The Schmoke administration is studying a proposal to reduce the city's cap on annual property-tax-assessment increases to 10 percent, which would mean a $2.5 million drop in tax revenues for Baltimore next year. Assessment increases currently are capped at 15 percent annually.
The proposal came from William R. Brown, city finance director, who is also recommending the city shave 10 cents, if possible, from its property-tax rate. That would mean a loss of another $8 million in city revenue, for a total loss of $10.5 million for fiscal 1992.
The cut in the tax rate, now at $5.95 for each $100 of assesse value, would offset political pressure building from the city's taxpayers, many of whom are demanding relief from their property-tax burden. The city's tax rate is double the next highest rate in Maryland.
A lower cap on annual assessment increases is mandated by a measure passed by the General Assembly in April. The new law repealed one that set a cap of 15 percent for every subdivision, including the city. The 15 percent cap meant that, if, for example, the assessed value of a residential property increased by 20 percent, local government could apply its property tax rate on only 15 percent of the increase.
In its place, the new law requires each subdivision to set its own cap at 10 percent or lower by Dec. 31.
Brown said he proposed the 10 percent cap because it would minimize the revenue loss for Baltimore. The lower the cap, the more the revenue loss, he said.
Brown pointed out that the assessment cap benefits only residential property owners. He said he recommended a cut in the property-tax rate "because it offers a more broad-base tax relief as it affects every taxpayer whether they are homeowners, owners of business property or owners of rental property."
For the current fiscal year, only about 5,398 city homeowners out of more than 136,000 saw their home assessments rise by more than 15 percent. More than 18,900 homeowners received notices that their assessments were increasing more than 10 percent.
Mayor Kurt L. Schmoke said he would like to see a 10-cent cut in the property-tax rate, but it is too early in the budget process to determine whether the cut is feasible. The mayor also said he would not make up his mind on the assessment increase cap until he meets with representatives from the Baltimore City Homeowners Coalition For Fair Property Taxes Inc.
The coalition, which includes more than 200 groups, wants a cap no higher than 4 percent, plus a 10-cent reduction in the property-tax rate.
David B. Rudow, president of the coalition, has threatened to mount political opposition against elected officials who do not support the coalition's proposal.
Councilman John A. Schaefer, chairman of the budget and appropriations committee, said the coalition's proposal could lead to layoffs and cuts in services.
"The council is in the mood to help the taxpayer, but that is too much money," said Schaefer, D-1st. He said he is mulling a 4 percent cap and a reduction of 5 to 7 cents in the tax rate.
Doug E. Brown, policy analyst for the city budget bureau, said his agency has not calculated the cost of a 4 percent assessment cap. But Rudow said city officials have prepared figures showing that there would be only a $1.1 million difference in the amount of revenue lost by the 4 percent cap compared with the 10 percent cap.
"So, by going from 15 percent to 10 percent, the city loses about $2.5 million and from 10 percent to 4 percent another $1.1 million for a total loss of about $3.6 million from a billion dollar budget," Rudow said.
"The taxpayers' coalition is out there pushing 4 percent and 10 cents, and the [Schmoke] administration is thinking 10 percent and 10 cents," said Schaefer. "In an election year, that puts the council in a real precarious position, but that's what we get elected for."
Brown cautioned that, if the city cuts its tax rate and lowers its assessment increase cap, the city may be facing other revenue shortfalls in the coming fiscal year.
With no reduction in the property-tax rate and with the assessment cap still at 15 percent, the city's revenue shortfall last year was around $40 million. State financial aid and layoffs of city workers managed to close the gap.