The failed mission of city tax cuts

Urban Chronicle

Crisis: Baltimore's policy on taxes has proven uneven and unsuccessful in maintaining adequate revenue for city services.

April 19, 2001|By Eric Siegel | Eric Siegel,SUN STAFF

THERE ARE a number of reasons for Baltimore's financial fix, chief among them the stagnation of the tax base because of the loss of population and the city's failure to adequately control costs and services.

But certainly a contributing factor are the incremental -- and ill-advised -- property tax cuts enacted over the past 12 years.

Four times since 1989, the city has cut the property tax, then as now the highest by far in the state.

The sum total of the four cuts: 3 percent.

That's 3 percent -- not nearly enough to make much of a difference to any individual taxpayer or affect the direction of the city but cumulatively more than enough to make a good deal of difference to the city's budget.

There may be a lesson here for Baltimore County, where County Executive C.A. Dutch Ruppersberger has proposed a 2 percent cut in the property tax rate.

In Baltimore, if you want to calculate the effect of the four property tax cuts, you can get out your tax bill and do the math at home. On my rowhouse, the amount of property tax "relief" last year came to $129.37.

The sum total of loss in revenue to the city: $14.9 million.

That amount would be almost enough to cover the $15.6 million increase for the police department -- a contribution Mayor Martin O'Malley persuasively characterizes as a needed investment in the city's future but one that has strained the rest of the city's budget.

Looked at another way, the lost revenue would be enough to restore proposed cuts to such popular programs as libraries, recycling, recreation, art and culture, and the community relations commission -- and still have $7.5 million left over.

And that's just this year. Over the last dozen years, by my rough calculations, the total revenue lost to the city from the incidental property tax cuts comes to about $100 million -- or about as much money as the city received in federal funds for the empowerment zone.

The oft-stated reason for the cuts was to stem the decline in Baltimore's population.

The total of the city's loss of people in the 1990s: 84,860.

"I think it's fair to say they didn't stop a single person from leaving," Joseph T. "Jody" Landers says of the cuts.

Landers speaks from a dual vantage point. As a former City Council member from the Northeast in the 1980s and early 1990s, he supported -- and, he says, "can be accused of leading" -- the early efforts at tax reduction; as executive director of the Greater Baltimore Board of Realtors, he has a view on the choices people make on where to buy homes.

One problem, says Landers, is that the cuts "were never sustained." Worried about constituents' complaints of cutbacks in services, the council, which consistently provided the impetus for the cuts, never had the fortitude to keep on a steady course of reductions, Landers said.

Without that will, the city's tax policy came across as chaotic as it was trivial: If there were a couple of extra million dollars, the property tax was shaved by a few pennies; if not, the tax remained the same.

Indeed, throughout the 1990s, there was talk of reducing the city's property tax rate to the point where it would be no more than 150 percent of that of Baltimore County.

Today, the city's rate of $2.328 per $100 of assessed value is still more than double that of the county's rate of $1.142. That's based on a new state law that calculates the rate based on full value of the property, not 40 percent or 50 percent, as in the past.

Bringing the city's property tax rate in line with the county's remains the goal of the Baltimore Homeowners Coalition.

"We don't believe the other cuts were enough," says Joseph Brown Jr., the coalition's new president. "We do believe there are more efficiencies that can be accomplished, including fleet maintenance and employee health benefits."

Landers says the high property tax is not deterring buyers of high-end properties in Roland Park and along the waterfront, who believe they are getting value for their properties and can afford the high tax bill. Though he says property taxes can make a difference to some younger families, it's a difference that a reduction of 3 percent doesn't begin to close.

"In hindsight, I can't say those reductions have made any difference at all," he says.

It is worth noting that of the few areas of the city that experienced gains in population in last month's census figures, three -- downtown, Mount Vernon-Belvedere and parts of Charles Village -- are special-benefits districts whose residents raised their property taxes so additional services could be provided.

O'Malley has ruled out raising property taxes, which he says are already too high, but he said last week that he would ask the council for a revenue increase to help him balance this year's budget. Among the items under consideration are increases in fees, energy taxes and/or income taxes.

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