O'Malley considers tax, fee increases

Mayor looks at boost in income levy, assessment limit to plug budget gap

April 15, 2004|By Tom Pelton | Tom Pelton,SUN STAFF

Mayor Martin O'Malley revealed yesterday several tax and fee increases he is considering to fill a projected $40 million hole in the budget for the fiscal year starting July 1, including a possible increase in the local income tax rate.

"No one is going to be happy about higher taxes," O'Malley said during a City Hall news conference. "But we just can't cut any more, because we've been cutting and cutting and cutting over the years."

O'Malley blamed the city's fiscal troubles in part on Gov. Robert L. Ehrlich Jr.'s budget, which O'Malley said was paying for the Thornton Commission plan to increase education funding by cutting other local aid, including state grants for parks and police.

The state budget for the year starting July 1 gives Baltimore schools a $51 million increase over this year, but cuts by $8 million government programs controlled by City Hall, which is independent from the school system.

"The way the shell game is working, Thornton is increasingly being funded by ... taking more from local government," O'Malley said.

The revenue-generating options that the mayor said he might submit to the City Council on Monday or a week later, on April 26, include:

Raising the local income tax rate from 3.05 percent to 3.20 percent, generating about $7 million and making it among the highest in the state.

Raising about $8 million by nearly doubling the recording tax paid when real estate is purchased. The tax would jump from $2.75 per $500 of the transaction price -- among the lowest rates in the state -- to $5 per $500 -- tied for the highest.

Imposing a $3.50 per month fee on each cell phone with a city billing address. This could produce about $20 million per year.

Creating an 8 percent energy tax for the electricity, gas and other utilities used by nonprofit organizations in the city. This could generate about $6.8 million a year.

More than doubling the real estate tax limit the city imposes on the annual rise in taxable property assessments, from a maximum of 4 percent a year to 10 percent. This would bring the city about $6.6 million a year.

The increases would total $48.4 million for the city next year, $8.4 million more than O'Malley would need to close the projected $40 million budget deficit. The gap is about 1.9 percent of the projected $2.1 billion budget for fiscal 2005.

But O'Malley and City Council members said yesterday that the council might oppose raising the real estate tax limit and other tax increases. So the mayor is meeting with council members to determine which tax increases would be the most palatable.

O'Malley said he hopes to find support for the increases by June, so he can prevent most of the 533 municipal job cuts -- including many in police and public works -- that his budget director has predicted might be necessary to balance the budget.

City Councilwoman Stephanie C. Rawlings Blake, chairwoman of the budget committee, said she is concerned about raising the income tax because many low-income people also will be hurt by other fee increases next year. These include a new state "flush tax" of $30 per year to be paid by sewer system users, and a 27 percent increase in city water and sewer rates over three years.

But she conceded that the city has few choices. "With the budget gap, we have to look at opportunities to enhance revenue," Rawlings Blake said.

City Councilman Kenneth N. Harris Sr., who represents Northeast Baltimore, said he opposes raising the tax limit because it would force people to pay more in property taxes.

"I can't support that, because we are trying to promote home ownership and promote people moving into the city, and that would send the wrong message," Harris said.

City Councilman Nicholas C. D'Adamo Jr., who represents downtown, Canton and other waterfront areas, said: "Do I feel people are paying enough taxes in the city of Baltimore? Yes, I do. But I have to sit down and talk to the mayor to hear where he's coming from."

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