Officials acknowledge tax mistake

Refunds an open question as city says credit should have applied to benefits districts

April 08, 2008|By John Fritze | John Fritze,Sun reporter

Baltimore officials acknowledged yesterday that thousands of residents have overpaid property taxes because of a billing error at City Hall, but they left open the question of whether anyone would receive a refund.

Homeowners in Bolton Hill, Mount Vernon, Charles Village and a half-dozen other Central Baltimore neighborhoods might have overpaid because the city failed to apply a credit to the supplemental property tax levied by two special benefits districts.

A written opinion from the city solicitor's office states that the current code requires that the credit - which caps property tax growth at 4 percent a year for homeowners - be applied to the surtax charged by the Charles Village Community Benefits District and the Midtown Community Benefits District.

But the opinion does not address whether residents should receive a refund if they overpaid in past years. City Solicitor George A. Nilson said it would be up to the districts to decide whether refunds are required - and to pay for them.

"It's the districts' decision to make on what they're going to do about the refunds," Nilson said. "If taxpayers want to seek a refund, they'll apply to the district."

City Councilwoman Mary Pat Clarke, who introduced legislation that led to the debate over the tax credits, said it is unfair to leave the issue to the districts. The districts' tax rate is approved by the Board of Estimates, and the Finance Department sent the bills and collected the money.

"It is the Finance Department's error," Clarke said. "The local benefits districts should not be responsible for finding the funds to rebate people's money."

Managers at the Charles Village and Midtown districts are revising budgets in anticipation of applying credit in the future. Midtown expects a $200,000 reduction in anticipated revenues for this coming year; Charles Village expects a $64,000 reduction.

"Clearly, a refund situation would put an onerous burden on the districts," said Peter M. Merles, the administrator of the Midtown district. "Any serious cuts, unfortunately, may come from direct services."

Both districts levy a tax in addition to the city's property tax to pay for extra services, such as increased garbage collection.

Although the city has applied the homestead credit to the regular property tax rate that pays for city services such as police and fire protection, it did not apply the credit to a separate surtax charged in the benefits districts.

The homestead credit applies only to owner-occupied homes and takes effect only when a home's value grows by more than 4 percent a year. Any overpayments likely have been small, though the city has not been able to estimate how much was overpaid.

State law sets a three-year statute of limitations on requesting tax refunds. City officials could not explain the process by which residents may file for a refund.

Late last month, the Law Department issued a similar opinion on the issue but then pulled it after questions from The Sun about its implications for past tax bills.

City records suggest the initial legislation that created the districts was changed specifically to allow the homestead credit to apply.

john.fritze@baltsun.com

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