City Tax

A Harbor East development that will become Legg Mason's new corporate headquarters appears on the verge of getting millions of dollars in city tax breaks. The City Council's Taxation and Finance Committee approved a bill yesterday that would forgive $33 million in taxes for H&S Properties Development Corp., owned by bakery magnate John Paterakis Sr., to construct a waterfront tower and an underground parking garage. Though the $581 million project also includes another tower for a Four Seasons Hotel and condominiums, the tax break, among the largest granted by the city, applies only to the office portion and the garage.

In one of his last duties as a city councilman, Baltimore Mayor-Elect Martin O'Malley presided over a hearing yesterday to grant $73 million in future property tax breaks to five downtown projects.City officials who support the hotel, apartment and office proposals contend that they will return $122.5 million to the city in other taxes while creating a projected 1,600 jobs.The incentive -- known as payments in lieu of taxes or PILOTS -- sparked more than four hours of debate among council colleagues, including opponents who accuse the city of mortgaging its future.

Nine cigar and wholesale tobacco companies in Maryland sued Baltimore yesterday to block a new cigar tax from taking effect July 1.The suit challenges legislation passed by City Council in December that will impose a levy of 18 cents to 36 cents on each cigar sold by wholesale tobacco dealers in the city.The bill originally targeted tobacco shops and pipe and chewing tobacco. Those businesses were cut from the measure after owners complained that the tax would wipe them out.A provision in the city law repeals the cigar tax when a 30-cents-a-pack increase in the state's cigarette tax -- now 36 cents a pack -- kicks in next year.

Question: When is a tax increase not a tax increase?Answer: When the Baltimore government takes out a newspaper advertisement for a "proposed property tax increase."Confused? So were several readers of The Sun, who upon seeing the ad in yesterday's editions of the paper confronted City Councilman Nicholas C. D'Adamo Jr.D'Adamo's name happened to be in the ad -- unknown to him, and in an election year, no less. When D'Adamo went to Patterson Park yesterday to hand out prizes in a dog contest, nearly 20 of his constituents let him have it."

The Baltimore Homeowners Coalition is using radio advertisements to criticize a city tax break for new hotels.The taxpayers group said the measure will open the door for casino gambling.During the next week, the City Council is expected to grant an estimated $75 million property tax break over 25 years to developers of the Wyndham hotel being built at President and Fleet streets in Inner Harbor East.The homeowners group contends that state law permitting the tax break also would allow the Wyndham hotel's owners, including chief partner H&S Bakery mogul John Paterakis Sr., to add casino gambling if the state ban is lifted.

Despite questions raised by the city's real estate officer, the Board of Estimates approved a Housing Department plan yesterday to sell a Reisterstown Road property to Afram Inc. for $1.Afram Inc., which holds festivals in the city, plans to build a two-story office building on the site in the 5400 block, for its operations and to lease it to third parties. If the building is sold in the next 10 years, the city would receive $10,000 in net proceeds.City real estate officer Anthony J. Ambridge told the board that he does not believe the deal was in the city's best interest.

BALTIMORE'S dire fiscal situation is real. The city has lost 60,000 residents in the last seven years -- 14,000 in 1996 alone -- and too many of them were middle-income taxpayers whose departure has left the city a revenue beggar.Mayor Kurt L. Schmoke last year threatened a severe cut in services unless the city's piggyback income tax was raised to offset an $8 million shortfall in the general fund budget. The tax hike was avoided largely through an early-retirement program that shrank the city work force.

IT MAY BE September, but June is busting out all over. The city has counted the taxes collected for the last month of the past fiscal year and discovered several records were broken. Property tax collections for June reached $9.6 million, compared to $2.3 million for June 1996. Personal property tax revenue was $3.3 million, compared to $527,000 for June 1996. Penalties and interest reached $2.6 million, compared to $580,000 in June 1996.But it doesn't stop there. Income tax revenue was $19.3 million, compared to $15.6 million in June 1996.

Still stinging from last year's defeat, Annapolis officials say they're determined to win the annual tax battle with the county this year -- and this time they have a new game plan.But determination and a game plan may not be enough. City officials say they have yet to find a persuasive argument to get Anne Arundel County to lower the property tax rate for city property owners.Last week, accountant James Lindsey, a consultant hired by the city, determined that "all the information that goes into the county tax formula is correct," said John L. Prehn Jr., the city administrator and point man in tax rate negotiations between the city and the county.

IT WOULDN'T be budget season without someone floating a proposal to raise the city income tax that's collected "piggyback" with the state levy. Set at 50 percent of the state rate, the city tax hasn't changed since being installed in 1967. Given Baltimore's dramatic decline in population and tax base since then, it makes sense to adjust the piggyback to help offset revenue losses. But people won't accept a tax boost just to maintain the status quo, and that's all politicians are promising.

A property tax credit meant to lure new residents to Baltimore and spur development in impoverished neighborhoods instead rewards current city dwellers who inhabit booming parts of the city, according to a report issued by the city's Finance Department. In the past nine months, 75 percent of the applications for the program, called the Newly Constructed Dwelling Tax Credit, came from 10 neighborhoods, according to the finance data. Forty percent of the credits went to households earning more than $100,000 a year.

A federal court ruling this week allowing Baltimore to tax an Internet phone company could push other jurisdictions to consider similar fees, a city attorney and industry lobbyist said yesterday. On Wednesday, U.S. District Judge J. Frederick Motz issued an opinion that said Vonage Inc., which provides Voice over Internet Protocol -- VoIP -- telephone services, must pay Baltimore City's monthly telecommunications tax of $3.50 per customer line like every other phone service business. VoIP converts the voice signal from a telephone into digital data that is delivered using the Internet.

A Harbor East development that will become Legg Mason's new corporate headquarters appears on the verge of getting millions of dollars in city tax breaks. The City Council's Taxation and Finance Committee approved a bill yesterday that would forgive $33 million in taxes for H&S Properties Development Corp., owned by bakery magnate John Paterakis Sr., to construct a waterfront tower and an underground parking garage. Though the $581 million project also includes another tower for a Four Seasons Hotel and condominiums, the tax break, among the largest granted by the city, applies only to the office portion and the garage.

A leading Baltimore developer would receive more than $33 million in city tax breaks to build a landmark headquarters for Legg Mason at an exclusive waterfront address, officials close to the proposed deal confirmed yesterday. Under the terms of bill to be introduced in the City Council on Monday, H&S Properties Development Corp., owned by bakery magnate John Paterakis, would get the incentives to subsidize the cost of its $550 million Harbor East project, the officials said. The development includes another tower housing a Four Seasons hotel and condominiums.

When assessed values are rising rapidly, it pays to know this quirk if you're trying to buy a home: Get the deed in hand before July 1 - your tax bill will be lower. That's especially true if you're buying in an area due to be reassessed the following year. Why? Follow closely: The Homestead Property Tax Credit caps increases in taxable assessments for people who live in the homes they own. You don't qualify the first full fiscal year you own it, meaning July 1 through June 30. But afterward your annual increases can't rise beyond the limit set by your jurisdiction - 2 percent to 10 percent in the Baltimore region.

Six City Council members said yesterday that they support reducing or eliminating a city tax on energy that would otherwise increase this year as Baltimore Gas and Electric Co. customers face massive rate increases. In what is fast becoming the most contentious debate surrounding Baltimore's proposed $2.38 billion budget, supporters of the tax cut say it would give energy consumers a needed break while others, including Mayor Martin O'Malley, warn that the energy tax may someday be a crucial source of revenue.

When Baltimore County residents Danielle and Charles Slike called their cellular phone company to complain about being mistakenly charged a city tax, they were told to call their city councilman. "We don't have a city councilman. That's the point," Danielle Slike, a Verizon Wireless customer who lives just over the city line, said her husband told the representative. The Idlewylde residents aren't the only people in Baltimore and Anne Arundel counties trying to make the point that although they might share a ZIP code with the city, they shouldn't have to pay city taxes.

A steady procession of business leaders told City Council members yesterday that Mayor Martin O'Malley's proposed tax package will stifle Baltimore's real estate market and make it more expensive for companies to operate in the city. Representatives from the real estate, telecommunications and nonprofit industries expressed opposition to two elements of the mayor's three-pronged tax plan aimed at eliminating a projected $40 million deficit for the fiscal year that begins July 1. The council's taxation committee held hearings yesterday on O'Malley's proposed $3.50 monthly tax on traditional and wireless phones and a proposed increase in fees for recording real estate purchases, from 0.55 percent to 1 percent.

The Annapolis city council approved last night a city budget for the next fiscal year that reduces the property tax rate by 2.4 cents, though many homeowners will see higher taxes due to increased assessments. Few amendments were made to the budget that the mayor called "bare bones" when she introduced it to the council last month. The $54.9 million spending plan - which goes into effect July 1 - includes a 5.4 percent reduction in general fund spending, achieved mainly by slashing the amount to be transferred to the capital projects budget by more than 80 percent.

If you are an Annapolis homeowner, chances are the value of your home went up sharply in the state's recent triennial assessment -- maybe even more than the city median of almost 40 percent. But Mayor Ellen O. Moyer has proposed cutting the city property tax rate by 2.4 cents in her spending plan for the next fiscal year. So will property taxes be going up or down in the city? More than likely, city homeowners will see a small increase in their property tax bills if the city council adopts Moyer's $54.9 million operating budget.