybe 1.1 million now. Um go ahead and look at some of the basics of our income tax structure. What is a progressive income tax structure look like? Talk a little bit more about the income tax offset credit and why that was used and recommended by the government operations and fiscal policy committee, and then provide some specific examples looking at what the county executive proposed, what the GO committee has proposed, and how that would impact specific residents. So the first thing to note is whether you use tax software, an accountant or you do it yourself, you file one tax return with the state. You pay your local income taxes, and if you live in a municipality such as the city of Rockville or City of Gatesburg or those, you also pay that through your one filing. Um I'm sorry, you you do that all through one filing. Um and then the state takes that one return and provides either you make one payment to the state to cover any um taxes you owe, um, or you get one refund back. Uh and that that is how all of our residents experience income taxes. Certainly, if they want to get into the minutiae, they can see where the current 3.2% is going and how that's happening.

SUMMARIZED BY OPENPUBLICA AI
TRANSCRIPT VIA PUBLIC VIDEO
openpublica.com