Schmoke won't cut property tax rate Mayor also warns city may be forced to lay off workers

January 05, 1996|By JoAnna Daemmrich and Eric Siegel | JoAnna Daemmrich and Eric Siegel,SUN STAFF

Saying Baltimore faces hard financial times, Mayor Kurt L. Schmoke yesterday backed off from a campaign pledge to cut the property tax rate and warned that the city could be forced to lay off workers.

Mr. Schmoke also said lower-than-expected tax revenues mean the city will not be able to give raises to its 26,400 workers at the beginning of the next fiscal year in July.

In a stern call for austerity at the start of the new year, Mr. Schmoke said: "It's belt-tightening time. This is the most prudent course to take."

The financially strapped city is expecting a $9.2 million shortfall in its daily operations, on top of a school deficit that is at least twice as much.

The squeeze is coming largely because of dwindling tax revenues from real estate, business equipment and personal income.

To cope, the city is imposing a near-total hiring freeze on all agencies except the Police Department, offering early retirement plans and putting off all purchases except the most essential.

Even with these strict measures, however, city budget officials believe that layoffs of some workers will be all but inevitable this spring.

"I think there will probably be some layoffs," said Baltimore Finance Director William R. Brown Jr. "We don't know the magnitude at this point."

The economic outlook for the next fiscal year is equally grim: If the city government continues its current course while tax revenues stay flat, there could be a $31 million shortfall.

Baltimore's tax base continues to be depleted by a steady middle- class migration to the suburbs and numerous successful appeals of property assessments.

The value of prime office buildings has dropped, reflecting the state of the city's commercial real-estate market, which has been slower to bounce back than the suburbs have after the recession of the early 1990s.

The mayor said he was left with few choices because of the decline in property tax revenues, which account for a little more than half of the city's $803.6 million main operating fund.

The overall city budget, which includes the schools budget and programs paid for with federal and state grants, is $2.3 billion.

No pay raises

The mayor had wanted to find savings within other city agencies to cover the school deficit, but he couldn't because of the shortfall.

He also said he could not follow through on his campaign promise to offer a property tax break in the coming fiscal year -- or offer any pay raises to employees without cuts in government.

Despite the bad economic tidings, Mr. Schmoke tried to be optimistic, saying he would do his best to avoid layoffs while continuing to reduce the size of government.

The city now has 26,400 workers, down from 30,000 in 1987, when he took office.

Mr. Schmoke also said he is hopeful of keeping to his commitment -- made a year ago and repeated throughout the hard-fought mayoral campaign -- to cut 20 cents off the real estate tax rate by the end of the decade.

At $5.85 per $100 of assessed value, Baltimore's property tax rate is by far the highest in Maryland.

Each nickel cut in the property tax rate costs the city about $4 million -- and saves the owner of a house worth $100,000 about $20 a year.

"We're just in a different fiscal environment than we were last year, and I think most people will understand that," Mr. Schmoke said.

His moves, announced at yesterday's weekly news briefing, drew some support but also sharp criticism from members of the City Council, unions and a homeowners group.

"You have to talk about priorities," said Councilwoman Sheila Dixon, who represents West Baltimore.

"I would rather see people working and have city services than chop another nickel off," Ms. Dixon said.

But Linda Prudente, a spokeswoman for the Baltimore Teachers Union, pointed out that 65 teachers, administrators and clerical workers are being laid off as part of reductions by the school system aimed at covering its deficit. "Here you have a city where the mayor and City Council voted themselves substantial raises, and some of our members are being laid off," she said.

"If there are tough times, if there is belt-tightening, then everyone has to participate," Ms. Prudente added.

And David B. Rudow, executive vice president of the Baltimore Homeowners' Coalition, vowed to remind residents of the mayor's pledge to cut the property tax at every opportunity.

"We're looking for a modest reduction. On a $2 billion budget, I know they can find the money," said Mr. Rudow.

Money shortage

From the middle of his first term, Mr. Schmoke has been grappling with a scarcity of money to confront the city's most persistent problems. The downturn in the economy and a major cut in state aid at the start of his second term in 1991 forced Mr. Schmoke to furlough city workers, shut the Baltimore Museum of Art for two weeks, and close libraries and firehouses.

City workers received no raises for two years, until the beginning of 1994.

But by the summer of 1994, the Schmoke administration had instituted a hiring freeze.

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