Council may push tax cut O'Malley, Bell say Schmoke too cautious about extra money

'Conservative budgeting'

Mayor's chief analyst says surplus is result of one-time revenue

May 19, 1998|By Robert Guy Matthews | Robert Guy Matthews,SUN STAFF

In one year, Baltimore has gone from a financially strapped city that closed recreation centers and threatened to raise taxes to having $60 million in extra cash in the city budget.

Mayor Kurt L. Schmoke wants to spend those millions -- the result of a strong economy -- on pay raises, additional police officers and capital improvement projects.

But as the City Council begins to scrutinize the mayor's $1.8 billion spending plan this week, some members are saying the city is so flush that it's time for a property tax cut.

"If you can't do it in the year you have a surplus, when can you do it?" said Northeast Baltimore Councilman Martin O'Malley, who supports a nickel reduction in the property tax, now $5.85 for each $100 assessed value.

Each 5-cent drop costs the city about $4 million in revenue.

In coming weeks, a philosophical debate could emerge between Schmoke loyalists and Schmoke opponents on the council over the city's budget: Should the city put forth a budget, like Schmoke's proposal, that spends the $60 million and offers no tax cuts?

Or, should tax relief be the priority?

The city's general fund this year rose from $815.3 million to about $877 million, a $61.7 million increase.

The general fund includes the taxes and other revenues the city generates and is one of the chief operating funds in which city officials may move money from one project or program to another.

Schmoke has cautioned that the growth in the city's coffers is largely the result of one-time revenues and that it would be fiscally irresponsible to cut taxes when the money won't be available to the city next year.

Council President Lawrence A. Bell III contends that some of the $60 million extra this year came from increased tax collections that shouldn't be counted as one-time sources.

About $24 million is from one-time sources, but nearly $33 million this year comes from an increase in revenues from levies such as the income, transfer and recordation, hotel and admission taxes, along with parking revenues. That money is showing no sign of slowing, city budget analysts say.

"We should have another year or two of a good strong economy," said Edward J. Gallagher, the city's chief budget analyst.

Schmoke cautions that the bottom could drop out of the economy, sending Baltimore back to the brink of financial failure. Cutting the property tax could leave the city in worse condition in coming years, Gallagher said.

"We're budgeting that the economy does not hold up," Gallagher said. "That's called conservative budgeting."

Bell said the mayor is being overly conservative.

"I understand that it is better to be somewhat conservative and not overly dependent upon good times, but by the same token we ought not be overly limited by the convenient characterization of certain revenues as one-time-only revenues," Bell said.

"We all need to continue to study the very concept of one-time-only money, because arguably virtually all of the money we have is one-time-only money because the economy has never been an absolute constant."

O'Malley said he will look at the $45 million in capital projects that the mayor wants to fund this year as places to cut. He would like to steer the resulting savings to schools, police or tax cuts.

Because the council is permitted to cut money from the budget but not to add or move money among departments, the members will have to persuade Schmoke to approve their suggestions.

This year, the mayor wants to double the amount from the general fund that the city spent on capital improvement projects in 1997, which was $19.7 million. In 1996, the city spent $1 million.

"We have such a huge backlog of capital needs that we have deferred over the years," Gallagher said.

A large chunk of money would pay the city's share of a required $17 million upgrade to BRESCO, the city's incinerator.

An additional $5 million is a loan to the Wyndham Inner Harbor East Hotel and a $3 million expansion to the city's Internet system and human resources center. The mayor also proposes increasing Police Department funding by $2 million.

The mayor also is budgeting $7 million for salary increases for police and fire employees, $2 million for an additional 52 police officers and $3 million to keep 13 recreation centers open for another year.

The $373 million capital budget, which includes bond money, state and federal grants and general fund money, will fund major projects, including $15 million for street resurfacing and $15 million for school construction.

For the next several weeks, council members will wrestle with the mayor's proposed spending plan. The budget must be balanced and approved by the council and the mayor before July 1.

The Baltimore Homeowners' Coalition has urged the council in writing to cut at least 5 cents from the property tax rate.

The school board recently met with the council over lunch to push for more money. Other lobbying groups have met with council members to see whether they could get support for their projects.

Lois Garey, who represents southern and southwestern Baltimore, said the council needs to consider providing more money for education.

Under pressure from parents, elected officials and city school board members, Schmoke has increased the city's annual contribution to public schools by $2 million, to $197.5 million.

But the mayor is recommending that $1 million of that money be for the Super Kids Camp, an intensive eight-week summer program for children entering the third grade who are not reading at grade level.

The mayor also aims to increase the city's contribution to the Enoch Pratt Free Library by 10 percent.

Pub Date: 5/19/98

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