Deficit dims hope of Baltimore cut in property tax High rate needed for revenues, Schmoke and councilmen say

March 06, 1991|By Martin C. Evans Ann LoLordo of The Sun's metropolitan staff contributed to this article.

Hopes that Baltimore homeowners will receive election-year relief from the city's highest-in-Maryland property tax rate appear to be fading, as Mayor Kurt L. Schmoke and key members of the City Council struggle to close a projected $54.1 million gap in the city budget for the next fiscal year.

Mayor Schmoke said last week that he would not take the lead in seeking a tax cut this year. He said the City Council's passage in December of a 4 percent cap on increases in homeowner property assessments might be all the relief the city could afford, particularly in light of council pressure to repeal a tax on beverage containers that brings in $6 million per year.

"I will not propose a rate cut," the mayor said. "I don't see how we could both repeal the container tax and cut the property tax rate without putting us back in the position I'm trying to avoid."

City budget officials said the assessment cap -- which would slow the growth in tax assessments for some 74,000 Baltimore homeowners -- would cost the city about $2.5 million in lost tax collections during the fiscal year beginning July 1, according to Edward J. Gallagher, budget director. Because property tax bills are calculated on a property's assessment, holding down increases in assessments holds down property tax bills.

While some council members insist that they will try for at least a symbolic cut in the property tax rate this year, key council members also say the prospects for a tax cut appear bleak -- given that the city's fiscal plight will force thousands of employees to cancel pay increases negotiated last year and that further budget trims might require the layoff of 600 city workers.

"How can you have property tax reduction when you have a $54 million deficit, anyway?" said Councilman Timothy D. Murphy of South Baltimore's 6th District, chairman of the council's Taxation and Finance Committee.

"I'm not sure it can be accomplished this year," said Joseph T. "Jody" Landers III, a councilman from the Northeast Baltimore's 3rd District, where pressure for property tax relief is intense.

"There are so many pressing needs," Mr. Landers said. "Employees are having their pay cut and are still facing layoffs. But I'm still willing to try."

The convergence of a number of factors is hindering efforts to cut the property tax. Tax revenues flowing into the city treasury are not growing as quickly as is the growth in city government spending.

Council members have acknowledged that it would be difficult to give away revenue in the form of a tax cut at a time the city is laying off some of the city's 27,600 employees and denying pay increases to the remaining ones.

And in Annapolis, where the city is lobbying for additional aid from the General Assembly, hopes that sweeping changes in Maryland's tax structure would bring millions of dollars in additional aid to the city are all but dead for this year, key legislators have said.

John A. Schaefer, D-1st, chairman of the council's Budget and Appropriations Committee, said while he would like to shave an additional 10 cents off the city tax rate, cityofficials must be careful not to create the impression in Annapolis that the city did not need additional state aid.

"We don't want to give the General Assembly the excuse to say, "They don't need it,' " Mr. Schaefer said. "We don't have as many friends down there as you think. They are all running around thinking of themselves now."

But pressure for a tax cut in Baltimore remains strong.

Baltimore's tax rate of $5.95 per$100 of the assessed value of homes is more than twice that of Baltimore County, which has Maryland's second-highest property tax rate, $2.895. The last time the city cut its property tax rate was in 1989, when the council seized the initiative from the mayor and cut the city's tax rate a nickel from $6.

Homeowner advocates say the high tax rate -- which amounts to about $200 per month on a home worth $135,000 -- is discouraging potential middle-class taxpayers from living in the city.

Indeed, pressure to approve a tax cut could increase this spring, as council members facing election-year challenges seek to curry favor with potential voters.

"I think it's very likely," said Councilwoman Jacqueline F. McLean, D-2nd, referring to the prospects of a tax cut. "We have to look at the fact that property tax payers have been footing the bill foryears."

Mrs. McLean said cutting a penny from the tax rate would provide a psychological lift to beleaguered taxpayers but would have a relatively small impact on the budget.

Each penny on the tax rate brings $794,000 into the city treasury.

"Having a property tax cut is certainly not going to equal the amount we would pay in salary increases," Mrs. McLean said.

David B. Rudow, president of theBaltimore City Homeowners Coalition for Fair Property Taxes, said even a small tax rate cut would be a satisfying indication of commitment to further tax relief.

"Are we still anticipating a cut? You bet," Mr. Rudow said. "We were very disappointed last year when there was no cut."

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