City's fiscal straitjacket tightens

October 01, 1992

After a number of fiscal scares, Baltimore has reached a turning point. Apparently for the first time in its recorded history, the wealth of the city contributed by its residents has stopped growing.

Maryland's largest city is not only declining in terms of absolute population and property tax base but its residents' taxable income also is diminishing. A long-term trend has pointed in this direction for years. A persistent recession has now made this fiscal reality inescapable.

While statewide taxable income crept up from $55.4 billion to $56.4 billion between 1990 and 1991, the amount of taxable income earned by city residents fell from $4.86 billion to $4.85 billion, according to new data from the state comptroller's office. Some of this drop may be attributable to the current recession. But budget analysts feel a chief reason of the decline is the unabated exodus of middle-class families from the city.

Even after they leave Baltimore many of those fleeing residents, ironically, keep working in (or for) the city. Since their income is not taxed on the basis of their work site but rather on their place of residence, they continue to use city services but without contributing to its tax base. Indeed, nearly half of the 432,600 jobs in the city are held by commuters from other counties.

In the decades following World War II, most of those leaving the city were whites, who cited cheaper home prices, lower property taxes and better schools as their reasons. Race also was a reason. But during the past decade, black middle-class families have joined the flight in increasing numbers. As a result, the city has become even more disproportionately poor with fewer and tTC fewer middle-class and wealthy taxpayers shouldering the burden for financing government.

At the present time, the city's property tax rate is double that of any other Maryland county. And while Mayor Kurt L. Schmoke vowed to refrain from joining half a dozen other jurisdictions in increasing the piggyback tax on income, the latest cuts in state aid to Baltimore have deprived him of any alternatives. The city is thus in a devilish predicament. If it keeps raising taxes, more and more of the remaining middle-class may move out. If it does not, municipal services will have to be cut further, thereby probably triggering increased outflow of taxpayers.

When numbers and trend lines turn against a city as decisively as they are now going against Baltimore, it is too late to talk about easy remedies. The concentration of poor is just too great. Yet unless the city's predicament is recognized by its neighbors and the state, Baltimore is likely to become a ward of the state of Maryland.

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