Maryland property owners will not see an increase in the state share of the property tax rate next year, when the rate will hold steady at the same level it’s been since 2007.
The three-member Board of Public Works voted unanimously, and without debate, Wednesday to approve a recommendation to hold taxes on commercial and residential properties at 11.2 cents per $100 in assessed value. The property tax rate on utilities will remain at 28 cents per $100 of assessed value.
Taxpayers are still likely to see their tax bills go up, however, even as the tax rate remains flat. That’s because all 23 counties and Baltimore City reported increased assessments for seven consecutive years.
Still, Gov. Wes Moore (D), who chairs the board, lauded his administration’s efforts Wednesday to hold the line on property taxes for the third straight year.
“I want to highlight that, because when I first introduced this administration’s budget proposal back in January, we made one thing very, very clear … the state of Maryland will not balance this budget on the backs of the working and middle class,” Moore said.
“Everything we were going to do was to make sure that working- and middle-class families were not just protected inside of this moment, but also that we can give just a little bit of extra breathing room for families that were actually receiving a whole lot of additional pressure,” he said.
The recommendation to keep the property tax rates unchanged was made two weeks ago by the Commission on State Debt, which is chaired by Treasurer Dereck Davis, who is also a member of the Board of Public Works.
State property taxes are used to repay general obligation bond borrowing. Currently there is more than $10 billion in outstanding debt. State law calls for the rate to be set at an amount sufficient to repay the annual debt service.
The current rate does not cover that amount. The difference is made up with hundreds of millions in cash from the operating budget.
In fiscal 2026, the state will use $156 million in general funds to backfill the debt service not covered by property tax collections. That amount grows to about $400 million a year later. In fiscal 2030, the general fund will kick in an estimated $500 million for debt service.
The rate-setting vote comes in advance of meetings with three major bond rating agencies in coming weeks, as well as a scheduled June bond sale.
Maryland enjoys a triple-A bond rating, the highest, from all three major rating agencies — Fitch, Moody’s and Standard & Poor’s. The high rating means the state pays lower interest on money it borrows.
The state has held that coveted “triple, triple-A” rating for more than three decades. Maryland got its first triple-A rating from Standard & Poor’s in 1961. Moody’s followed 12 years later and Fitch gave Maryland its highest rating in 1993.
Maryland is one of 13 states with the highest rating of all three agencies.
But there are rumblings and concerns about a potential downgrade on the horizon.
A year ago, all three rating agencies reaffirmed the state’s creditworthiness. Moody’s, however, placed the state on a “negative outlook.”
In its report, the agency cited the “difficulties Maryland will face to achieve balanced financial operations in coming years without sacrificing service delivery goals or adding to the weight of the state government’s burden on individual and corporate taxpayers.”
That report was released six months before the election of President Donald Trump and eight months before his administration began making good on his promises to slash federal employment and funds.
Last month, Moody’s released a new report naming Maryland as the most at risk “from changing federal priorities and policies.”
Those back-to-back Moody’s reports and continuing uncertainty at the federal level, as well as how rating agencies will react to potentially billions in looming sex abuse settlements the state could be facing, are stirring concerns about a potential downgrade.
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