Baltimore officials unveiled a bleak budget picture yesterday for next year that calls for eliminating more than 500 municipal jobs, increasing a variety of fees and reducing fire protection and trash collection.
The city should also consider increasing how much it can tax the annual assessment growth of homes, currently 4 percent, Mayor Martin O'Malley said.
The change could cost homeowners in neighborhoods with escalating real estate prices hundreds of dollars a year in additional taxes.
Just as O'Malley prepares to lend city money to help avert the need for severe layoffs in school classrooms, his top budget official said the city has barely enough to deliver its own services next year.
To balance the city's $2.1 billion budget for the fiscal year beginning July 1, it would have to eliminate 533 jobs, including police officers and trash collectors, Deputy Finance Director Edward J. Gallagher told the Board of Estimates.
Most of the jobs slated for elimination are filled, which could mean some layoffs.
"The preliminary budget plan suggests the most significant service reductions that I've seen in my 22 years," Gallagher said.
Gallagher's presentation was the first step in a three-month budget process that ends in June with the adoption of a final spending plan that officials hope will avoid the proposed cuts.
The budget blames macroeconomic factors such as the recession for lost jobs that result in less revenue from income taxes.
The budget also pins partial blame for the city's revenue shortfall on Gov. Robert L. Ehrlich Jr. State aid is shrinking by $6.1 million next year to $89.9 million.
In past years, the city's preliminary budgets have painted worst-case scenarios that often improved as revenues trickled in at levels higher than expected.
Gallagher acknowledged that the plan he presented yesterday is "not acceptable because it digs too far into services."
To avoid such cuts, he said, the O'Malley administration would introduce a package of fee increases and other revenue measures to the City Council on Monday.
O'Malley said property taxes - already by far the highest in the state - will not increase but local levies must rise in order to deliver critical services.
Such increases would affect fees related to, among other things, water use, energy consumption by companies, parking, telephone service and property transfers.
"We've been cut to a level that we can't cut any more without affecting core services," O'Malley said. "Some things may be more expensive."
The $2.1 billion preliminary budget represents a decrease of 2.2 percent, or $44 million, from the current year's spending plan.
Before the final budget is approved, O'Malley's administration will need to come up with $34 million to maintain current levels of police and fire protection and trash collection without implementing the steep cuts.
Gallagher said the $42 million loan to city schools will not affect next year's budget because it comes from a fund saved for emergencies and the school system is expected to repay most of the money by August.
To begin finding long-term solutions to revenue shortfalls, O'Malley said the city should consider raising the 4 percent cap on how much it can tax annual assessment growth of residential homes.
Under state law, the cap can be raised as high as 10 percent.
If Baltimore raised its cap to the limit, it would reap an additional $5.1 million, Gallagher said.
The city's property tax rate is $2.328 per $100 of assessed value. The owner of a home assessed at $100,000 pays $2,328 in annual taxes. If the assessed value increases, however, the city by law can only tax up to 4 percent of the jump each year. Taxing more of the increase will generate more money.
Reap the benefits
O'Malley said the average sale price of homes in Baltimore has gone from $64,000 to $114,000. In some neighborhoods, tri-annual assessments have risen 50 percent or more.
"Why do we not reap the benefit?" of that increase, O'Malley asked.
The city would not be able to increase that cap for fiscal year 2005, and any increase would need to be approved by the City Council - an action that is by no means a certainty.
But discussions are expected to begin this year in order for city officials to notify the state by Nov. 15 that they want to increase the cap for the fiscal year beginning July 1, 2005.
The struggle to find ways to increase revenues will determine whether the cuts proposed yesterday go into effect.
Even though the budget calls for cutting the Police Department's $245 million budget by less than 1 percent, it nonetheless requires abolishing 202 positions.
Of those, 186 are sworn jobs in administration, specialized patrols and investigative units.
Gallagher said the cuts, proposed by Commissioner Kevin P. Clark, would come from retirements, not layoffs.
But the proposed staff cuts were criticized by the head of the city's police union.