City moves to strip undeserved tax breaks from vacant properties

Mayoral candidate says he will repay unwarranted tax credits on a rental property

August 23, 2011|By Jamie Smith Hopkins and Scott Calvert, The Baltimore Sun

Baltimore officials moved Tuesday to take back undeserved tax breaks from owners of vacant properties who are profiting from a program intended for primary residences.

The effort followed a Baltimore Sun report that the owners of 465 empty homes — cited by the city as unsafe or uninhabitable — had their city property tax bills reduced by a total of $325,000, thanks to homestead property tax credits meant for owner-occupiers.

Challengers to Mayor Stephanie Rawlings-Blake in the Democratic primary next month were quick to pounce on what they described as a symptom of insufficient oversight.

But one of those candidates has a tax-credit problem of his own. Circuit Court Clerk Frank M. Conaway Sr. is receiving homestead breaks on two properties: a rental property as well as his home.

He said he was unaware he was getting credits on both properties and notified the state Tuesday, vowing to repay the break on the Northwest Baltimore rental.

The city Finance Department said Tuesday that it was sending a list of vacant properties to the state Department of Assessments and Taxation, which oversees the homestead credit program but relies on local jurisdictions to provide information about empty or rented properties.

Candidates for mayor said that should have happened long before.

"We don't have good checks and balances," said Otis Rolley, a mayoral candidate and former city planning director.

The homestead credit was intended to act as a cap to protect owner-occupiers from big spikes in their property taxes. In the city, the amount of assessed value on which a homeowner may be taxed cannot increase by more than 4 percent per year.

Even with the home price declines of recent years, the tax break has been valuable for many homeowners because the housing bust has not fully erased the gains of the past decade.

To ferret out landlords getting undeserved tax credits, city officials twice a year provide state assessors with a list of properties registered as rentals and ask that they be cross-checked against the homestead files. The city had not done the same with the list of homes it has identified as vacant.

City officials, who launched a "billing integrity program" last month to make sure no one gets an undeserved break, said they could not explain why the information had not been sent before.

Henry Raymond, deputy director of the city's Finance Department, said Tuesday that the state agency would have the list by the end of the afternoon.

Robert E. Young, director of the state Department of Assessments and Taxation, said his agency got a heads-up that the information was coming. Staff members are coordinating to get the analysis started, he said.

Rawlings-Blake said earlier this week that the city had found $2 million in potential new revenue through the billing-integrity effort.

But her challengers say not enough is being done. State Sen. Catherine E. Pugh said she hopes the billing-integrity effort works but called it "a little late."

"There's a lack of oversight," Pugh said. "The city needs to take every step it can to correct this problem so we don't see it again. It's costing the city money."

A spokesman for Rawlings-Blake declined to comment on the matter Tuesday.

"The mayor is focused on responding to the earthquake and has no comment on politics," spokesman Ryan O'Doherty said in an email.

Former City Councilman Joseph T. "Jody" Landers III, another mayoral challenger, called vacant homes with homestead credits "a symptom of the overall problem."

Landers said it underscored the need for city government to better manage the thousands of empty and dilapidated homes in Baltimore. He repeated his call for the city to create a land bank that would take sole responsibility for that oversight.

He says the city should follow in Washington's footsteps and tax vacant properties at a higher rate than occupied homes.

Landers said he suspects that the assessed value of some of the vacant properties with homestead credits is higher than the market value, meaning that owners could successfully appeal to have the assessed value reduced.

But if the owners are receiving a sizable tax break, he said, they have no incentive to do so. If they lose the break, he said, they would probably appeal the assessed value and lower their tax bills that way.

Conaway, contacted by a Sun reporter Tuesday about his two homestead credits, said he had no idea he was receiving breaks on both his home and his rental property.

Conaway has received $1,657 in city homestead credits over the most recent three tax years — as far back as records are available online — plus a small state homestead credit.

He said he tried to write a check Tuesday afternoon but could not figure out to whom he should send it. The city told him to call the state — which oversees the homestead tax credit program — and the state insisted he had to call the city, which handles the billing.

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