Best of bad options

Our view: Mayor Rawlings-Blake’s proposal to soften the impact of Baltimore’s budget shortfall spreads the pain, protects key priorities

April 12, 2010

The plan Baltimore Mayor Stephanie C. Rawlings-Blake unveiled today to raise $50 million in new revenue to reverse some of the cuts that would otherwise be necessary in next year's city budget is, to paraphrase Winston Churchill, the worst possible option, except for all of the others. Her proposal would require more of everyone in the city — residents, businesses, nonprofits, not to mention commuters and visitors — in ways large and small. What she's asking the City Council to do is to place an additional burden on people during a recession, something she shouldn't even be considering except for the fact that the alternative, massive cuts to the police and fire departments, layoffs of hundreds of employees, and major reductions to civic services, would clearly set Baltimore's progress back much further.

There are two key points in favor of Ms. Rawlings-Blake's plan. The first is that she is not simply trying to tax her way out of Baltimore's fiscal trouble. That would be a dangerous proposition considering city residents already pay more in taxes than suburban dwellers do. The total magnitude of Baltimore's financial problem next year is $185 million. About $65 million of that comes in additional support for the fire and police pension fund; the mayor is attempting to eliminate that amount through changes to the system. Of the remaining $120 million, Ms. Rawlings-Blake is proposing to solve about 30 percent through general cost savings such as furloughs and the sharing of some costs with the school system; 30 percent through service reductions; and 40 percent through new revenue.

The second good point about the mayor's revenue plan is that it doesn't rely at all on increasing property taxes. (Raising $50 million would require increasing the property tax rate by 19 cents per $100 in assessed value.) Baltimore's property tax rate is double that of Baltimore County, and it is a major disincentive for families to move to or stay in the city. Ms. Rawlings-Blake said her primary goal in crafting the tax package was to find new revenue sources that could help the city continue to move forward, and a property tax increase would clearly set it back. "I thought it was important even in these trying times that I emphasize that our property tax works against us," she said.

The biggest-ticket item among Ms. Rawlings-Blake's proposals that directly targets residents is a 4-cent-per-bottle tax on beverage containers. The tax would exempt milk and juice or larger bottles, which the mayor said is designed to keep the levy focused on convenience purchases and not on families trying to get by. And it is a tax people can avoid if they want to. Energy tax increases, telecommunications tax increases and a hike in the city's income tax rate would all hit residents in their pocketbooks, but not by much. The energy tax would cost the average household about 60 cents a month (which could be offset by turning the thermostat down by 1 degree), and the telecommunications tax increase amounts to 50 cents per month for a phone line. The income tax increase would cost a person earning Baltimore's median income ($36,894 a year) about $3.60 a month.

The bottle tax has already sparked some popular resistance, but the proposals to squeeze more money out of Baltimore's nonprofits may be the more difficult sell. Nonprofits are exempt from the property tax, and the mayor's office estimates the city loses $120 million a year based on the real property exemption alone. But at the same time, nonprofits are a tremendous economic engine for the city; the mayor needs to make sure she doesn't kill the goose that lays the golden eggs. Her approach — a $350 bed tax levied on hospitals and colleges — is better than ending the property tax exemption because it is focused on institutions that generate the most revenue, not churches or small charities.

In general, the mayor's revenue proposal appears well thought out and designed to diversify the city's revenue stream and spread the burden as widely as possible. The council should scrutinize it carefully for unintended consequences — for example, would increasing the hotel tax from 7.5 percent to 10 percent make Baltimore less competitive in landing conventions? Other ideas, such as a modest fee on the plastic bags given out at grocery stores, should also be welcome.

But it's clear that raising some new revenues is a necessity. The mayor's plan would generate enough money to avoid layoffs of sworn personnel in the police department and maintain the helicopter, mounted and marine units; reduce the number of rotating firehouse closures; keep all city recreation centers open at least through the summer; increase repairs to city streets; and maintain bulk trash pickup, among other things. Increasing taxes and fees surely doesn't help make Baltimore a more attractive place to live, but the effect of leaving in place cuts to public safety and other top priorities would be far worse.

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