Pugh budget includes tax cut, more funding for Baltimore schools, police

Baltimore Mayor Catherine Pugh released her first budget Wednesday — a plan to pump millions more into both public schools and police while backing a modest tax cut for homeowners.

The $2.8 billion spending proposal closes a projected $20 million shortfall in part by reviving the city's once-troubled speed and red-light camera program, which is projected to generate $8 million annually. Pugh also proposes refinancing the debt-burdened, city-owned Hilton Hotel downtown.

The budget funds some of Pugh's signature initiatives, including launching mobile employment centers and adding 6,000 new street lights across the city.

Recent budget debates have focused on spending on police versus education. Several City Council members, including Council President Bernard C. "Jack" Young, have said they want to spend more on schools and less on law enforcement.

Pugh's budget would increase funding for both. Baltimore's contribution to its public schools would increase by $22 million to a total of $288 million — part of a city-state plan to help close the school system's $130 million budget shortfall.

Baltimore's schools receive most of their money from state government.

The city budget also funds a number of other youth initiatives, including $12 million for a new voter-mandated "Youth Fund" and $39 million for recreation activities. Pugh's budget director, Andrew Kleine, said Baltimore's combined spending on school and youth programs is more than its spending on police.

"My priorities are around youth and education," Pugh said of her first budget. "We've got to get to the root of the problems our city is facing."

But Pugh would also increase the police budget by $17 million, to a record $497 million. That's necessary, Pugh said, to cover salary increases, higher pension costs and $10 million in initiatives required by the police reform consent decree the city entered into with the U.S. Department of Justice.

There are, however, a number of cuts to specific police functions. The budget contains a $1.7 million cut to criminal investigations, a $6.8 million reduction to Homeland Security surveillance and a $180,000 cut to the CitiWatch camera program.

The budget does not provide funding for a hotly debated police aerial surveillance program. That program is on hold while police evaluate it and seek outside funding.

"The mayor is calling for more accountability for police spending," Kleine said. "We're running large overtime deficits. The Police Department has to stay within its budget."

Pugh had said she would seek to cut police overtime costs, which currently run well over their $16 million budget. The budget unveiled Wednesday does not make a reduction to baseline overtime spending, but Pugh said she plans to tighten fiscal controls to make sure the agency doesn't exceed spending limits.

State and city officials have negotiated for weeks to come up with a plan to help close the huge budget shortfall in the city school system to avoid widespread layoffs. Gov. Larry Hogan has committed about $24 million to help close the gap, while state lawmakers have proposed eliminating about $14 million in required spending by the school system.

Even with Pugh's pledge of $22 million and schools CEO Sonja Santelises' proposed cuts at the central office, a funding gap of about $40 million remains for the coming school year.

Meanwhile, violent crime is on the rise in Baltimore. So far this year, there have been more than 200 shootings and 1,300 robberies — both up by a third from 2016.

Young, a Democrat, has pledged to look for cuts totaling $10 million in the police budget and redirect that money to the school system. "I know there's some fat over there," Young said Wednesday of the police budget.

Even so, Young called Pugh's first spending plan "fiscally sound." He said he was happy there were no layoffs of city employees.

City Council budget committee chairman Eric T. Costello called Pugh's proposal "responsible" and said he was "very pleased" to see funding for new street lights and solar-powered compacting trash cans and $6 million to keep the Charm City Circulator bus running.

He, too, said their could be more cuts to the Police Department budget.

"The council is going to need to work with the mayor's office to realize those additional funds for the schools," he said.

Pugh's budget counts on revenue from restarting the city's speed and red light camera program. Former Democratic Mayor Stephanie Rawlings-Blake shut the cameras down in 2013 amid accuracy concerns.

At its height, the city's speed camera system brought in nearly $20 million a year. But the system was dogged by questions about its accuracy after a Baltimore Sun investigation revealed numerous problems, including tickets issued to stopped or slow-moving cars.

Pugh said the cameras can play an important role in generating money for the city. The Democrat said there will be greater safeguards this time to ensure accuracy. City officials said they plan to relaunch the program this summer.

"It's always been a revenue-producing tool, but it's also a tool that helps us slow down traffic," Pugh said. "We expect them to be accurate."

Officials are also looking to the money-losing Hilton Hotel to improve Baltimore's finances. Kleine said refinancing the hotel's debt would improve the city's financial outlook by $2 million annually. The 757-room convention center hotel opened in August 2008, two years after then-Mayor Martin O'Malley, a Democrat, and the City Council authorized more than $300 million in tax-exempt bonds to finance its construction.

Pugh's budget continues to fund a small, phased-in tax credit for Baltimore homeowners that began under Rawlings-Blake.

Though the city's overall property tax rate of $2.248 per $100 of assessed value remains twice that of surrounding counties, the modest tax break means the average owner-occupied home will pay $2.10 per $100 of assessed value. The tax break is designed to continue through 2020, when the discount for owner-occupied homes would grow to 20 cents.

Pugh said she is considering a more "drastic" tax cut to spur economic growth in some of the city's most impoverished areas.

"Can't we offer a lower property tax rate in those areas to get people coming back in larger numbers?" she said. "Can we create the incentives for them to rebuild those neighborhoods?"

City Councilman Leon F. Pinkett III, vice chairman of the council's budget committee, said he was encouraged to hear those comments and wants to see more programs focusing on the poorer areas of East and West Baltimore.

"I want to make certain that resources for our youth are prioritized, whether that's money for the school system or after-school programs or for rec and parks," he said. "We need to spur commercial development as well. In a city with transportation needs, we need to encourage job opportunities in the communities where people need them most."

The growth in spending in Pugh's budget is made possible by rising revenues. The city expects to receive a more than $60 million increase from property and income taxes next year after six years of job growth.

Even as the city anticipates higher revenue, a recent report from the U.S. Census Bureau estimated that Baltimore lost more than 6,000 residents in the year that followed the rioting and increased violence that came after the death of Freddie Gray from injuries sustained in police custody.

Pugh said Wednesday she is appealing the census findings.

Pugh said about one-third of Baltimore's recent population loss — 2,100 people — is due to the federal housing voucher program that allows poor families to move to Maryland's suburban jurisdictions.

Kleine said data show the average city resident is getting richer. A building boom around the waterfront has helped lure younger residents and seniors, while middle-age families with children continue to leave for the suburbs.

"There's been a change in the population of the city," Kleine said. "We have 13,000 more households earning $50,000 or more and 13,000" fewer households earning less than $50,000.

The budget shrinks city government by three positions, and gives all workers a 2 percent raise, costing about $20 million.

The city's capital budget is $1.1 billion. Most of that funding is for water and wastewater projects needed to keep up with a $1.2 billion consent decree to stop sewage leaks and help clean up the Chesapeake Bay by fixing Baltimore's aging infrastructure.

Kleine warned that if Republican President Donald Trump's budget passes as proposed, it could cost the city millions in funding in future years.

lbroadwater@baltsun.com

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