Rawlings-Blake to propose 9% property tax cut for homeowners

Would use slots revenue to offset gradual drop in tax rate

July 19, 2011|By Julie Scharper, The Baltimore Sun

Mayor Stephanie Rawlings-Blake will unveil plans Wednesday to direct nearly all of the revenue from Baltimore's long-delayed slots casino to reducing property taxes for city residents who own their homes, a spokesman said.

Rawlings-Blake, who faces several Democratic challengers for mayor in the September primary, will propose reducing taxes for homeowners by 9 percent over a nine-year period, the spokesman said. If the plan is approved, the owner of a home valued at $200,000 would save $400 in 2020.

Rawlings-Blake would leave tax rates unchanged for rental, commercial and vacant properties. She would use slots revenue to compensate for half the cost of the tax cut. The city's property tax rate is double that of surrounding counties.

While the proposal would amount to the largest drop in the property tax rate for homeowners in decades, it is less ambitious than the plans of her leading challengers, who have promised to slash the rate in half.

A spokesman for Rawlings-Blake characterized the mayor's plan as realistic and feasible, and said it would strengthen neighborhoods by drawing and retaining homeowners.

The plan would "target the very limited resources the city has directly to homeowners," said spokesman Ryan O'Doherty. "This is real. This can happen and this will happen."

Under Rawlings-Blake's plan, the city would devote 90 percent of its revenue from slots to help fund the property tax reduction. The other 10 percent would be directed to city schools. Reducing property taxes and funding school construction are the only two uses for slots revenue allowed by state law.

O'Doherty said Rawlings-Blake would stagger the reductions over eight years. Homeowners who qualify for the Homestead Tax Credit would automatically be eligible for the reduction.

By 2020, the tax rate would drop to $2.068 per $100 of assessed value. The rate is now $2.268 per $100 for all city properties; in contrast, the rates for Baltimore, Harford, Howard and Carroll counties hover around $1 per $100 of assessed value.

Rawlings-Blake's challengers, who have tried to make the city election a referendum on property taxes, said her proposal does not go far enough.

"It's too little, too late," said realtor Joseph T. "Jody" Landers. "We need to grow the tax base."

Former city planning director Otis Rolley said officials have "tried incremental tax cuts over the last decade — and we still saw 30,000 people leave and have widespread blight. Why should we continue a policy that clearly isn't working?"

Rolley and Landers, who resigned as vice president of the Greater Baltimore Board of Realtors to focus on the campaign, have pledged to follow the District of Columbia's model of raising tax rates on vacant and blighted properties while lowering the rate for residences.

State Sen. Catherine Pugh has promised to cut the property tax rate in half across the board in four years, but has not offered specifics.

Economists expressed mixed reactions to Rawlings-Blake's proposal. Some praised its practicality, while others said it would not cut the tax rate deeply enough to reverse a decades-long decline in the city's population.

Steve H. Hanke, a professor of applied economics at the Johns Hopkins University, described the plan as "half-baked and largely irrelevant."

It "would at best be a very small footnote in the economic history of the city of Baltimore," said Hanke, who has urged a sharp drop in the city's tax rate.

Given that Baltimore has lost nearly a half-million residents since 1950, Hanke said, a dramatic property tax reduction — for businesses and all residents — coupled with sharp cuts to city spending is needed to reinvigorate the city.

"We're really in a death spiral," he said. "The course and the magnitude of the death spiral will not be affected at all by what she is proposing."

Richard P. Clinch, director of economic research at University of Baltimore's Jacob France Institute, praised Rawlings-Blake's plan because it appeared feasible.

"A realistic proposal is better than an unrealistic proposal that can't be funded," he said. "I think every bit helps in getting people to move into the city."

But Clinch questioned the plan's reliance on slots revenue, in light of the difficulties the city and state have faced in trying to get a casino built in Baltimore.

Officials had hoped that the slots parlor would open this year. But the first round of bidding for a slots license in Baltimore yielded just one applicant and he was deemed unacceptable.

Canadian homebuilder Michael Moldenhauer, the spurned bidder, has sued the city and the state.

State lottery officials hope to receive a new batch of bids next week. City officials predict that multiple groups will submit proposals — and the $23 million application fee.

The two slots casinos now open in Maryland — one in Cecil County, the other outside Ocean City — have fallen short of revenue targets in their first months of operation.

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