Top mayoral aide got homestead tax breaks for rental property

A top aide to Mayor Stephanie Rawlings-Blake received more than $14,000 in homestead property tax breaks on an East Baltimore rental property he owns, records show, even though only owner-occupied homes qualify for the subsidy under Maryland law.

State officials recognized the issue several months ago, and in January the city sent a bill to Khalil Zaied, the mayor's deputy chief of operations, demanding repayment of more than $5,000 for the tax year that began July 1.

Zaied paid the bill last Wednesday after The Baltimore Sun asked about it.

And Tuesday evening, even as state officials said they were still investigating whether to take away credits for the previous two years, Zaied said he had given the city an added $9,800 to repay those credits as well. The city finance director confirmed the payment.

Zaied, one of three deputy chiefs appointed by Rawlings-Blake, said that until last week he was unaware he had been getting a 50 percent tax break on the rental house while living in the Homeland neighborhood in North Baltimore. He also said he hadn't realized that he owed the $5,200 billed in January, which included penalties and interest for late payment.

"Obviously, I wasn't trying to hide anything," he said.

"Mr. Zaied made a mistake, immediately took steps to correct it, and understood the importance of resolving the issue promptly," Ryan O'Doherty, a spokesman for Rawlings-Blake, said in an email.

Maryland's homestead tax credit is intended to promote homeownership. It works as a cap, limiting the rate at which a homeowner's property taxes may rise in a single year — in the city, 4 percent. The state allows individuals and married couples to claim the break only on their primary residence.

Zaied and his late wife bought the house on East Baltimore Street in 1998, and he acknowledges that he lived there only until 2010. Then he and his current wife moved to a house they bought in Homeland. A former tenant says the couple left the East Baltimore property by February 2010, which would have made Zaied ineligible for the subsidy starting in July of that year. But he was issued the break for that year and the next two.

In 2011, an investigation by The Baltimore Sun documented how hundreds of city homeowners were improperly receiving homestead credits on second homes or rental properties. Many said at the time that they did not know they were getting the benefit, or failed to grasp that only owner-occupied homes qualified. Owners were often granted the credit simply by indicating at settlement that they intended to occupy the home.

Zaied said in an interview last week that he recalls those articles, including some mentioning politicians. One documented that Frank M. Conaway Sr., clerk of the Baltimore Circuit Court, was getting discounts on two houses. Another showed that Rawlings-Blake and her husband, Kent Blake, had simultaneously received two credits — one on a house he owned in Howard County, the other on a city condominium in her name.

"My discussion at the time was 'Wow,'" Zaied said, recalling the articles. But he said the news coverage did not lead him to realize that he was claiming two houses in the city as a principal residence at the same time.

"Honest to God, it wasn't anywhere on my mind or that I was somehow, some way related to those stories," he said. "I'm as busy as probably anyone can be, especially with everything going on."

As deputy chief of operations — the title used to be deputy mayor — Zaied monitors the Transportation Department, the city parking authority, the Department of Public Works and the Department of General Services for Rawlings-Blake. His salary is $147,800. He has worked for the city in various posts for 15 years.

The East Baltimore rental property is a three-story brick rowhouse in the 2200 block of E. Baltimore St., a tree-lined block just west of Patterson Park in the Butchers Hill neighborhood. It has an apartment on the first floor and one on the upper two floors.

City records show it has not been registered as a rental property, a requirement in Baltimore for any home that is rented or not occupied by the owner. Zaied said Tuesday he has now registered the property.

In 2010, Zaied rented the upper two floors to Angelina Sutin and her husband. Sutin said the couple, both psychologists, moved into the apartment in February of that year and lived there for more than two years before moving to Florida last summer.

"I know he lived there up until close to when we moved in," Sutin said in an interview.

Zaied said he and his wife moved from the building to Homeland in 2010, but he did not recall the month.

Owen C. Charles, deputy director of the state Department of Assessments and Taxation, said Zaied should not have received a homestead credit for the Baltimore Street house for the tax year that started July 1, 2010, if he had moved out. Neither would he have qualified for the credit in the 2011 or 2012 tax years.

In 2010, the homestead credit knocked about $4,800 off the $9,000 city tax bill for the property. It also reduced the much smaller state property tax bill by $169. A year later, city and state credits cut the overall tax bill by about $4,800. This year the credit — since revoked — lopped $4,646 off the bill.

The amount of the homestead credit on the Baltimore Street house has been bigger than the citywide average because the home's assessed value has nearly tripled since Zaied bought it in 1998 for $140,000. The state values it at $399,400.

Zaied said he didn't realize that his taxes had been cut in half by the credit because he didn't study his tax bills. He said he looked only at statements from his mortgage company, which paid his net tax bill from his monthly payments.

"I don't remember seeing any of the credit, to be honest with you," he said. "The only number I saw is what I received from my mortgage company — what they say they paid for my taxes. That's what I understood as my taxes."

Charles said the state was doing a periodic check late last year when it found that Zaied listed two homes as his principal residence. In January, the state removed the credit for the Baltimore Street property after getting no reply to a letter mailed to the house in December. (Zaied says he does not recall receiving the letter.)

That in turn prompted the city to send Zaied a revised tax bill Jan. 30. It said he owed $4,646 — the value of the erroneous credit — plus about $600 in interest and penalties, for a total of $5,265.

After The Sun asked the city Finance Department last Wednesday about tax bills for the Baltimore Street property, someone in the department notified him, Zaied said. "That was the first I was made aware of those issues," he said.

He said he paid the overdue $5,265 the same day, a payment that is reflected on the city's property tax website.

"I don't want to be the deputy mayor with a delinquent tax bill," he said.

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