O'Malley to unveil '07 budget

$2.38 billion plan features tax-rate cut, more spending on police, health

March 22, 2006|By JOHN FRITZE | JOHN FRITZE,SUN REPORTER

Riding a wave of home sales still strong enough to boost the city's bottom line, Baltimore Mayor Martin O'Malley will propose a $2.38 billion budget today that reduces the property tax rate and raises spending on police, affordable housing and public health.

The proposed budget, the latest indication of the city's more rosy fiscal health, represents a 2.6 percent increase in spending over the current fiscal year and provides new money for everything from the Enoch Pratt Free Library system to the city's budding inspector general's office.

"It's a hopeful budget," said O'Malley, who is running for governor this year in part on a message of making progress in Baltimore. "It shows the beginnings of the growth that is happening in our city."

Nearly 70 percent of the city's growth in revenue next year is expected to come from property taxes and recordation and transfer fees - both of which are increasing as a consequence of the rising value of homes and new construction in the city, budget officials said. In all, the city expects to collect $89.3 million more in local taxes next year.

The budget presentation, which will be made at a Board of Estimates meeting this morning, is the first step in a long process that will include public hearings and a vote by the City Council in June. The budget will guide spending for the 2007 fiscal year, which begins July 1.

The proposed spending plan comes just weeks after the administration announced that this year's budget will contain a $60.6 million surplus - a cash infusion city leaders are still deciding how to use - and follows many lean years in which city budget makers struggled to make ends meet.

Included in the proposed budget is the second in a planned series of five annual 2-cent cuts to the city's property tax rate, which would save $30 for the owner of a home assessed at $150,000. However, many homeowners will still pay considerably more in property taxes this year than in the past because their assessments have increased.

Assessment increases are spread out and are capped at 4 percent a year, meaning the city can essentially bank on receiving even more from property taxes as the higher valuations are phased in.

Given the city's fiscal strength, some at City Hall are suggesting the administration should consider rolling back taxes even more - including by repealing a series of tax increases supported by the O'Malley administration in 2004. Those increases nearly doubled the recordation tax and tacked a $3.50 monthly fee onto telephone bills.

Councilman Keiffer J. Mitchell Jr., who is chairman of the City Council's committee on taxation, said he will introduce legislation next month to eliminate an energy tax the administration imposed on residents in 2004. That tax will grow next year, on top of large rate increases proposed by Baltimore Gas and Electric Co.

"We have to step up and do something," said Mitchell, who also has supported a number of new property tax credits. "Considering what's happening with the BGE rate increase ... I think this is the fair thing to do."

The city's tax on energy, which includes electricity, gas, steam and fuel oil, is expected to bring in $29.5 million in fiscal year 2007, a city official said. That projection is slightly lower than what is expected to come in this fiscal year, $31.7 million.

Others, especially city Budget Director Raymond S. Wacks, continue to sound a note of caution about spending as the real estate market shows signs of cooling. The number of housing units sold in the city last month declined 20.5 percent compared with February 2005, according to budget documents.

"The news is almost too good," Wacks told top city leaders, including O'Malley, at a briefing on the budget yesterday. "The danger for us is that it can't continue at this rate."

About $2.02 billion of the city's budget would go toward day-to-day operating expenses - a 6.1 percent increase over last year - while $361.9 million would be reserved for construction and other capital expenses. The budget calls for a 5.3 percent increase for the operations of the Police Department, to $288.4 million, and a one-tenth of 1 percent increase to the city schools, to $204.3 million.

With a projected enrollment decline of 2,400 students next fall, that represents about a $67 increase in the city's education funding per pupil, officials said.

The city's Health Department, meanwhile, would realize a 10.4 percent increase in its budget to $24.5 million, including $1.3 million designated to expand testing for HIV and maintain the Men's Health Center on North Avenue. Part of that money would be used to implement new DNA testing that can more quickly identify patients with HIV.

"This money is not just for the Health Department," said Dr. Joshua Sharfstein, Baltimore's health commissioner. "It's for the Health Department to collaborate with community organizations to maximize the impact we can have."

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