The cap on increases in property tax assessments for Baltimore homeowners should remain at 10 percent because the city cannot afford to take advantage of a new state law allowing an even lower limit, according to a proposal being considered by Mayor Kurt L. Schmoke.
William R. Brown, the city's finance director, has told the mayor that lowering the cap below 10 percent -- which is more than twice that of Baltimore County -- would benefit only a small number of Baltimore's 220,000 property owners.
"The real issue here is the appropriate means of tax relief," Mr. Brown said. "Any tax relief should be broad-based and equitably distributed, and this [a lower tax credit] does not accomplish that objective because it benefits a few and not all the taxpayers."
Mr. Schmoke and the City Council must reach agreement on a cap by the end of this year. Members of the council have been pushing for a cut in the city's $5.95 property tax rate since they took office in 1987. They want a commitment from Mr. Schmoke that he will provide for some kind of tax relief in the next budget -- and before council members face re-election in 1991.
Mr. Schmoke won't make up his mind on the tax cap until he meets with representatives from a city taxpayers coalition, according to his spokesman, Clinton R. Coleman.
"He also feels the most significant relief would be a tax rate cut, that the best way to provide the most relief for the largest number of people would be a tax rate cut rather than the assessment cap," Mr. Coleman said.
In its 1990 session, the Maryland General Assembly decided to provide some tax relief for homeowners throughout the state by reducing from 15 percent to 10 percent the cap on increases in assessments. The legislature also gave Baltimore and Maryland's 23 counties the option of providing additional relief by allowing the jurisdictions to set an even lower assessment cap.
Baltimore County Executive Dennis F. Rasmussen swiftly lowered the county cap to 4 percent. A 5 percent cap has been considered in Howard County, but formal action on the proposal has been delayed until after next week's general election. Anne Arundel, Harford and Carroll counties have not addressed the issue.
In Baltimore, several council members are proposing "a cap and cut" -- combining a lower ceiling on assessment increases and a reduction of the city's $5.95 tax rate.
"We have to see how we can best benefit people -- through a tax cap, or do you benefit them better through a tax rate decrease?" said Councilman Wilbur E. "Bill" Cunningham, D-3rd. "I think you do both. We're in a position where we have to give our middle-class taxpayers some relief. We have to give some relief to the people who are able to pick up and leave, or we're not going to have a tax base. And the question is, how do you best do it?"
David B. Rudow, president of the Baltimore City Homeowners Coalition For Fair Property Taxes Inc., supports a "cap and cut" approach.
"We would like to see the city set the cap at 4 percent. In order to be competitive with the neighboring counties, we have to have a cap somewhat comparable to theirs," Mr. Rudow said. "We also have to get a cut in the rate. Baltimore City today is double the next highest county in the state. We just can't hang out there like that anymore."
Mr. Brown, the city's chief finance officer, wants to maintain the 10 percent cap in the city because he says Baltimore can ill afford to lose additional revenues in an already tight fiscal climate.
The General Assembly's decision to reduce the cap on assessment increases from its present level of 15 percent to 10 percent will cost the city between $2.1 million and $2.6 million in tax revenues and provide tax relief to about 15,000 city homeowners during the fiscal year beginning next July. Under the 15 percent cap, only 5,500 Baltimore homeowners benefited from the program and received $1.1 million in tax relief.