Mayor Martin O'Malley backed away yesterday from his proposal to impose an 8 percent energy tax on Baltimore's nonprofit institutions and instead agreed to a plan under which the city's hospitals and major colleges would pay $20 million over the next four years.
The tentative agreement ended a week of intense negotiations in which O'Malley stood firmly behind his proposal to expand the energy tax to include nonprofits while the institutions lobbied for making voluntary payments to the city.
"I think it's a win-win," O'Malley said. "The energy tax was kind of a crude mechanism ... and given the fluctuating prices of energy these days, it was a scary thing for the nonprofits."
O'Malley said the City Council agreed yesterday to delay its scheduled Monday night vote on the budget so that both sides would have time to work out the fine points of the agreement.
The agreement should go before the Board of Estimates for final approval Wednesday, he said.
As it stands, 22 institutions would pay a total of $4 million for the next year, $6 million in each of the two years after that and $4 million in the fourth year. The Johns Hopkins University and its medical complex would make more than half of the payments.
Hopkins Provost Steven Knapp, who had been frustrated by the pace of the negotiations, said yesterday that the agreement was "a sign of partnership" and that levying an energy tax on the nonprofit organizations would have been "a mistake."
"This approach, we think, really does address the mayor's specific needs," Knapp said. "We're very pleased."
Under the plan, Hopkins would pay $2.1 million next year, $3.1 million in each of the next two years and $2.1 million in the fourth year.
O'Malley proposed this year extending the energy tax, currently imposed on businesses, to include nonprofit groups. The idea was to raise $4 million next year, avoid some layoffs and help balance the nearly $1.7 billion operating budget for the fiscal year that will begin July 1.
Negotiations between the administration and the nonprofit groups took a significant turn after the City Council tentatively approved the tax Monday night. The council amended the measure to exempt churches, charities and many other organizations, leaving the tax to apply to colleges, universities, hospitals, nursing homes and other medical facilities.
Review after 4 years
In addition to Hopkins, other groups in the agreement include Maryland Institute, College of Art, the College of Notre Dame of Maryland, Mount Sinai Hospital, Mercy Medical Center and the University of Maryland Medical System. The agreement would be reviewed after four years.
"We've been talking about this for 30 or 40 years, and now it looks like it's going to happen," said O'Malley, adding that council members played a key role in closing the deal.
The agreement follows a national trend of asking traditionally tax-exempt institutions to pay for city services.
Nonprofit groups have long been exempt from paying most taxes on the theory that they provide important services, such as education and social welfare programs. The organizations also use government services, such as police patrols, snow removal and trash pickup - without having to pay for them.
In 1997, Mayor Kurt L. Schmoke faced overwhelming opposition when he proposed expanding the energy tax to include a 2 percent tax on nonprofit groups. O'Malley, then a city councilman and chairman of the council's Finance Committee, killed the proposal.
Agreements elsewhere
Several cities and counties in Maryland and elsewhere tax nonprofit groups or have long-term payment agreements.
Harvard University has been paying Cambridge, Mass., since the 1920s, and Cornell University pays significant fees to Ithaca, N.Y. Northwestern University and Evanston, Ill., are battling in court over a proposal to tax university employees.
