While citizen group leaders come in many shapes and sizes, it would be hard to beat Dan Spiegel’s qualifications in making the case for tax reform in St. Michaels.
A current Covington & Burling law firm attorney with a distinguished background that includes being the former ambassador to the UN in Geneva, Dan is the overqualified spokesperson for a group of neighbors advocating for a more fair and equable tax model for the small village town of 1,000 people.
A part-time resident of St. Michaels since 2016, when he and his family, avid boaters, purchased the historic Cannonball House, Speigel was drawn to the community’s picturesque streets, unique walkability, fine restaurant s and, of course, the Chesapeake Bay Maritime Museum.
That fondness for all things St. Micheals remains true today. However, the issue of who should pay the increasingly high cost of maintaining the town’s infrastructure, and protecting the municipality from becoming a poorly planned tourist town, hit a cord with Dan.
Over the last few months, Spiegel has joined the Historic District Residence Association in their efforts to have the CBMM and other businesses benefiting from tourism contribute what is known as a payment in lieu of taxes (“PILOT”) to St. Michaels.
From Spiegel’s point of view, the CBMM only pays a fraction of what a property tax would be for the town’s largest landowner. As a result, the property owners must fill in this significant funding gap with increased taxes every year.
The Spy asked Dan to stop by the Spy Studio last week to talk more about this issue, which impacts many popular communities, and his group’s desire that the Commissioners of St. Michaels study the issue more carefully.
This video is approximately 14 minutes in length.
Craig Fuller says
Good Intentions / Bad Information
It is natural and important early in the year to examine the future of our communities on the Eastern Shore. As every candidate said during last year’s local elections, we live in a unique and special place, and we need to protect our quality of life through careful and thoughtful planning.
To be sure, the importance to the region of the Town of St. Michaels (TOSM) should interest us all as the Town looks to its future. Sadly, a recent well-intentioned call for dialog about the future of St. Michaels is falling prey to the increasingly common spread of misleading information that we see all too often on the national scene.
I believe we can agree that clear thinking about the future requires an honest understanding of the facts. Or, as someone once said, “if you do not know where you are starting from, it is very difficult to get where you want to go!”
I firmly believe that members of the St. Michaels Historic District Residents Association are good and well-intentioned people who absolutely require a seat at the table as the future of the Town is contemplated. However, the conversation about the future of St. Michaels has begun with these good people being provided with some very misleading information.
Thankfully, the Town of St. Michaels (TOSM) provides easily understood information online allowing for a clear understanding and interpretation of the facts by anyone going to their site.
The premise of recent presentations by spokesmen for the residents’ group has been along the lines that there is an urgent “need (in) St. Michaels to support a tourist economy with robust municipal infrastructure that is largely paid for by homeowners and not the businesses which benefit economically from tourism growth.” (Emphasis mine.)
However, the TOSM charts currently online show the following:
Total revenue for the TOSM is projected to be $3,916,599
74% of real property tax revenue comes from residential property; thus, the annual residential property tax revenue is $1,095,845.
So, simple math tells us that residential property tax contributes 28% of the TOSM revenue. The notion that residential property taxpayers are “largely” paying the revenue coming to the Town is totally incorrect.
One wonders how well-intentioned people might have been misled.
That might be answered in the recent presentation made to the TOSM with data reporting that there are 877 taxable properties in the TOSM. Of those, 81 properties or 9% are commercial properties. Somehow, a curious conclusion followed that if 91% of the properties are residential then a huge portion of Town revenue comes from residential taxpayers with non-residential sources not paying their fair share. The facts, as demonstrated above, are clearly different.
There is an important balance in the St. Michaels community coming from an attractive environment on the Miles River along with the shops, restaurants, lodging and the Chesapeake Bay Maritime Museum. Combined, the TOSM attracts people throughout the region and across the globe in significant numbers.
All of this happens inside a delicate “eco-system” of sorts. As the community advances, it is vital that all members of the community participate in discussions about the future direction and the future needs of this important community.
Good people will have different points of view and may reach different conclusions. And, people are entitled to their views; however, no one is entitled to their own facts.
While I live in Talbot County outside the town of Easton, I have been visiting St. Michaels since arriving to the region in 1981. And, I do have a specific interest in St. Michaels. I serve as the chair of the board of the Chesapeake Bay Maritime Museum.
Since 1965, CBMM has been dedicated to sharing what is best about the Chesapeake Bay and educating people about the significance of its past and the importance of its future. As such, CBMM has contributed to enhancing the enjoyment of this community for decades.
And, for all the many reasons people are drawn to the community, an economy grew providing restaurant, retail and other commercial opportunities that are the envy of other towns across the Chesapeake region.
The success of the town has provided for rising property values bringing investments in both residential and commercial properties. And, with the success of commercial property, storefronts are open, and revenues are flowing to the Town.
This is an “eco-system” worthy of protection.
Any objective view of the past decade offers clear evidence that there are important benefits to residents from all this activity.
Indeed, owners of property in the Town have seen attractive increases in property values. Due to the financial success in the community and because of the significant revenue contributions by the commercial sector to the Town’s revenues, the reality is that the operations of the Town can be funded largely by non-residential revenue. And, by examining publicly available information about the homes owned by members of the St. Michaels Historic District Residents
Association, one finds the average current values of these residences exceeds $1 million. Current public information also shows that these property owners in the historic area forming the Association are contributing on average about $3,100 per household as the TOSM share of their property tax.
Some might say this is a pretty fair arrangement for residents, made possible by an attractive, strong and carefully balanced community.
It is critically important that people have a thorough understanding of real facts, ensuring that vital discussions recognize and expand on what has so carefully been created. I, for one, look forward to the dialog.
For more facts from the TOSM on revenue and expenditures, go to the Town of St. Michaels online data:
https://stmichaelsmd.gov/wp/wp-content/uploads/2023/05/FY2024-Budget-Pie-Charts-St-Michaels-MD.pdf
Craig Fuller
Kristen Greenaway says
Accurate Information in TOSM Auditor’s Report
While I welcome comments from the St. Michaels Historic Residents Association about the need for careful planning around the future of our community, I am concerned that the information they were provided with takes them to a rather misguided conclusion.
The Town of St. Michael’s (TOSM) Auditor’s Report for the period ending June 30, 2023, has recently become available and several of their statements are important to understand. You can view the report in its entirety at TOSM’s Auditor’s Report (starts p10).
First, it was a favorable year according to the Audit: “Overall the Town shows a positive budget variance in the amount of $629,171 with the final budget.”
The favorable results were in large part to: “Revenues [that] were $655,772 over budget primarily due to an increase in real estate, local income, and public accommodations taxes.”
(See page 17 of the PDF/page 8 of the Auditor’s report.)
The value of all property in TOSM continues to grow, which is an important benefit to residents and commercial property owners. From the Audit: “Property tax revenue increased by $72,588. The increase was primarily due to an increase in assessed property value. There was no increase in property tax rates. Non-property taxes increased by $76,000 as compared to the prior year.”
(See page 14 of the PDF/page 5 of the Auditor’s report.)
And this is a conclusion from the Auditor’s Report: “Projected revenues of the current year remained more stable than anticipated, aided by a continually strong tourist market that resulted in more Accommodation Tax receipts than expected.”
(See page 18 of the PDF/page 9 of the Auditor’s report.)
As we look forward into the future of St. Michaels, it is important for all segments of our community to be heard. However, we need to be starting from the same fact–based position to clearly understand the success we have enjoyed to help consider what might be changed in the future.
Kristen Greenaway
President & CEO
Chesapeake Bay Maritime Museum
Kristen Greenaway says
Link for TOSM Auditor’s Report:
https://stmichaelsmd.gov/wp/wp-content/uploads/2024/01/Meeting-Packet-1.10.2024.pdf
Howard Freedlander says
Dan Spiegel is a bright, engaged person armed with misinformation. He characterized CBMM as a gem. Would it not be logical to enhance the value of this jewel, not chip away at its undeniable contribution to the community and region. Dan stated that the CBMM board contains only one St. Michaels resident. That simply is untrue. A recent economic impact study showed that the museum draws residents, particularly retirees drawn to volunteer opportunities.
Dan opined that the town should study Payment in Lieu of Taxes (PILOT) and recommend revenue sources. Past interaction between the town and CBMM offers little cause for optimism that fairness will guide the town fathers. Would the car museum be asked to make payments in lieu of taxes?
Dan rightly recognized the museum’s outreach to you and its workforce. He failed to mention the museum’s shipbuilding capabilities and its financial value to the community.
As Craig Fuller said, the museum would welcome a leve-headed conversation uncluttered by preconceptions.
Dick Deerin says
Fascinating discussion. Very informative. Thanks for putting this report together.
Pete Lesher says
It is inaccurate to claim that St. Michaels residents pay the highest property taxes in Talbot County. As an Easton resident, my 2023-2024 rates are higher, looking either at the municipal rates alone, or the sum of municipal and county rates:
St. Michaels property tax is $0.47 + county rate of $0.6165 = $1.0865
Easton property tax rate is $0.52 + county rate of $0.6105 = $1.1305
One of the challenges for local government is the reliance on the property tax. While the second highest source of local revenue is the “piggyback” income tax, only full-time residents and businesses pay a share to local government. Talbot County generally and St. Michaels have part-time residents who do not pay any income taxes locally. Local income taxes are the same across all Talbot County jurisdictions, and the local income tax rate is the second-lowest in Maryland.
Brian Wroten says
I don’t think this challenges your conclusion but the property tax rate in St. Michaels is $0.49 per $100 of assessed value which is the same as last year according to the TOSM auditor’s report.
Willard T Engelskirchen says
It seems a little strange to me that the Spy would give Mr. Spiegel access to a video platform which is much more likely to be watched than than the comment letters which the reader must search out. If indeed the comments are on the mark, then the Spy did a very poor job of fact checking the original video. With the demise of so much local news we are dependent on the Spy to present a fair and honest picture of what is going on and not one which slants the story.
Does the Spy plan to offer other sides of the issue a chance to present their case in video format?
I am a resident of Talbot county who lives Bozman. We do not pay St. Michaels taxes. However, my wife and I do support the town’s businesses and pay county and state taxes. We also support our church and some local organizations which serve the community such as the CBMM, the Community Center, and the fire department. Most of us in Talbot county have seen our property values go up in recent years. We have been full time residents for 25 years. We should all be happy about that circumstance.
As to who is on the board of an organization like the CBMM, our daughter is employed by a museum in Chicago. She told me that to be on the board of one of these kinds of organizations one must either give or get support. I agree that residents of St. Michaels are stake holders and deserve a voice. However, one with a more positive viewpoint might be better for all concerned.
Michael Estrella says
Dan,
I found your piece in today’s Spy interesting and thought provoking. I would like to point out just a couple of things you may not be aware of. While it is true that at one time St. Michaels residents did pay the highest tax rate in the county (64 cents at one point in time) I don’t believe that is not still the case. If my facts serve me well, the honor now goes to Easton at 52 cents. The use of a P.I.L.O.T. program is not new to St. Michaels. The federal housing project here in town had been paying the town an agreed to pilot payment for years.
One thing I did find a bit curious was your seeming focus on the CBMM. If a pilot is a good solution, why do you propose it for just the CBMM and not the other museums and tax exempt organizations as well. If I were the museum I might just get the feeling that I was being “singled out” and not being fairly treated.
I do believe that we must find ways to sustain what we have here in the area. I think that there are ways we can do this that are fair and equitable to all the parties involved and without placing undo burdens on one small part of the population. I look forward to hearing ideas from the museums and the general business community and others on the solutions we can implement to ensure a bright future for US ALL!
Mike Estrella
Jennifer Smith says
Living in our quaint town, nestled by the Chesapeake Bay, brings unique joys and benefits. We all cherish the beauty of our surroundings, the safety in our small community and the plethora of activities that our town provides. It’s essential to foster positive conversations, particularly regarding town finances.
Our town experiences an increase in tourism from May to October, adding vibrancy to our community. Some residents express concerns about property taxes, suggesting that businesses should contribute more. While open dialogue on financial matters is crucial, it’s equally important to consider the following:
1. Business Vitality: Local businesses play a pivotal role in our town’s economy. Encouraging their growth and success ultimately benefits everyone. Imposing additional taxes on businesses may hinder their ability to thrive and provide essential services and employment opportunities.
2. Tourism Boost: The influx of tourists during the peak season significantly contributes to our local economy. Businesses, supported by tourism, play a key role in generating revenue that indirectly benefits residents through increased property values and improved community services.
3. Balanced Approach: To address financial concerns, it’s essential for residents and businesses to engage in healthy conversations. Finding a balanced approach that benefits both parties ensures the sustainability and prosperity of our community.
Let’s embrace open dialogue, respect diverse perspectives, and work collaboratively to find solutions that benefit the entire community. Together, we can maintain the charm of our small town and secure a bright future for all.
Connect – Collaborate – Cultivate
Jennifer Smith
President, St. Michaels Business Association
Vice President, St. Michaels Restaurant Association
Daniel Spiegel says
The responses to my SPY interview by the CBBM’s Board Chair and its CEO are interesting and informative. Rather than comment on the specific and general concerns of residents about the role of the Maritime Museum in the life of the town and the substantial municipal costs its visitors bring, they attack our facts and say we were “misled.”
Each then develop an alternate theory of life in St. Michaels even though neither reside here. To them, the St. Michaels’ “eco-system” need neither be questioned nor disturbed. Why is this so? They claim the value of our homes has been increasing due to unspecified benefits of a tourist economy fueled by both the CBMM and our Talbot Street business community. But the same is true for rising real estate values across many non-tourist communities on the Eastern Shore fueled principally by the Covid pandemic and the enduring remote work phenomenon, making that argument less than credible.
Their analysis is essentially all is well and that the CBMM does not have a greater financial obligation to the town that hosts it. All is well in St. Michaels, they appear to be saying from the outside, suggesting that the concerns of residents don’t matter. But they do.
Taxes and revenue issues, whether they are being discussed in Congress or by the St. Michaels Town Commission, can be twisted, manipulated and misunderstood for obvious reasons. Craig Fuller’s analysis of St. Michaels revenue is misleading as it minimizes the property tax contributions of residents because he looks at total Town revenue which includes one-time-only payments such as state and Federal grants for specific projects. I am told that these funds do not go to the Town’s operating budget.
Let’s instead look at the actual numbers. Residents pay the most – about $1,000,000 in property taxes. Commercial properties pay half that amount but pay at the same tax rate as homeowners even though our homes do not produce income. Most of the rest comes from overnight visitors through the Accommodations Tax and from patrons using amusements like sightseeing boats. The State also makes payments to the Town from resident income taxes which amount to about a quarter of a million dollars.
Mr. Fuller also notes that with storefronts open, “…revenues are flowing to the Town.” Really? Business revenues may originate in our Town, but the money doesn’t stay here. Of the 89 commercial properties in St. Michaels, only seven are owned by Town residents. The latest census data shows very few people who live in St. Michaels work here. So those revenues are actually going to landlords and business operators who reside elsewhere. Even the local post office is owned by someone who lives in San Francisco!
Mr. Fuller also claims that town operations can be funded “…largely by non-residential revenue.” This is simply not true. I am reliably informed that the only non-resident Town revenue sources that fund its operations are the Accommodations tax and the Admissions and Amusement tax. There is no way that the Town could operate successfully without the property tax payments of its homeowners. I want to be clear that the Historic District Residents Association is not arguing for a reduction in their property taxes. We are saying that organizations as large and prosperous as CBMM should do more to support the town that supports the museum.
Residents are not organizing an anti-tax movement. Instead, we seek a dialogue between all stakeholders based on facts and to clarify:
1. The revenue needs of the Town of St. Michaels over the coming 2-5 years, and
2. Whether existing tax revenues are adequate to meet the Town’s needs.
3. Whether the CBMM, the largest landowner and tourist-draw in St. Michaels and a tax- exempt entity, should make a voluntary yearly contribution to the Town’s budget to support the burdens of its operations on town services and infrastructure.
I have confidence that we can all work together to answer these and the many complex issues which flow from such questions.
Dan Spiegel
St. Michaels, MD
January 16, 2024
Howard Freedlander says
I am intrigued and disappointed by Dan Spiegel’s continued referral to the non-resident status of Craig Fuller and Kristen Greenway. May I assume that Dan feels constrained to comment about the fiscal health or deficits in Washington, DC because he doesn’t live there (or do you?). Must I further assume that residence outside the jurisdiction where one works blinds that person to the needs and wants of that venue?
It would appear that Dan, though bright and informed, has little insight into the financial
challenges that have faced CBMM during the Great Recession and the pandemic. A nonprofit business, though well-managed by the staff and the board, CBMM confronts continual economic ebbs and flows outside its control.
A PILOT would be an unreasonable burden on CBMM, an economic engine that justifiably could expect support from town leaders and residents. Dan Spiegel’s suggestion, instead, would reflect an effort to stymie an institution that brings cultural value and economic development to St. Michaels, Talbot County and the region.
John L. Seidel says
This is a useful discussion, but I think that advocates for PILOTs miss a number of important points. Some of what’s missing is general or a matter of principle – by consensus and longterm practice, we give favored tax status to organizations that we value for their cultural impact, community importance, and contributions to our economy. Other points relate to specific economic data. I won’t address these, as several well-informed people have responded with facts and figures. I find their arguments and data quite convincing, Mr. Spiegel’s rejoinder notwithstanding.
But perhaps the most important missing element in the various arguments is a simple one. Non-profits, including museums and small private colleges, live a hand-to-mouth financial existence, and even the best managed organizations inevitably will run into financial head winds. These range from regional/national economic downturns to public health crises like COVID. They may result from cyclical dips in visitation or membership to natural disasters such as fire and flood, or other conditions that discourage visitors. It wasn’t that long ago that CBMM was in rough financial shape, with a very uncertain future. A lot of very hard work and many years were needed to rebound. These cyclical and all but inevitable downturns have profound implications for any PILOT proposal.
It’s all very well for heavily endowed institutions with built-in buffers and discretionary funds to commit to PILOTs (think Harvard), but quite another for small, under-endowed organizations. When the inevitable downturn comes, what does their leadership do to cope? If the PILOTs are optional, most leaders will opt for reducing or eliminating the payments for a time, in order to save critical staff and programming. That leaves a town that depends upon predictable revenue in the lurch, often in a time of need (i.e. a recession). That is not a good outcome. If the PILOTs are mandatory, then all flexibility is removed, and non-profit leadership will be forced to cut staff and programming, potentially gutting the institution. That can effectively kill the goose that lays the golden egg, with structural impacts that will take many, many years from which to recover. In other words, be careful what you wish for. PILOTs sound good on paper, but are fraught with danger.
Michael Estrella says
Dan,
As fledgling consultants, one of the
early lessons that was drummed into our heads was to never present inaccurate data to our clients. We were warned continuously that any conclusions drawn from that data would be immediately discounted by most clients and would severely impact any credibility the firm might have had with the client. I have carried that lesson with me for decades and adherence to it has served me well.
In your response to comments made by a number of folks brings up yet one more inaccurate fact that seems to shade you credibility. In the closing of your response you claim that the CBMM is the largest property owner in town. May I suggest that you look at the town’s zoning map where you will find that there are lots much larger than the 18 acres that the CBMM claims to have in their campus. The map reveals one lot that contains over 135 acres. Another owner holds almost 90 acres. And there are others.
I’m not sure where the Museum stands in the SIZE game but that doesn’t really matter. We need the museums and the businesses to be a viable town and we need to maintain two way OPEN communications with them all to solve the issues we face. Painting inaccurate pictures of them will not get us to where we need to be!
Mike Estrella
Stacey Sass says
Thank you Dan for all of your work and for this informative interview regarding the tax structure in St. Michaels. As a resident who has attended meetings regarding this property tax issue, the goal has always been to bring the topic to the attention of the commissioners, not to start an adversarial relationship between the entities involved.
Citizen involvement in local politics has always been the cornerstone of a successful democracy. Let’s move forward in an intelligent and respectful manor where all concerned parties work on a fair solution. I know this wonderful town can do this.
John Novak says
I’ve read Dan Spiegel’s response to comments. Overall, the comments from others didn’t seem to directly address the points that Dan raised.
Respectfully to John L. Seidel — I agree with you that overall non-profits are valued “for their cultural impact, community importance and contributions of our economy.” But here we are talking about a specific non-profit and its unique relationship to the town of St. Michaels, not general principles. Here, see my comments to Howard below, the issue is not temporary changes in the Museum’s financial spreadsheet nor the size of its endowment but it’s failure to pay a voluntary PILOT. So, for me, let’s focus on two issues — (1) does the Museum provide so much community and cultural benefit to the 1,054 town residents that it should be exempt from a PILOT — which I doubt, but please convince me otherwise with specifics — not generalities, and (2) regardless of the answer to #1, should the Museum, as a contributing member of our community show “Good Faith” and volunteer something in the form of a PILOT.
Respectfully to Howard Freedlander — The issue at hand is not the national deficit in Washington so why mention it? The town’s tourist economy and the Museum’s have grown substantially since the pandemic. I disagree with your claim that the Museum is an “economic engine”. How is this the case? The Museum pays no taxes and most of the profits that other businesses make from Museum visitors flow out of town to business and commercial property owners who live in Talbot County and beyond. Remember, only 7 of approximately 93 commercial property owners live in town? (note tax burden numbers below)?
Respectfully to Michael Estrella — Yes, you are correct the Museum isn’t the largest property owner in town, but you also state that “the SIZE game doesn’t really matter.” We agree that the size of the Museum has nothing to do with the PILOT discussion. And, as with Howard above, I would ask for justification of your statement “We need the museums and the businesses to be a viable town”. Does this mean financially viable? Is so, both of you assume something that is unsupported with data. If either of you wish, I’m willing to review with you the sources of Town revenues; residents pay more of the burden than businesses and the reason is our large town infrastructure.
Respectfully to Stacey Sass — I completely agree that we should begin a respectful, open discussion on this topic. I believe that Dan’s response is not adversarial but along with the comments here from others should be a starting point for this public discussion.
Here are some facts to consider as part of this ongoing discussion:
The Museum, which just bought the Craw Claw, and its parking lot presently owns approximately 18 acres in St. Michaels.
The total assessed (Talbot County 2024) value of that property is $22,827,433. St. Michael’s annual town total tax for this sized property is about $107,000.
In addition, the Museum recently purchased the Patriot tour boat which, until now, contributed approximately $50,000 annually to the town in amusement tax.
Thus each year, the total tax burden (real estate and tour boat) on the Museum’s holdings is about $157,000 which the museum does not pay to the town as it is a non-profit.
WHO PAYS THESE EXTRA TAXES — The Town has approximately 877 taxable lots so each lot owner, on average, pays an additional $180/year in town taxes to subsidize the CBMM. In principle, are we all in agreement on this bottom line? We can then begin our public discussion to air our various perspectives on whether a problem exists and, if so, how we might resolve it.
I welcome all comments and corrections, but please be town specific in your responses — this is not a Talbot County, State nor Federal level issue. Thank you to the Spy for the opportunity to comment.
John Novak