Increases in hotel, parking taxes draw complaints

City Council finance committee says it has few options

May 14, 2010|By Nick Madigan, The Baltimore Sun

Despite vehement opposition from operators of downtown hotels and parking garages, Baltimore City Council members stood firm Thursday in their support of a contentious package of new taxes, saying the money was needed to stem a torrent of red ink.

"We're facing a $121 million deficit," said Councilwoman Helen L. Holton, head of the council's finance committee. "What do we do?"

Holton and other committee members gently chided a group of business leaders who came to a public hearing to complain, reminding them repeatedly of the city's dismal financial state and all but declaring that, if taxes are not raised, disaster will follow. Committee members invited the business community to suggest other ways to extricate the city from its predicament.

"Help us find some way to raise this money," Councilman James B. Kraft said. "Please understand what we're faced with."

Kraft noted that almost every department in Baltimore's government is financially strapped and should expect reductions in funding. "We're cutting jobs," he said. "We're probably going to see an exodus of fire and police officers."

The proposed increases come as Mayor Stephanie C. Rawlings-Blake seeks to raise $50 million, a partial effort toward filling a $121 million gap in the city's $2.2 billion budget for the fiscal year that begins in July. "All of us must share the pain," the mayor said a month ago, when she released details of the revenue plan,

Finance committee members occasionally grew testy on Thursday as representatives of business interests said the higher taxes would push companies and tourists from the city and leave conventions looking for cheaper places to meet.

"Baltimore will be a ghost town," said Ben Greenwald, president of the Baltimore Parking Association, as he painted a grim future in which "people who don't live in the city stop coming into the city to work and spend money on all the good things the city has to offer."

Greenwald and other parking-structure operators said they objected to a tax increase from 16 percent to 20 percent on parking fees in lots and structures, the same as in Philadelphia. The proposal comes after a boost 17 months ago, when it was raised from 12 percent.

Other plans under discussion Thursday call for taxes on hotel rooms to be increased from 7.5 percent to 10 percent. Some parking fines would also go up. The city is contemplating raising levies on energy and telecommunications, as well as a 4-cent tax on some beverage containers.

"If all these taxes were to pass in their present form, it would cost our hotel alone over half a million dollars," said Jon Koscher, general manager of the Sheraton Inner Harbor Hotel. "This 2.5 percent increase in the lodging tax will cause great harm to the industry and ultimately to the city and its tourism."

Koscher said that eight downtown Baltimore hotels saw a drop in revenue of almost 22 percent from 2007 through 2009, a result of lower occupancy as well as an average rate decline of about $23 per room. Those decreases have "endangered the viability of the industry," he said, adding that some downtown hotels are "in deep financial trouble."

Michael E. Haynie, managing director of the Tremont Plaza Hotel and the Tremont Grand, echoed that view, saying that a dozen downtown hotels reduced their combined payroll by $30 million over the last two years.

"It's terrible out here for us," Haynie told the committee. "Last year was an extremely painful year."

If the tax increases go through, he suggested, they could "kill this industry."

Holton, the committee chair, acknowledged that the tax package would not fully plug the budget shortfall, but said the city is desperate for the additional revenue.

"We need it today," she said. "We have done our best."

Holton asked the business owners to compromise. "Give us something that helps us get out of this hole," she said. "The reality is, this is where we are."

Under the mayor's plan, the city would lose 250 employees, primarily from recreation, parks and public works departments, as well as 50 contract employees from the Police Department. The proposed budget, which would not raise property taxes, includes $70 million in spending reductions and mandatory furlough days, and higher prescription plan premiums for employees.

"We do understand the city's need to raise revenue," Adrian Harpool, executive director of the Baltimore Parking Association, which represents 75 percent of downtown parking structures, said in an interview Thursday afternoon. "But eight or nine years ago, the city was begging people to build parking structures, and then a few years ago the city got into the parking business itself. Now, we all have fewer parkers and the tax keeps going up."

Additional taxes, Harpool said, will only serve to dissuade people from using the parking structures. "It's a little counterproductive," he said, "because if we have fewer patrons, there less money to collect taxes on."

Projected revenues

Proposed Baltimore tax increases and expected revenue:

Beverage container tax: $10.75 million

Energy tax: $8.16 million

Hotel tax: $6.5 million

Parking tax: $5.8 million

Hospital and university bed tax: $4.12 million

Telecommunications tax: $3.75 million

Parking fines: $1.68 millio

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