Rawlings-Blake to propose 9% property tax cut for homeowners

Mayor Stephanie Rawlings-Blake will unveil plans Wednesday to direct nearly all of the revenue from Baltimore's long-delayed slots casino to reducing property taxes for city residents who own their homes, a spokesman said.

Rawlings-Blake, who faces several Democratic challengers for mayor in the September primary, will propose reducing taxes for homeowners by 9 percent over a nine-year period, the spokesman said. If the plan is approved, the owner of a home valued at $200,000 would save $400 in 2020.

Rawlings-Blake would leave tax rates unchanged for rental, commercial and vacant properties. She would use slots revenue to compensate for half the cost of the tax cut. The city's property tax rate is double that of surrounding counties.

While the proposal would amount to the largest drop in the property tax rate for homeowners in decades, it is less ambitious than the plans of her leading challengers, who have promised to slash the rate in half.

A spokesman for Rawlings-Blake characterized the mayor's plan as realistic and feasible, and said it would strengthen neighborhoods by drawing and retaining homeowners.

The plan would "target the very limited resources the city has directly to homeowners," said spokesman Ryan O'Doherty. "This is real. This can happen and this will happen."

Under Rawlings-Blake's plan, the city would devote 90 percent of its revenue from slots to help fund the property tax reduction. The other 10 percent would be directed to city schools. Reducing property taxes and funding school construction are the only two uses for slots revenue allowed by state law.

O'Doherty said Rawlings-Blake would stagger the reductions over eight years. Homeowners who qualify for the Homestead Tax Credit would automatically be eligible for the reduction.

By 2020, the tax rate would drop to $2.068 per $100 of assessed value. The rate is now $2.268 per $100 for all city properties; in contrast, the rates for Baltimore, Harford, Howard and Carroll counties hover around $1 per $100 of assessed value.

Rawlings-Blake's challengers, who have tried to make the city election a referendum on property taxes, said her proposal does not go far enough.

"It's too little, too late," said realtor Joseph T. "Jody" Landers. "We need to grow the tax base."

Former city planning director Otis Rolley said officials have "tried incremental tax cuts over the last decade — and we still saw 30,000 people leave and have widespread blight. Why should we continue a policy that clearly isn't working?"

Rolley and Landers, who resigned as vice president of the Greater Baltimore Board of Realtors to focus on the campaign, have pledged to follow the District of Columbia's model of raising tax rates on vacant and blighted properties while lowering the rate for residences.

State Sen. Catherine Pugh has promised to cut the property tax rate in half across the board in four years, but has not offered specifics.

Economists expressed mixed reactions to Rawlings-Blake's proposal. Some praised its practicality, while others said it would not cut the tax rate deeply enough to reverse a decades-long decline in the city's population.

Steve H. Hanke, a professor of applied economics at the Johns Hopkins University, described the plan as "half-baked and largely irrelevant."

It "would at best be a very small footnote in the economic history of the city of Baltimore," said Hanke, who has urged a sharp drop in the city's tax rate.

Given that Baltimore has lost nearly a half-million residents since 1950, Hanke said, a dramatic property tax reduction — for businesses and all residents — coupled with sharp cuts to city spending is needed to reinvigorate the city.

"We're really in a death spiral," he said. "The course and the magnitude of the death spiral will not be affected at all by what she is proposing."

Richard P. Clinch, director of economic research at University of Baltimore's Jacob France Institute, praised Rawlings-Blake's plan because it appeared feasible.

"A realistic proposal is better than an unrealistic proposal that can't be funded," he said. "I think every bit helps in getting people to move into the city."

But Clinch questioned the plan's reliance on slots revenue, in light of the difficulties the city and state have faced in trying to get a casino built in Baltimore.

Officials had hoped that the slots parlor would open this year. But the first round of bidding for a slots license in Baltimore yielded just one applicant and he was deemed unacceptable.

Canadian homebuilder Michael Moldenhauer, the spurned bidder, has sued the city and the state.

State lottery officials hope to receive a new batch of bids next week. City officials predict that multiple groups will submit proposals — and the $23 million application fee.

The two slots casinos now open in Maryland — one in Cecil County, the other outside Ocean City — have fallen short of revenue targets in their first months of operation.

Clinch said he supports Rawlings-Blake's approach of using the bulk of the projected slots revenue from Baltimore for tax reduction rather than for schools.

"I'm wondering personally if Baltimore city schools are even savable," he said. "This is putting the money where it actually can do something."

But Bebe Verdery, director of the ACLU of Maryland's Education Reform Project, urged Rawlings-Blake to set aside funds to rehabilitate schools. In a report last year, the American Civil Liberties Union described deplorable conditions in 70 percent of the city schools and concluded that $2.8 billion was needed for improvements.

"The deteriorating condition of school buildings is at a crisis point for our children and teachers," Verdery said Tuesday. "The money from slots could renovate five large high schools like Digital Harbor."

If a larger percentage of slots money is not directed to schools, Verdery said, "then it's imperative that we identify other funding streams so that school buildings can be modernized to help children and revitalize Baltimore."

Rawlings-Blake agreed last year that $2.8 billion in school repairs were needed. She pulled together a task force of city and school system officials to compile a report on funding sources by February. A report has not been released.

O'Doherty said the task force has continued to work on the report. He said an added $12.5 million in cost savings due to a new state funding formula for schools could be used to make repairs to school buildings.

Rawlings-Blake's challengers have stressed property taxes throughout the campaign.

Pugh spoke Tuesday at City Hall in support of a proposal by Councilman Carl Stokes to reduce tax rates in part by eliminating the Homestead Tax Credit cap on property tax increases.

Stokes introduced the bill when he was considering a run for mayor. He later decided to run for re-election to his council seat. No other council members have signaled support for Stokes' plan.

Pugh said the city needs to consider different ideas and solutions to increase homeownership and stem population losses.

"We need new energy and new proposals like this … to breathe new life into Baltimore," she said.

But William Voorhees, the city's director of revenue and tax analysis, told council members that the Finance Department "adamantly opposes" Stokes' proposal. Voorhees said it would "significantly jeopardize city services in the future."

Voorhees said Baltimore would need to attract 217,000 new households to make up for the revenue it would lose by cutting the rate in half over the next four years. Costs for city services such as fire and police protection are expected to rise, Voorhees said.

Stokes said the city would get added tax revenue from job, income and business growth that would be spurred by the property tax reduction.

Alfred L. Singer, vice president of the Property Owners Association of Greater Baltimore, suggested that the city explore the various property tax proposals and work with property owners to devise creative solutions.

Michael Fish, who owns 15 rental properties in Baltimore, said in a phone interview that help with taxes on such properties is badly needed.

Since rental properties are not eligible for the homestead tax cap, they are taxed at a higher rate. Fish said taxes on some of the houses he owns near Patterson Park have quadrupled in recent years.

"There's no choice but to pass that along to the consumer, just as any other business owner passes the expenses on," Fish said. "The people who are least able to afford it get taxed."

Baltimore Sun reporter Hanah Cho contributed to this article.