O'Malley lobbies for three tax plans to avoid city cuts, layoffs

Manufacturers, residents will leave, opposition says

April 25, 2004|By Tom Pelton | Tom Pelton,SUN STAFF

Facing resistance to parts of his $40 million tax proposal, Mayor Martin O'Malley is waging a lobbying campaign with City Council members, manufacturers and nonprofit organizations.

Manufacturers are warning that imposing an energy tax could prompt layoffs or movement out of the city. Some council members suggest it would be unfair to force the tax on small churches or the poor.

"None of us want to raise any taxes," said O'Malley, who has been holding private meetings in City Hall to explain his proposal. "But we made a decision that the way we would get through this is to ask everyone to sacrifice a little bit."

Struggling with rising retirement costs and cuts in state funding, O'Malley is scheduled to work with City Council President Sheila Dixon to introduce three tax bills at tomorrow's meeting. Together, the measures would raise enough money to close a $40 million gap in the budget for the fiscal year starting July 1.

One proposal would impose a 4 percent energy tax on manufacturers, residents, churches, nonprofit organizations and state and federal office buildings. Another would create a $3.50 monthly fee for cell and conventional phones with billing addresses in the city, and a third would raise the fees people pay when they buy real estate.

For a household with a $150 monthly gas and electric bill, plus a cell phone and conventional phone, O'Malley's proposed tax increases would cost about $114 a year.

Without these new taxes, O'Malley has warned he will have to eliminate more than 500 municipal jobs - including 126 police officers - reduce garbage collection, get rid of the city's recycling program and cut back on fire protection.

Councilman Keiffer J. Mitchell Jr., chairman of the council's tax committee, said he would like to exempt manufacturers from O'Malley's proposed tax on electricity, gas, oil and other energy consumption.

"We've lost a lot of manufacturing jobs, and I just don't think we can afford to lose any more," said Mitchell. He added that he might look at exempting others, too, such as small churches.

Mitchell's opposition is shared by some other council members and Tim Stansbury, plant manager of the General Motors plant on Broening Highway. The facility employs 1,400 workers and builds 50,000 vans a year.

"It's a horrible idea," said Stansbury, who expressed his displeasure during a meeting with the mayor in City Hall Wednesday. "The impact on us would be at least $500,000 a year. It would significantly impact our competitiveness, not only in Baltimore but in GM as a whole."

Councilman Robert W. Curran said he would also oppose the energy tax on manufacturers. "The fear is that General Motors is here on a thread, and if they are given any other reasons to move, we really don't want to see that," Curran said.

O'Malley does not want to make exemptions for manufacturers or anyone else. Other businesses in the city pay an 8 percent energy tax, which would remain unchanged.

"We're asking manufacturers as well as residents, nonprofit institutions as well as churches, to join with one another in sacrificing a little bit so that we can continue to improve public safety in the city and meet the obligations we have to the people and children of the city," O'Malley said.

O'Malley's public relations offensive includes meeting with City Council members in one-on-one sessions. He's also showing computerized visual presentations to groups of manufacturers, nonprofit organizations and church leaders.

A spokeswoman for Council President Dixon said she has questions about imposing the energy tax on residents.

Councilman Nicholas C. D'Adamo Jr. said: "I don't like the idea of raising any taxes, period. ... This is just another way of driving people out of the city."

But Councilwoman Lois A. Garey said she doesn't want to create loopholes for the energy tax.

"If we make an exemption for the manufacturers, then next we'll take the churches out, and then the poor people out, then everyone else," she said. "If we don't raise these revenues, then we have to look at the cuts we'd have to impose - on the police officers and on trash collection. We have to maintain these services."

O'Malley contends that his need to raise taxes stems from cuts and unfunded mandates imposed by Gov. Robert L. Ehrlich Jr. and President Bush.

"What we're asking for is to keep local government functioning in the wake of a trillion dollar federal tax cut and the $600 [million] to $800 million state tax cut," O'Malley said.

But a close reading of O'Malley's proposed budget shows that only a fraction of the city's projected $40 million shortfall for next year can be traced to the $8 million in state and federal aid cuts.

More significant is a $9 million - or 20 percent - rise in retirement costs for the city next year. The city has to make a larger contribution to pension funds because the investments of the city's retirement boards were hammered by the stock market, city officials said.

The city will also have to pay an additional $10 million - or 15 percent - for debt-service costs related to development projects, such as rebuilding the west side of downtown. The city is giving $6.7 million more in tax breaks during next fiscal year to try to stimulate growth. And the city has seen a $4.6 million drop in income tax revenues because of a loss of jobs.

Stephen Kearney, a spokesman for the mayor, noted that the state and 13 other jurisdictions - including Howard, Anne Arundel and Montgomery counties - raised taxes last year while the city did not.

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