Council hears of new tax cut plan

November 20, 1990|By Michael A. Fletcher | Michael A. Fletcher,Evening Sun Staff

A proposal that would tie property tax rate cuts to revenue from new construction was supported by 14 City Council members last night, but got a wary reception from the mayor.

A bill that would cap property assessment increases at 4 percent annually was also introduced at the meeting.

While the assessment cap has been embraced by Mayor Kurt L. Schmoke, he is leery of the proposal to automatically reduce the property tax rate by an amount about equal to the tax revenue generated by new construction.

"This really has to be looked at very closely," said Peter N. Marudas, Schmoke's liaison to the council. "The mayor has some reservations. Is it flexible enough? How does this fit with" the tax changes recommended by a special gubernatorial commission?

Another concern of Schmoke's is the impact of the measure on revenues.

Councilman John A. Schaefer, D-1st, sponsor of the bill, said that if such a measure was in place last year, it would have cost the city 18 cents on the tax rate, which is currently $5.95 per $100 of assessed valuation, or $13.8 million. The current city budget is $2.2 billion.

The potential benefit to the average city homeowner from the proposed measure would be modest. For instance, under Schaefer's proposal, a home valued at $45,653 -- the median in Baltimore -- would have had a July 1990 city tax bill of $877 compared with $904 under the existing rate.

Despite Schmoke's concerns, Schaefer and the 13 other co-sponsors hailed the proposal as one that is vital to the city's future.

"I think this is one of the most important pieces of legislation in terms of providing property tax relief to our citizens," Schaefer said. "It gives us a vehicle by which you can reduce property taxes year to year."

Councilwoman Sheila Dixon, D-4th, said she supports the bill even though it would mean a major revenue loss. The alternative is worse, she said.

"We just can't continue stretching property taxes," Dixon said. "We have to maintain some sort of tax base in this city. I don't want to see us become a ghost town, with nobody left but the poor and the elderly."

Bowing to pressure from homeowners, Schmoke last week decided to sponsor legislation to limit increases in assessments -- the taxable portion of a home's value -- to 4 percent a year.

In making known his decision, Schmoke rejected a Finance Department recommendation to cap assessment increases at 10 percent annually, the maximum allowed under a state law passed by the 1990 General Assembly.

A 4 percent cap will cost the city $2.5 million in lost revenue next fiscal year, officials said. A home whose value has risen from $100,000 to $150,000 would see its July 1991 tax bill reduced from $2,769 to $2,528 under that proposal.

Schaefer said that the city would have to compensate for the added fiscal burden resulting from his proposal with some additional belt-tightening.

"The Finance Department will have plenty of notice about how much the rate is going to be cut," Schaefer said. "The state gives quarterly reports on new construction and what it means to the tax base. We pay those people in finance a lot of money. They will simply have to come in with sharpened pencils."

Schaefer also dismissed any opposition the bill could generate in the General Assembly, which the financially troubled city petitions for increases in state aid.

"By passing enabling legislation, the legislature could allow us to raise money for ourselves," Schaefer said.

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