In a major reversal, state tax assessors have backed down from a bid to raise assessments on office buildings and other downtown property in the teeth of the recession, a decision that will cost Baltimore as much as $5 million annually in projected revenue.
But city officials don't expect the lost tax dollars to force any tax increases. Baltimore's fiscal 1993 budget includes a reserve that assumed $8 million in potential revenue would vanish during the appeals process, city finance director William Brown said.
That reserve also must protect the city against successful tax appeals by owners of city properties outside downtown's Ward 4 taxing district, but officials are confident it will be enough even as more appeals are heard. Ward 4 is bounded by the north side of Pratt Street, Franklin Street, Fremont Street and the Jones Falls Expressway.
"We're sticking to our strategic financial plan, which calls for tax decreases, not tax increases," Mayor Kurt L. Schmoke said through a spokesman.
This year's budget reserve was more than three times the amount the city allowed for tax appeals in fiscal 1992, reflecting the severity of the real estate recession. The increase also stemmed from the fact that the downtown office district that makes up the heart of the city's tax base was reassessed last year, with the revised tax bills set to take effect this year.
In assessments released in December, state real estate assessors raised their estimates of the value of Ward 4 by 4 percent, or about $80 million over 1988 levels, to about $2.1 billion of full cash value.
But the figures have been attacked in the appeals process by developers, who say the state's original numbers were wildly out of touch with the grimness of the commercial real estate market.
The new figures show that $200 million in property value vanished in Ward 4 alone, compared with the original estimates, leaving the value of downtown property $125 million below 1988 levels.
"I don't know that we learned anything since January, other than the market is so poor," said Kevin Mueller, acting supervisor of Baltimore assessments for the state Department of Assessment and Taxation. "A lot of the buildings are losing tenants, and even those who haven't, the dollars they're getting per square foot are less."
One developer whose assessment was cut said the state understood its first numbers were too high and cooperated in cutting assessments the second time around.
"All we did was give them the appraisals," said David Kornblatt, developer of the St. Paul Plaza project at 200 St. Paul Place. "I think they [the state officials hearing the appeal] were real-world. They were fair."
The overall cut in assessments is likely to keep growing as more appeals are heard, including appeals from four of the biggest, most-expensive Class A office buildings in town -- the USF&G Tower, 100 E. Pratt St. (the IBM-T.Rowe Price building), Signet Tower and 250 W. Pratt St.
"There isn't a major office building downtown that hasn't lost value," said M. Ronald Lipman, a principal in Lipman, Frizzell & Mitchell, real estate consulting firm. "It just has yet to be done. It's going to be done."
Fifteen of the city's 23 tax-paying Class A buildings -- newer buildings with modern amenities or older buildings with prestigious tenants -- saw their assessments fall on appeal not just below the levels the state proposed in December, but also below their 1988 assessments.
Assessments for the USF&G, IBM-T. Rowe Price and Signet buildings rose, and those for 250 W. Pratt, Equitable Bank Center II, the Mercantile-Safe Deposit building, Legg Mason Tower and One Charles Center were essentially the same as before last year's reassessment, Mr. Mueller said.
Appeals of the three assessments that rose are pending, as is an appeal by the owners of One Charles Center, whose appraisal remained at $31.3 million despite the announced defection of the building's biggest tenant, CSX Corp.
Mercantile and Equitable Bank Center II did not appeal, and anappeal of the Legg Mason Tower's assessment has been withdrawn, Mr. Mueller said.
FTC The 24th Class A building downtown, the World Trade Center, is exempt from property taxes because it belongs to the state of Maryland.
State assessors had conceded that December appraisals would have to be reduced, but they hadn't predicted cuts so deep. fell 38 percent from its 1988 level, to $16.2 million. t