New energy taxes sought Schmoke to propose sales levy to offset projected shortfall

About $52 more a year

Taxpayer, nonprofit groups denounce mayor's budget plan

April 09, 1997|By Robert Guy Matthews and Eric Siegel | Robert Guy Matthews and Eric Siegel,SUN STAFF

Baltimore households would have to spend about $52 more a year in new energy sales taxes under a plan by Mayor Kurt L. Schmoke to offset a projected multimillion-dollar shortfall in the city's budget next year.

Schmoke wants each city household to pay a 4 percent energy sales tax -- a levy on residential use of natural gas, electricity, steam, fuel oil and other fuels. He also wants to place a 2 percent energy tax on nonprofit organizations and an 8 percent tax on manufacturers.

The new taxes -- which would be the first broad-based tax increase under Schmoke -- would help balance the mayor's $2.3 billion budget for the fiscal year that begins July 1. Schmoke's plan will be presented today to the Board of Estimates, a panel of five top city officials. The proposal will then go to the City Council, which must approve the budget and any new tax measures.

City budget officials estimate that the energy tax would net the city $13.4 million in fiscal 1998, when it would be in effect for only part of the fiscal year. In fiscal 1999, the tax would generate $20.1 million, budget officials estimate.

"It is a fairer tax, because it asks everyone to contribute -- citizens, businesses, for-profit and nonprofit," the mayor's spokesman, Clinton R. Coleman, said yesterday.

City officials estimated that households would pay on average $52 in taxes, a calculation apparently based on an annual energy bill of about $1,300, or $108 a month.

Taxpayer and nonprofit groups immediately denounced the energy tax.

George A. Nilson, head of the Baltimore Taxpayers Coalition, questioned whether the mayor had looked hard enough at potential cost savings and noted that the tax would fall equally on residents regardless of income.

If more income is needed, he said, proposals such as an increase in parking fees would be preferable, despite concerns they might hurt businesses. The costs would be borne by anyone who parked in Baltimore, not just those who live in the city.

"I don't know what justifies millions in new taxes on the residents of Baltimore City," Nilson said.

Schmoke said that if the council doesn't support this proposal, he'd be open to covering the shortfall with any tax except an increase in the property tax or in the piggyback income tax.

Peter V. Berns, executive director of the Maryland Association of Nonprofits, was even more critical of the proposed tax.

He said that nonprofits would have to pay for the tax with money now spent on services and that the tax could discourage new organizations from coming to the city.

"The nonprofit sector in Baltimore City is one of the few growth industries," he said. "The city ought to be looking at what it could be doing to make the city more hospitable to nonprofits, rather than starting to look at them as a source of revenue."

Schmoke's plan to cover the city's projected $18.1 million shortfall also includes tapping into the $55 million surplus in police and fire pension funds. Exactly how much of the fund Schmoke wants was unclear yesterday.

"Let's put it this way, between [the pension surplus] and the new tax, that will be adequate to cover the gap," Finance Director William R. Brown Jr. said yesterday.

Schmoke is also aiming to pay for an additional $1 million allocation to the Police Department for a patrol program that focuses on high-crime neighborhoods.

The tax proposal would change current city policy that waives energy taxes for households, manufacturers and nonprofit organizations. The city places an 8 percent levy on commercial businesses.

Schmoke's plan is likely to be a hard-fought issue in the council, which has been reluctant to pass tax increases.

Last year, Schmoke tried to increase the piggyback tax by 10 percent. But the council quashed the measure and instead sought a mixture of cuts and smaller taxes.

City Council President Lawrence A. Bell III reserved judgment yesterday on Schmoke's proposal.

"It is far too early to commit to any option or combination of options," Bell said through his chief of staff, William Henry II.

Most of the $18.1 million shortfall in the city's $823 million general fund comes from pay increases for employees, who did not receive a raise last year.

Today's budget plan comes one week after the public became outraged over a proposal to shutter all recreation centers and most parks, and to end all city funding to cultural institutions, such as the Baltimore Museum of Art.

Schmoke told residents then that he would revamp the budget proposal so that those city services could be saved.

Pub Date: 4/09/97

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