Dixon studies tax cut method

O'Malley's annual 2-cent reduction is up for reconsideration

February 16, 2007|By John Fritze | John Fritze,Sun reporter

Baltimore Mayor Sheila Dixon backed away yesterday from a commitment made by her predecessor to cut the city's property tax rate by 2 cents annually - potentially ending a policy that lowered Baltimore's tax rate to its lowest point in decades.

During a news conference in which she named a new task force to make long-term property tax relief recommendations, Dixon would not commit to continuing annual 2-cent reductions billed by then-Mayor Martin O'Malley as the best way to cut Baltimore's tax rate, which is the highest in Maryland.

The shift away from the annual reductions and toward what she promises will be a more comprehensive overhaul of the city's tax structure represents one of Dixon's most significant breaks from the O'Malley administration so far.

FOR THE RECORD - An article in yesterday's Maryland section incorrectly stated that the city of Baltimore recorded a budget surplus in the current fiscal year. The surplus was achieved in the previous fiscal year, which ended in 2006.
The Sun regrets the error.

When asked directly whether she will include the 2-cent reduction in next year's budget proposal, Dixon said: "I'm committed to evaluating it as we deliberate over this budget."

Asked to clarify, she said: "It's on the table, and I'm looking at our entire budget. We have a lot of needs in our budget."

Unlike many of the nation's rust belt cities, Baltimore has benefited from a real-estate boom in recent years that increased the amount of money collected in property and recordation taxes. In the current fiscal year, the city expects to post a $61 million surplus, the second surplus in as many years.

In March 2005, O'Malley announced the city would knock 2 cents off the city's property tax rate every year for five years, a commitment that was kept in the two subsequent budgets.

In the first year of those cuts, the owner of a home assessed at $250,000 saved $50 a year. By year five, assuming a constant assessment, that homeowner would have realized an annual savings of $250.

Dixon, who became mayor last month when O'Malley became governor, attended the 2005 announcement of the five-year tax plan, said she supported the effort and voted in favor of it on the council and Board of Estimates. She did express caution at the time, noting that the city would have to "assess it every year as we move forward."

Dixon named 20 people to a task force yesterday to look into other solutions for reducing property taxes, but that committee will not make its recommendations until a week after the Sept. 11 primary election. The budget for fiscal 2008, which begins July 1, must be completed early this summer.

Dixon named Comptroller Joan M. Pratt as a co-chair of the committee even though Pratt has said she will run against Dixon this year. Both Dixon and Pratt said politics will not play a role in the committee and, when asked whether she is still considering a run for mayor, Pratt said, "This press conference is about a tax reform initiative."

Dixon also tapped Joseph T. "Jody" Landers III, executive vice president of the Greater Baltimore Board of Realtors and a former councilman, as a co-chairman. Other prominent members include Donald C. Fry, president of the Greater Baltimore Committee, Robert C. Embry Jr., president of the Abell Foundation, developer C. William Struever, Baltimore state Sen. Verna L. Jones and the city's new solicitor, George A. Nilson.

"We simply must provide some property tax relief for families," Dixon said. "It's either now or never."

Baltimore expects to receive $592.1 million in real and personal property taxes in the current fiscal year, up nearly 6.5 percent from the year before - despite the 2-cent cut. The city's tax rate is $2.288 per $100 of assessed value. The next highest rate, in Baltimore County, is $1.10 per $100 of value.

City Council President Stephanie C. Rawlings-Blake, who said she looks forward to working with the mayor's task force, suggested the city should not back away from the annual reductions.

"The people of Baltimore deserve at least the reduction in property taxes they are expecting," Rawlings-Blake said in a statement. "We hope, together, we can address this issue with even greater relief in the future."

O'Malley, through a spokesman, declined to comment.

Despite recent reductions in the property tax rate, most homeowners paid more because assessments increased - most recently in the northern third of the city. The annual increase of taxable assessment is capped at 4 percent per year, but that cap disappears when property is sold.

Last year, both O'Malley and Dixon repeatedly said a 2-cent reduction in rate was the most fiscally responsible approach to the budget. Bills introduced in the City Council that would have cut the tax by more than 2 cents were never seriously considered.

City Councilman Keiffer J. Mitchell Jr., who is running against Dixon for mayor, sponsored one of those bills. Last month, he was ousted as the chairman of the council's taxation and finance committee. Dixon has said she had nothing to do with his reassignment.

"Every little bit helps. For the 2-cent reduction, that's something that there was a lot of fanfare about in the past," said Mitchell, who said he would maintain O'Malley's 2-cent reductions. "It must be a sign that the budget projections aren't as rosy as they predicted."

john.fritze@baltsun.com

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