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Councilman: Cut Baltimore's property-tax rate in half

Baltimore City Councilman Carl Stokes submitted a charter amendment last week that would do what most readers here seem to want: cut the city's property-tax rate in half.

In an interview, he said everyone is telling him such a reduction is important -- "except the mayor and City Council."

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One colleague on the council calls his proposal a "tooth fairy plan." A spokesman for Mayor Stephanie Rawlings-Blake said the idea would result in "irresponsible cuts" to an already strapped budget.

Here's what Stokes, a mayoral candidate, is suggesting:

Voters would get to approve or quash a city charter amendment that would decrease the property-tax rate from nearly 2.27 percent to 1.1 percent -- same as Baltimore County's rate -- over a three-year period. The drops would begin July 1, 2013.

Stokes' amendment specifies that the rate "may not exceed $1.10 for every $100 of assessed or assessable value" (otherwise known as 1.1 percent) from July 1, 2016 onward.

It could come with a catch for taxpayers, at least initially. Because Stokes anticipates an initial drop in revenue, he also submitted a companion bill that would temporarily increase the ceiling on the Homestead tax credit and put the extra money collected from residents into a fund to help the city pay its bills once the tax rate takes a nose dive.

The Homestead cap currently protects owner-occupiers from seeing more than a 4 percent increase in their taxable assessment in any given year. Stokes' amendment would increase the ceiling to 6 percent in July 2013, to 8 percent the following year and to 10 percent in 2015 -- the state maximum. It would stay there until July 2020, when it would drop back down to 4 percent.

The bill specifies that any money generated from the higher Homestead cap must be used "exclusively to reduce the City property tax."

Newcomers, landlords and most homeowners who haven't owned their properties for more than a few years would see no change from a higher Homestead ceiling because they're getting zero benefit from it now.

Longer-term owners would feel the impact. If my back-of-the-envelope calculation is correct, someone who has amassed a particularly large Homestead credit amount would pay just 7 percent less in taxes in 2020 under Stokes' plan than she's paying now. But if nothing changed, she'd pay 37 percent more in 2020 than her current bill. (I did the math for a hypothetical homeowner whose place is assessed at $200,000 but who is paying on just $100,000 of that amount right now.)

Stokes says he's offering a variety of suggestions to get the city over the hump of the initial revenue hit and isn't married to the idea of a Homestead increase. But he said he does feel strongly that the city needs to make its property-tax rate competitive with other jurisdictions in the state. He believes it would help Baltimore increase its population, jobs and development activity -- thus increasing its tax base.

"It is based on sound economic principals that have been proven to work over and over again in other towns and other cities," said Stokes, chairman of the council's taxation, finance and economic development committee.

He added, "The city recognizes that the tax rate is an impediment -- it recognizes it, because when someone comes to town and says, 'I want to build a big development in your town,' we say, 'Here's a tax incentive, here's a tax break, please come in and do it.'"

Meanwhile, homeowners complain that they're not getting twice the services of the suburbs for twice the tax, he said, and some leave as a result. 

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"In the short term, we're going to have to make some adjustments" to the budget if the rate plummets, Stokes said. But he believes "at some point, the fact that the property tax is going down will cause such an expansion in the tax base that we won't have to cut."

Stokes' plan is similar in some ways to a proposal by a Loyola University Maryland professor and one of his former students, which would drop the rate to 1 percent even.

But the academics' proposal calls for a charter amendment specifying that the rate will fall all at once in three or four years. They believe growth would start immediately -- leading to an increase in revenue that officials could bank and use when the rate plummets. They don't suggest a Homestead hike.

Steve Walters, the Loyola economics professor, said in an email interview that Stokes' plan is "a good first step down the path of a genuine, organic renaissance for Baltimore." That it's proposed as a charter amendment means people shouldn't fear it's an empty promise, he said.

He doesn't think the Homestead increase is necessary. And he'd rather see a rate that's a bit lower than Baltimore County's to give the city an edge.

"But the Councilman deserves considerable credit for his insight and courage on this issue," Walters wrote in his email. "The status quo well serves many entrenched, special interests -- especially our redevelopment bureaucracy and an in-crowd of developers who have 'paid to play' and now receive the kinds of subsidies that offset the City's brutal tax rate; they'll fight this change tooth and nail. The problem is that the status quo just isn't working very well, as the latest census numbers showed -- as did the census before that, and before that. How long will we keep doing things the same way and expecting different results?"

The Baltimore Sun has not yet taken an editorial position on either plan, saying the population growth needed to cover a tax-slash budget gap would be "massive."

"But the knee-jerk dismissal the ideas are getting at City Hall is wrong," the Sun says in an editorial. "Of all the things holding Baltimore back, there is only one that the City Council and mayor could change with a stroke of the pen, and that is the property tax rate."

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