Mayor pushes boost in taxes

O'Malley to ask council to approve increases to avoid cutting 500 city jobs

Hoping to cover $40 million hole

Plan seeks 4% energy tax, cell phone, real estate fees

April 22, 2004|By Tom Pelton | Tom Pelton,SUN STAFF

To prevent more than 500 municipal job cuts, Mayor Martin O'Malley said yesterday that he intends to ask the City Council to impose new taxes on utility bills paid by residents, churches, manufacturers and nonprofit organizations, among others.

In addition to a 4 percent energy tax, O'Malley is seeking approval for a $3.50 monthly tax on cellular phones that have city billing addresses and an increase in fees on real estate purchases.

O'Malley said he hopes the increases, taken together, would cover a roughly $40 million hole in the city's budget for fiscal 2005 that he said was caused in part by the national economic slump and cuts in federal and state aid.

"We have a budget that is suffering from cuts passed through from the state and federal governments, so we are left with shortfalls," O'Malley in a morning news conference at City Hall. "Last year, we were able to avoid raising taxes. But this year, we are unable to do this."

The City Council is scheduled to receive O'Malley's proposals by Monday along with his $2.1 billion budget for fiscal 2005, which begins July 1.

If the council does not approve tax increases before June 30, the administration's draconian spending plan calls for laying off 182 police officers, reducing trash collection, eliminating the city's recycling program, cutting back on fire protection and closing the central library on Sundays, among other measures.

"This is the worst budget in my 20 years of service," said Edward J. Gallagher, the city's budget director. "We've never had to cut so deeply. ... But we're sending a revenue package to the council because we know these service reductions are not acceptable. It is the council's responsibility to set the tax rates. Working as a team, they will resolve this."

The mayor's proposals drew a mixed reaction. Council President Sheila Dixon said she'll study the plan while some council members acknowledged the city must raise taxes to prevent drastic cuts. But some residents, churches, manufacturers and nonprofit organizations complained that the city already has among the highest tax rates in the state.

"It's a zero-sum game," said Dennis O'Shea, a spokesman for the Johns Hopkins University. "You tax a soup kitchen, you harm its ability to feed the hungry. You tax a hospital, you harm its ability to heal the sick. You tax a school, you harm its ability to educate."

City Councilman Kenneth N. Harris Sr. said that the mayor was putting the ball in the council's court by warning of deep cuts in service if 10 of the 19 council members don't agree to raise taxes.

"The strategy is that this puts pressure on the council to come up with a revenue package to prevent layoffs and prevent all of these cuts," Harris said. "This forces the council's hand, so we have to act."

The numbers in O'Malley's proposal may change by Monday. But the proposal on the table yesterday was to require manufacturers, residents, nonprofit organizations and churches to begin paying a 4 percent energy tax on electricity, gas, oil and other energy bills.

The city would continue an 8 percent energy tax it already imposes on nonmanufacturing businesses.

In addition, the city would raise taxes on phones. The average homeowner now pays about $2.22 per month in local taxes for each telephone line. That would increase to $3.50 per month and be expanded to cover cellular phones and pagers for the first time.

The city would also nearly double the recording tax on real estate purchases, from $2.75 per $500 of transaction price to $5 per $500, according to O'Malley's proposal.

"I think there are a lot of jurisdictions that are going to have to raise taxes to make ends meet this year," said Michael Sanderson, legislative director of the Maryland Association of Counties. "A lot of jurisdictions got more money from the state for schools but cuts in other areas of local aid."

Mike Galiazzo, executive director of the Regional Manufacturing Institute, said some of the trade group's members have told him that imposing an energy tax could force them to cut payroll.

"Some of my folks said, `Yes, we would have to lay off people if this passes,'" Galiazzo said. "Potentially, it could mean manufacturers would have to relocate."

Jim Ruggiero, director of energy procurement for National Gypsum, a manufacturer of gypsum wallboard, ceilings and other products, said that he might be forced to move some production from the city to neighboring states.

"Taxes are a tremendous burden on us," Ruggiero said.

The Rev. Gregory B. Perkins, pastor of St. Paul Community Baptist Church in East Baltimore, said the energy tax will hurt the ability of churches to help the needy.

"We use the small amounts of donations we receive to minister to the least, the last and the lost," he said.

Peter Molan, president of the Tuscany-Canterbury Neighborhood Association, said he is glad to hear that O'Malley is not considering raising the property tax rate.

"Oliver Wendell Holmes said taxes are what we pay to live in a civilized society," Molan said.

But David Blumberg, president of the Roland Park Civic League, said raising phone taxes and energy taxes isn't much better.

"No one wants their taxes raised," he said. "This may be just another nail in some people's decision to stay in the city or not."

Sun staff writer James Gallo contributed to this article.

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