Mayor seeks modest tax cut

Property tax rate would fall 2 cents annually for 5 years

Attracting new residents a goal

State Republican official calls it a political move

March 20, 2005|By Eric Siegel | Eric Siegel,SUN STAFF

Mayor Martin O'Malley proposed yesterday a 2-cent reduction in Baltimore's property tax for each of the next five years - a move that he said was made possible by the city's improved revenue picture and that was necessary to maintain and accelerate the recent pace of growth.

The mayor's plan, which needs the approval of the City Council, would mean that the owner of a home assessed at $150,000 would save $30 on the tax bill in the first year, $60 in the second and up to $150 savings in the fifth year. Cumulative savings over the five years would be $450 for that homeowner - or about $73 million for property owners citywide, according to officials.

Just a year ago, city officials imposed a package of new and increased taxes on cell phones, energy and real estate transfers. But O'Malley called Baltimore's property tax rate, which is more than twice that of surrounding jurisdictions, a "disincentive to city living."

Describing his proposed reductions as "steady, albeit modest," O'Malley said, "This is really about continuing our strategy of growth. This is about continuing what we have started."

The proposal for cutting the property tax rate - currently $2.328 per $100 of assessed value - comes as the second-term mayor gears up for a likely run for governor next year. This past week, Montgomery County Executive Douglas M. Duncan, an expected rival for the Democratic nomination to challenge Republican Gov. Robert L. Ehrlich Jr., proposed a one-year, 2-cent cut in his jurisdiction's property tax.

O'Malley's initiative comes after his persistent and often strident criticism of state and federal budget reductions that he says threaten the city's prospects.

Mayor's timing

The mayor was chided yesterday for the timing of his announcement by a top state Republican official.

"It's just politics," said John Kane, chairman of the Maryland Republican Party. "I'm sure the mayor recognizes that people like to pay less taxes rather than more taxes. So he is reducing them now to be more acceptable to Maryland voters.

"I think it makes it clear that it was mere rhetoric in the past, blaming someone else for the city not being able to take care of itself," Kane added.

O'Malley acknowledged that some would ascribe political motives to his proposal. But he added that "most people will understand this as part of a broader growth strategy" of boosting revenue by attracting people to the city, which has seen its population level off after decades of decline.

The mayor pointed out that Ehrlich raised the state's property tax rate by 5 cents two years ago - part of an effort to close the state's budget gap - and said he hopes the General Assembly will repeal the increase. He was joined in that call by a spokesman for Duncan, David Weaver, who said, "What's really needed is a rollback of the Ehrlich property tax hike."

Support for plan

As for his own proposal, the mayor seems to have wide initial local support.

He announced his proposal at a groundbreaking ceremony in Locust Point for a $50 million luxury townhouse development by Pulte Homes - and he was joined on stage for the announcement by City Council President Sheila Dixon.

"This is the time to do this," Dixon said of the reductions. "I believe the rest of my colleagues will work to make this happen as well."

But Dixon cautioned, "We've got to assess it every year as we move forward."

Several council members who attended the announcement expressed enthusiasm for property tax cuts but said they'd like to examine the possibility of reducing other fees and taxes.

"While I'm glad to see this effort, I'd like to see it expanded," said Councilwoman Belinda Conaway, who represents West Baltimore's 7th District.

Tracy Gosson, executive director of Live Baltimore, a nonprofit group that promotes city living, said the proposed cuts would give people incentive to buy homes in the city.

"I think it's stellar," she said.

Kirby Fowler, president of the Downtown Partnership, a business group, agreed that the cuts would be a "tremendous shot in the arm" in efforts to attract and retain companies.

"It's incredibly great news for large property owners downtown as well as individual homeowners," he said.

The first year of the proposed tax cut would be part of the 2006 budget that begins July 1. O'Malley's spending plan is scheduled to be presented before the Board of Estimates on Wednesday.

Even with the proposed 2-cent property tax cut, which would cost the city an estimated $5 million in the first year, property tax revenues are projected to be $556.1 million, city officials said. That's an increase of $21 million over the current year, which officials attribute to the city's booming market for new and existing homes.

The city's 4 percent cap on annual increases due to rising assessments would not change under the proposal, officials said.

Seeking advantages

If approved by the council, the first year's property tax cut would bring the city's property tax rate to its lowest in three decades, officials said.

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