Bleak realities

Budget prospects: Overspending and a fall in outside aid presage difficult times for Baltimore.

April 02, 2002

THE GOOD NEWS is that Baltimore's property tax revenues, fueled by strong home sales, are rising. But property taxes raise only 28.7 percent of the city's revenues.

In fact, 34.5 percent of Baltimore's $1.7 billion annual operating budget comes from the state and federal governments. Both are slashing aid, due to recent bad economic times. The modest growth in local revenues will not compensate for those cuts.

This is the bleak picture Mayor Martin O'Malley faces in preparing the city's budget for the fiscal year starting in July. Making matters worse is the reality that the city has an $8 million gap in the current year's budget, largely because of unanticipated spending on security in the wake of last September's terrorist attacks.

The O'Malley administration's budget plan calls for laying off 121 city workers and eliminating 379 vacant positions.

When the crunch comes, the mayor is likely to try to reduce the number of layoffs by cutting services that are deemed non-essential. City parks could receive less care, and building maintenance could be postponed.

However, the mayor has pledged that there will be no property tax increase. That's a relief. Baltimoreans, after all, are already by far the state's most heavily taxed homeowners.

Even if the national economy turns around, Baltimore's predicament will not end. Too much of the budget is simply stopgap financing.

One example is the pioneering "payment in lieu of taxes" agreement the city negotiated last year with major nonprofit institutions. It will raise $6 million in the next fiscal year.

The voluntary agreement will expire in another two years. But it's likely that colleges, hospitals and foundations will be asked to continue their payments.

This may be a perfectly legitimate expectation. But it shows that what begins as a one-time offer of help tends to turn into a long-term tax in a fiscally strapped city.

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