A fresh look might ease money woes

Urban Chronicle

Budget: Resurrecting some old ideas and floating some new ones could bring in revenue to make the annual spring ritual less uncomfortable.

April 01, 2004|By Eric Siegel | Eric Siegel,SUN STAFF

IT HAS become almost a Baltimore rite of spring.

As winter fades, the city administration presents its budget for the new fiscal year that begins July 1 - often accompanied by dire forecasts of the draconian cuts in services that will be required unless new sources of revenue are found.

This year is no exception. Mayor Martin O'Malley says he will have to lay off more than 500 city workers unless he can find ways to generate more money. He proposes to do just that by imposing an energy tax on nonprofit groups, putting a new tax on cell phones or raising the limit on tax increases for homes, measures that are drawing howls of protest from many of those who would be affected.

What makes this latest manifestation of financial distress so disappointing is that it comes amid signs of a turnaround in the city's fortunes, from a decrease in crime to an upsurge in housing prices.

Clearly, the resurgence is either not all it's been cracked up to be or it's too new and too narrowly focused to offset the effects of widespread poverty.

Just as clearly, it's high time to resurrect some long-neglected ideas for generating money for the city - and float some new ones - that go beyond putting the squeeze on the city's residents and institutions.

Ideas such as some sort of commuter tax.

A study two years by the Johns Hopkins University Institute for Policy Studies estimated that a modest 1 percent income tax on Marylanders who work outside the jurisdiction where they live would net Baltimore about $32 million a year, an amount roughly equal to the projected shortfall in the city's coming budget year.

Because a commuter tax would need General Assembly approval, the idea has long been considered impractical, if not impossible. But one often-noted impediment - the notion that if Maryland had a commuter tax, Washington would impose a tax on commuters into the District of Columbia - has been eliminated: A federal judge threw out last month a lawsuit that sought to give Washington the authority to tax commuters.

And what if instead of a direct tax on commuters, a small portion of state revenues was earmarked for a pool to be divided among jurisdictions, including Baltimore, that provide jobs for large numbers of employees who live elsewhere? Distribution of the money could be modeled on an existing state grant that directs money by formula to the state's poorest jurisdictions.

The Hopkins study that examined the commuter tax estimated that a 1 percent regional sales tax, earmarked for cultural and recreational facilities and modeled after a program in the Pittsburgh area, could save Baltimore $25 million that the city now spends maintaining city parks and museums.

The concept has never taken hold here, mostly because it, too, required state legislative approval. But what if the member jurisdictions of the Baltimore Metropolitan Council - the city and Anne Arundel, Baltimore, Carroll, Harford and Howard counties - each agreed to impose a small local income tax increase - say, a quarter of a percent - to support major cultural attractions that are an asset to the region but are concentrated in the city? The city would still see a net gain.

While we're on the subject, business and political leaders often talk about the need for the region to have a healthy core but do little of substance to back that up. How about a sustained push for tax-base sharing, in which the entire region shares in part of revenue from new developments, as is the case in Minneapolis-St. Paul?

The National League of Cities suggests in its municipal policy recommendations that the federal government pay taxes on its exempt property. In Baltimore, where the federal government has half a billion dollars' worth of untaxed property, that would mean annual revenues of about $12 million. If Maryland paid taxes on its $2 billion worth of exempt city property, that would add $46 million.

And what if the state and federal governments gave incentives to people to live in the city, similar to tax breaks routinely offered to businesses. Imagine those governments designating the city a distressed area and giving five-year income tax credits to residents who moved here as renters or homeowners.

A stream of young singles flowing into the city, with college loans to pay off and few if any deductions, could become a torrent. Some might use the savings as down payments on homes, helping to stabilize neighborhoods and increase the property tax base. Empty-nesters, too, would have another reason to move to the city. And Baltimore would still get the benefit of its 3 percent city income tax.

These ideas are controversial and might be costly. But they, and any others, deserve consideration. The alternative is a perpetuation of the springtime budget ritual until everyone is fiscally tapped out, and the city is only marginally better off.

Then what?

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