City officials lobby against tax-credit cap

They fear projects will be hurt by plan

February 28, 2002|By Gady A. Epstein | Gady A. Epstein,SUN STAFF

Top Baltimore officials traveled to Annapolis yesterday to urge legislators not to put stringent caps on a historic tax credit program that has greatly benefited the city.

They told lawmakers the tax credit is too good to limit, and one went so far as to recommend canceling this year's planned state income tax cut to pay for it and other programs.

The tax credit, which helps finance the rehabilitation of older buildings in historic areas, has soared in popularity in the past few years, at a potential cost to the state of $50 million to $84 million a year, according to the latest estimates by legislative analysts.

Leading legislators have introduced bills to put a cap on the tax credit as low as $20 million a year, which city officials and developers said yesterday would wipe out projects that have been in the works for years and stifle a rebuilding boom in Baltimore.

"It has been the single most effective tool, I believe, to encourage growth and development in the city," Mayor Martin O'Malley said yesterday in testimony before the House Ways and Means Committee, which is leading the charge to curtail the tax credit.

"I understand you have to contain costs ... but I hope that we don't swing the pendulum all the way in the other direction and kill the very good projects that we have coming on line that are going to generate a lot more tax dollars for the state of Maryland," he said.

O'Malley aides came to Annapolis with several proposals, chiefly that the tax credit, now worth 25 percent of the cost of rehabilitation of a building, be reduced to 20 percent, without an overall cap to the cost of the program.

That is unlikely to impress legislators: A reduction to 20 percent is already in the House bill, and House Speaker Casper R. Taylor Jr. testified at yesterday's hearing to make clear that limiting the cost of the tax credit is a top priority for him this session.

But comments from O'Malley, other public officials and members of the committee clearly demonstrated yesterday that the tax credit debate will be about more than the merits and costs of one government program.

Because most of the money from the tax credits pours into the city, the fate of the program may be intertwined with the rest of the city's priorities in Annapolis, including drug treatment funding and education. And because there's not enough money to go around in a tough budget year, O'Malley and others want state leaders to forgo a planned 2 percent income tax cut for this year.

In an interview after his brief testimony, O'Malley challenged top state leaders to cancel the tax cut -- at an estimated savings of $177 million -- arguing that President Bush and Congress have made a tax cut unnecessary by passing their own federal cuts.

Others echoed those sentiments in their testimony yesterday.

"Keep that money," Baltimore City Council President Sheila Dixon said of the income tax cut.

The issue of cost is sensitive for city legislators, who have to compete with legislators from around the state who think Baltimore gets more than its fair share.

"Everyone back home is blaming us and trying to make us look bad in Annapolis," said Del. Clarence Davis, co-sponsor of the bill to limit the tax credit, in comments to a panel of city officials and others. "Who should get this money? ... Is your program more important than the health benefits for our poor and uninsured? Is your program of greater value than the enhancement of quality education for our poor children?"

Davis, an East Baltimore Democrat, lambasted O'Malley for leading the charge in blaming legislators, saying the mayor implied they were heartless to consider cuts to drug treatment, the mayor's top issue this session.

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