Property taxes for Baltimore homeowners will drop again under Mayor Stephanie Rawlings-Blake's plan to gradually lower the city's rate to bring it more in line with the rest of the state.
The city's spending panel agreed Wednesday to lower the rate to $2.13 per $100 of assessed value — still double the levy of surrounding counties, but down 14 cents in the past two years. The reduction is part of the mayor's plan to knock 20 cents off the tax for homeowners by 2020.
The tax break, approved without discussion by the Board of Estimates, will lower the property tax bill for an average home by $174. The bill for a $145,500 house will drop from $3,269 to $3,095 in the fiscal year that begins July 1.
"Residents have been clear that they want to see action taken to reduce property taxes without a reduction to city services, and we're listening," Rawlings-Blake said after the meeting. "And more importantly, we're taking action that will lay the groundwork for growth in Baltimore."
The tax break is part of the Targeted Homeowners' Tax Credit. The rate for rental properties and businesses will remain $2.25 per $100 of assessed value.
Baltimore's rate remains the highest in the state, but some economists say the mayor is taking a reasoned approach that makes the city's rate more competitive without cutting services, such as public safety initiatives, after-school programs and trash pickup.
Anirban Basu of Sage Policy Group, an economic and policy consulting firm, said the action brings the city's rate "closer to being reasonable."
"The only way to deal with Baltimore's uncompetitive tax rate is to chip away at it in a way that allows for a combination of a balanced budget and taxpayer relief," Basu said.
The board reviewed another of the mayor's ideas to keep city residents and attract new ones by encouraging the development of apartment buildings. That proposal, which still needs City Council approval, would give a tax credit for 10 years to developers who build or renovate apartments throughout the city.
Intended to spur apartment construction and renovation citywide, the credit would give developers an 80 percent break on taxes due for any value added to the property by the project. The percentage would gradually decrease after five years.
A similar program has been available to developers who build and improve apartments downtown.
Together, the tax breaks could help keep members of the millennial generation — the children of the baby boomers — living in Baltimore as they get married, have children, pay down student loans and look for houses to raise their families, Basu said.
The millennials show a propensity to live in urban areas, but as they grow older, Baltimore must find a way to entice them to stay, he said.
"The mayor has begun to unleash a process that I think is very productive," Basu said. "There has to be a concerted effort to drive down these tax rates."
By 2020, Rawlings-Blake's plan will translate into a $291 savings on an average home property tax bill.
The mayor said she sees providing the tax breaks as "a critical component" of her goal to increase the city's population by 10,000 families.
"I understand in order to grow a city, you have to do many things. You have to attract new residents, but you also have to give the residents who are here more reasons to stay," Rawlings-Blake said.
Providing the property tax break will cost the city $20.2 million, which is built into the mayor's $2.5 billion budget that doesn't cut city services for the first time since 2008.
Critics note that while the city is cutting taxes, city water and sewer rates are rising by 42 percent over three years. Bills for a typical customer, including homes and businesses, jumped by nearly $100 this year, and are projected to climb by a total of $250 by July 2015. The water rate increases raise the typical bill from $690 in fiscal 2013 to $784 in fiscal 2014 to $944 in fiscal 2016.
The mayor has said the water rate increases are necessary to repair the city's "crumbling" infrastructure.
Rawlings-Blake has made sweeping changes to the city's overall financial picture. More money has been banked in Baltimore's rainy-day account and a series of changes, such as requiring city workers to contribute more to their pensions, is helping to shore up the long-term structural deficit.
The shortfall is down about $300 million from the $750 million that was projected a few years ago.
The city also is working to implement another tax break approved this year by the General Assembly that will be available to homeowners who move from one house in Baltimore to another in the city. The Resident Retention Credit is capped at $3 million, and will be granted on a first-come, first-served basis.
The city is expected to begin taking applications for the tax credit on Oct. 1. That application and others will eventually be available online, officials said.