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The money that slipped away

Property TaxLuxury Goods IndustrySilo Point

Baltimore's property tax rate is high (that's one thing that everyone that owns a home or business in the city can agree on) so nothing makes the blood boil quite like news that someone has successfully avoided paying their fair share — except, perhaps, finding out it wasn't a case of avoidance so much as lax enforcement.

That's what appears to have happened in the case of some of the city's priciest condos, as recently uncovered by reporter Jamie Smith Hopkins. Baltimore lost out on more than $10 million in property tax revenue over the last several years because some 200 luxury condos were assessed as if they were little more than holes in the ground.

But the condos at the Ritz-Carlton Residences and at Silo Point were a great deal more than that. Most have had occupancy permits for several years. Perhaps they awaited final details — finishing touches like floor coverings or paint colors — but that's not how they were treated by the Maryland State Department of Assessments and Taxation.

Instead of being assessed for $1 million or more, the premium properties were viewed as worth no more than $10,000 to $55,000 apiece. Somehow, they were judged as not being "substantially complete," which is the point when full market-based tax assessments are supposed to kick in.

Three years after occupancy permits are issued, they are not regarded as substantially complete? Sorry, but somebody in the state agency screwed up in a major league manner on this one.

Make no mistake, the owners of those two prestigious developments appear to bear little or no responsibility for this circumstance. And certainly, we would not blame them for wishing to have lower assessments, particularly in such a challenging real estate market.

But the low assessments were patently unfair for those developers with projects that compete against Silo Point and Ritz-Carlton Residences but must pay thousands of dollars each year in property taxes for unsold units. No doubt they'd benefit from this kind of lax enforcement, too, but they didn't receive it.

And the situation is especially unfair to the residents of Baltimore who pay high property taxes to support such essential services as fire and police protection and public education. You can bet that Joe Average Homeowner would love to get this kind of treatment and pay taxes based on such a faulty assessment process.

Granted, assessing property value is not an easy business, and those who tackle this duty seldom win a lot of popularity contests. State officials have an enormous inventory to track and are bound to make mistakes. It's clear that whenever possible, they prefer to err on the side of caution, avoiding excessively high assessments.

What happened in this case, however, is damaging to the agency's reputation as it can easily be construed as preferential treatment to deep-pocketed private interests. When property owners lose confidence that the tax collector is adhering to the rules, what started as an honest mistake could be viewed as far more nefarious.

Nor is it exactly the only problem with property tax laws (and how they are administered) that has been uncovered in recent months. As The Sun has previously documented, Maryland's property tax credit programs have shortcomings, too. In one case, the law has fueled massive inequities in property tax bills that have been particularly advantageous to the wealthy. In another case, the system has caused people to purchase homes they could not afford (while failing to help others who qualified for assistance because the program wasn't sufficiently publicized).

Although the state is broadly in charge of assessments, it is Baltimore City and the counties who bear the brunt of such mistakes; the state portion of property taxes is much lower than the local share. And in Baltimore, where revenues chronically fall short and the tax rate is twice as high as anywhere else in Maryland, the consequences of those mistakes are so much the greater.

The city has recently put some resources into cracking down on mistaken assessments and ill-gotten tax breaks, but the frequency with which Ms. Hopkins and her reporting partner, Scott Calvert, are uncovering new breakdowns in the system leads one to wonder just how effective those efforts are. Moreover, their reporting has, so far, focused just on Baltimore City; there's no reason to expect that the faults they have discovered here are not repeated across the state.

If a pair of reporters with no greater access to property tax data than members of the general public can uncover so many millions in lost tax revenue, there's no reason every local government in the state shouldn't be doing the same. Clearly, such a project would pay for itself in no time, and elected officials might discover that cracking down on assessments is a whole lot more popular with voters that broad-based tax increases when it comes time to cover budget shortfalls, state or local.

Copyright © 2014, The Baltimore Sun
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Property TaxLuxury Goods IndustrySilo Point
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