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News Opinion Editorial

The real problem is the vacant house, not the tax credit

Butchers Hill property owner Alex Stroh had the right question about The Sun's comparison of two public databases that found hundreds of vacant Baltimore properties getting a tax break for owner-occupied homes: "Why couldn't the city just do that?" According to a report by Scott Calvert and Jamie Smith Hopkins, at least $325,000 in credits was at stake — not a fortune in terms of the city's overall finances, perhaps, but enough to at least partially restore some of the services that have been eliminated in recent budget cutting.

The city's answer to Mr. Stroh's query is "We're working on it," and there is at least some reason to believe it may succeed. Still, given the fact that such promises have been made before, with little to show for it, that promise must be greeted with some skepticism and scrutiny.

Mayor Stephanie Rawlings-Blake says she has created a "billing integrity program" to make sure that people who are getting property tax breaks deserve them and to go after those who don't, even to collect taxes retroactively. And she has hired someone to focus on the issue full-time; once the effort is fully up and running, the administration hopes to do annual checks of a dozen different databases — including the one The Sun used — to ferret out scofflaws.

Indeed, the administration points to successful efforts to identify those who are receiving unwarranted tax breaks for nonprofits or brownfields, worth a collective $2 million. But that success comes with a key caveat — identifying money the city is owed is not nearly the same thing as collecting it, and that process is difficult. For starters, the city isn't the one that administers the homestead tax credit program. It can forward the names of those it believes are undeserving to the state Department of Assessments and Taxation — and it already does for rental properties — but that state agency is the only one with the power to actually revoke the credits.

That process takes a minimum of 30 days, and longer if the property owner contests the finding that he or she doesn't deserve the tax break, which happens 20 percent to 25 percent of the time, according to Robert Young, director of the state Department of Assessments and Taxation. Mr. Young says his agency is working with the city to automate the process so that it can more easily handle an increase in cases.

If the state removes the homestead exemption from a property, it is up to Baltimore to actually collect the money, and that's no sure thing. The reason many of the houses in question are boarded up is that they are in foreclosure — that is, the owners are not paying the mortgage and already stand to lose the house, whether they owe money to the city or not. In other cases, the owners have concluded that the investment necessary to make the homes livable isn't worth it, and being forced to pay property taxes at a higher rate isn't likely to improve that calculus. Either way, the city could wind up with the deeds to yet more vacant properties on top of the thousands it already owns.

Baltimore officials, including Ms. Rawlings-Blake, have been promising to get tough on tax cheats for years, and it's crucial that they follow through, both because the city needs every dime it's legally entitled to and as a matter of fairness to those who do pay all the taxes they owe. Ms. Rawlings-Blake needs to show that her "billing integrity program" is showing results — not just that it has identified possible untapped revenue but that it has actual cash in hand.

But the issue points to a deeper problem than whether the city is collecting a few hundred thousand dollars from the owners of vacant homes. As galling as the tax compliance question is for those who live around these eyesores, the bigger issue is the fact that the homes are sitting vacant in the first place.

Ms. Rawlings-Blake has sought to deal with the problem through her "Vacants to Value" program, which is supposed to streamline the sale of city-owned property and to increase code enforcement on vacant properties in the hope that stiff fines will persuade their owners to fix them up or sell them. It has received national attention — Ms. Rawlings-Blake has briefed the White House on the program and got a City Livability Award from the National Conference of Mayors — and it has shown some modest success so far.

Since the program launched in November, about 150 vacant properties have been demolished or rehabilitated as a result of the code enforcement effort, though that doesn't necessarily mean that people are living in them, and the owners of a few hundred more have applied for permits to fix up their houses. That's a start, but at this rate, it will take a long time to make a serious dent in the city's 30,000 vacant properties.

What's needed is a broad strategy to change the economic circumstances that led to vacancy in the first place, and to change the perverse incentives in the tax code that make renovation more expensive than abandonment. Such an effort might not show quick results, but fostering private investment would do much more for the city's bottom line than scouring databases of tax credits. By all means, the city needs to work to collect every penny it's owed, but the biggest priority should be on making sure it's owed a lot more pennies.

Copyright © 2014, The Baltimore Sun
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