Despite a healthy increase in property values last year, city officials say they had hoped for even better and still face a budget shortfall of tens of millions of dollars for the next fiscal year.
The city stands to receive less than $3 million in additional revenue from the 2000 property reassessments - a full $4 million less than initially expected for the next budget year, officials say.
The disappointing news comes at a time when everything has seemed to be going right for Mayor Martin O'Malley in recent months, with violent crime down, city home sales up and downtown businesses booming. But city officials say they are not dismayed by the unexpected shortfall.
"It's not a reason to panic," said mayoral spokesman Tony White. "It means that [Finance Director] Peggy Watson and her office will have to do some more creative financing."
Officials estimate that the city faces a shortfall of as much as $25 million for the budget year that begins July 1, and O'Malley already has asked for cuts from a wide array of city departments to help pay for his heavy investment in fighting crime, which has been his top priority.
A number of downtown businesses might be baffled, though, at the notion that the city isn't getting as much out of property taxes as had been hoped. Building values in the central business district shot up almost $300 million, or close to 20 percent, last year - with two office towers nearly doubling in assessed value, to the consternation of taxpaying businesses.
But the nearly 1,000 taxable properties downtown were only a small part of the story in assessments last year, because an entire third of the city is revalued every year.
"The city does not live or die by downtown," said Douglas E. Brown, public policy analysis supervisor for the city Finance Department. "It's about 9 percent of the city's property tax base. You can't balance the budget on downtown."
An additional 67,000 properties outside of downtown - roughly the northern third of Baltimore - were also reassessed last year.
Those didn't fare as well: The tax base outside of downtown only inched upward, resulting in an overall increase of 3.4 percent for all properties assessed last year.
"We were looking for at least another percent, minimum," Brown said.
Worse, more than 19,000 of those homes and businesses - nearly 30 percent of all that were assessed - declined in value, the largest drop for that group of buildings in the past decade, Brown said.
"We just did not anticipate [this] kind of devaluation," said Brown, who added that he does not know where the most declines were.
The swath of North Baltimore that was assessed includes upscale Guilford, Roland Park and Homeland, but it also includes some depressed neighborhoods.
"We're talking about Belair-Edison through Forest Park, and we're talking about pockets of not-very-robust areas," Brown said.
Compounding the problem for the city, declines in assessed property value take effect immediately, reducing tax receipts from those properties.
The effect of increased assessments, however, is phased in over three years, and tax increases are capped at 4 percent a year for homeowners - somewhat muting the city's tax gain.
That essentially means that if a $300,000 house in Guilford goes up $30,000 in assessed value, the city's tax gain on that home for the coming year would be wiped out by a $10,000 decline in value at another house elsewhere.
The real property tax is by far the single largest source of revenue for perennially cash-strapped Baltimore, accounting for about 20 percent of the city's funding from all sources.
The tax rate of $2.328 per $100 in assessed value - which has been adjusted from $5.82 under a new state law that changed how property taxes are calculated - nets the city close to $400 million a year.
With O'Malley expected to issue next year's proposed budget in coming months, city departments are preparing to tighten belts.
The city must have a balanced budget, and officials have said publicly that they estimate the budget shortfall for next fiscal year at well over $20 million.
The disappointing property tax numbers "widened the gap," Brown said. "The big shocker is we were looking for more and how could we be so naive."
