Mayor offers tax breaks to bolster middle class

March 14, 1995|By JoAnna Daemmrich and Norris P. West | JoAnna Daemmrich and Norris P. West,Sun Staff Writers

Saying he wants to boost homeownership in Baltimore, Mayor Kurt L. Schmoke announced two new tax breaks yesterday as part of a broader package aimed at attracting and keeping the middle class in the city.

The mayor is offering a tax credit to buyers of newly constructed homes and to homeowners who hesitate to make improvements, such as building a garage or adding a deck, for fear that the bill comes with higher property assessments.

Both efforts are seen as ways to encourage middle-class families to reinvest in Baltimore, which has by far the highest property tax rate in the metropolitan region.

In addition to the new programs, Mr. Schmoke has proposed cutting 20 cents off the city's real estate tax rate by the end of the decade. The mayor wants to begin annual nickel reductions in July 1996 to lower the city's tax rate to $5.65 per $100 of assessed value. Mr. Schmoke, who has presided over three 5-cent cuts in the tax rate since he took office in 1987, has emphasized that further reductions hinge on whether future budgets can be kept in line.

The mayor outlined five credits to benefit a wide range of housing needs, from longtime owners who want to build additions to those who agree to buy and renovate one of the city's thousands of boarded-up properties.

Other tax credits include a 4 percent limit on property assessment increases and a program to ease closing costs at the time of purchase by dividing the tax bill in two installments.

"We hope this increases homeownership in the city," Mr. Schmoke said. The mayor devoted much of his attention to the credit for home repairs, saying it would "encourage people to fix up that garage or fix up the porch and not get socked with a substantial increase in their assessment. We think it's going to encourage a lot of people who normally would have said, 'I'm not going to fix it up if they're just going to raise my taxes.' "

Developers and real estate agents said the program would help the city.

"I couldn't encourage it more. We need all the help we can get," said Marianna Donisi-McCann, executive director of The Development Corporation of Northwest Baltimore. "In the Park Heights area, we are dealing with first-time low- and moderate-income families. Every 20-cent savings on the tax bill makes a difference."

Ms. McCann's organization plans to build 15 modular townhouses at West Belvedere Avenue and Pimlico Road this spring. She said the city's tax rate is one reason for its population loss.

"It's one of the things people say about Baltimore City: high taxes, high crime and its education system," she said. "We need to work on all three fronts to make sure we have something to attract middle-income people to Baltimore City."

Maurice Simpkins, vice president of public affairs at the Ryland Group, said Baltimore residents suffer by paying the highest property taxes in a state with the second-highest closing costs. He said the tax breaks should encourage people to move into the city, or at least persuade residents to stay.

"Any kind of relief is welcome," said Mr. Simpkins, whose company is joining with developer Otis Warren to build 113 townhouses near the B&O Railroad Museum west of downtown.

Daniel Loden, president of the Baltimore City Homeowners Coalition for Fair Property Taxes, said his group has fought five years for the tax-relief programs.

"It's the first time the city has acknowledged that they need a program to keep people in the city and bring people back. And they have packaged this program and promoted it," said Mr. Loden. "We've been talking gloom and doom for so long. Psychologically, this is going to do 100 percent good."

William F. Cassidy, sales manager of Long & Foster, said the program should help the already rising sales of homes in the city.

"It gives us one more asset to point to when we're dealing with homebuyers on the fence when they're deciding if they should live in the city or live in the suburbs," he said. "It's not going to sway all of them, but it's going to sway some of them."

Under the program for newly built homes, buyers are required to pay only half of the property taxes the first year. The full amount is phased in over five years.

"We think the best incentive to provide people is an incentive on the price," said Housing Commissioner Daniel P. Henson III, adding that the tax breaks are designed to turn around the impression that it is more expensive to buy a home in the city.

The second incentive, created for homeowners who undertake major renovations, phases in the higher assessment over five years. In the first year, the homeowner would have to pay 50 percent of the higher assessment, then gradually more each year.

Homeowners and buyers would have to apply to the programs. Anyone would be eligible as long as permits were pulled before Oct. 1, 1994. A brochure explaining the programs gives an example of how each would work. Under the new-home program, a buyer purchasing a home in Baltimore costing $120,000 and assessed at $48,000 would see the tax bill halved, from around $2,800 to $1,400, in the first year. The full tax would be phased in over five years. The buyer would save $4,200 over the five-year period.

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