City spending board approves another property tax break

Baltimore's spending board voted Wednesday to approve another property tax break for city homeowners, part of Mayor Stephanie Rawlings-Blake's plan to cut property taxes by 22 percent over 10 years.

The tax credit approved by the Board of Estimates would knock $140 off the median property tax bill on owner-occupied homes.

That is on top of the $40 cut that came when the panel created the credit last year. The numbers are based on the taxes that would be due on a property assessed at $200,000.

The board approved the tax break Wednesday without discussion.

Baltimore's property taxes remain the highest in the state. Critics say the break approved Wednesday does not make up for rising water bills and the new stormwater fee derided as a "rain tax."

The Department of Public Works is seeking a 15 percent increase in water and sewer rates, and the city plans to impose a stormwater fee of $48 to $144 a year on single-family homes to reduce pollution from runoff and improve the health of the Chesapeake Bay.

Comptroller Joan M. Pratt, a member of the Board of Estimates, said Rawlings-Blake's plan could disproportionately affect lower-income residents who do not own their homes.

"The decrease in the property tax rate doesn't offset the increase in the water rates, so it's still more money that the citizens are spending," Pratt said.

The 15 percent water rate increase planned for July 1, if approved, would be followed by 11 percent increases in each of the next two years.

A spokesman for Rawlings-Blake said her 10-year plan, which includes both spending cuts and community investments, is designed to entice 10,000 families to move to Baltimore over the next decade.

Rawlings-Blake would address the city's $750 million structural deficit by requiring city employees to contribute to their pensions and by reducing the city's vehicle fleet by at least 5 percent, among other measures. She would demolish more than 4,000 vacant homes and restore 10 recreation centers.

The property tax breaks are to be offset by city spending reductions coupled with money the city will bring in from leasing land for the casino to be built on Russell Street.

The impact of the tax break, the water rate increase and the stormwater fee on the typical city resident is likely to be negligible, said Matthew Crenson, a political scientist at the John Hopkins University. "This is probably going to be a wash."

Because stormwater fees are to be assessed by all area jurisdictions, he said, the added financial burden likely won't be a deciding factor for residents or businesses considering a move. The water rate increase, spread over a year, is unlikely to factor into anyone's long-term decisions, he said.

And he said a $140 break in property taxes, which probably would not be passed on from landlords to renters, would not be much of an incentive.

The tax break approved Wednesday reduces the city's property tax rate on owner-occupied homes to $2.176 per $100 of assessed value. The property tax rate on rental properties and businesses is $2.268 per $100 of assessed value.

The city's property tax rate is still about twice the rate in neighboring jurisdictions: $1.15 per $100 of assessed value in Howard County, $1.10 in Baltimore County and $0.91 in Anne Arundel County.

Rawlings-Blake plans more property tax cuts. If fully implemented, the Targeted Homeowners' Tax Credit would reduce the city's property tax rate by 20 cents by 2020. That means the break on a $200,000 home would grow to $400 over the next seven years.

She is also planning a 2-cent cut in the property tax rate as part of the plan to implement the stormwater fee. The new fee, which has not been approved, would free up general fund dollars that the city would divert to property tax relief.

The General Assembly required Baltimore City and Baltimore, Howard, Anne Arundel, Carroll and Harford counties, among other large jurisdictions, to impose stormwater fees by July 1.

Council Vice President Edward Reisinger said he supports the mayor's vision.

"Any time we can pass property tax cuts, I am 1,000 percent in support," he said. "That's the one thing about this administration, I do give her kudos, the mayor does plan out. This mayor isn't kicking the can."

Also Wednesday, City Auditor Robert L. McCarty told the board the city had to spend nearly $1.5 million to rework audit reports that contained erroneous information.

Pratt said the city could have saved money if the finance department had listened earlier to auditors' concerns about inaccurate books. The comptroller said auditors brought the errors to the city's attention in 2009.

"I was very displeased we had to spend additional money to have these statements restated," Pratt said. "We're one city. We like to work together. We're not trying to say, 'I got you.' We want to work with other agencies to make sure the city's records are in the best shape they can be."

The city finance department said in 2011 that it had mistakenly overvalued $223 million in roads, bridges and other property in financial statements.

Then-finance director Edward J. Gallagher said the city's accountants did not classify about 5 percent of Baltimore's $4.3 billion of fixed assets in the correct accounting category, causing the property — which includes resurfaced roads, renovated buildings and improved parks — to be overvalued in financial statements. City accountants never factored in the depreciation of the assets, officials said.

The city auditor released audits last week and Wednesday that corrected the books for 2010 and 2011.

The auditors raised concerns about financial practices throughout city government, including accounting of property tax revenue, water bill payments and grants received.

Asked about the books last week, Rawlings-Blake said the city worked diligently to make corrections.

"It did take time," she said. "But we also took it very seriously, and we wanted to make sure that we were getting it right. When you do this type of comprehensive audit, it is complex. It's a $2.4 billion corporation. My instructions were to take the time to get it right, and that's what we did."

Baltimore Sun reporter Luke Broadwater contributed to this article.

By the numbers

Baltimore's property tax rate remains the highest in the state at $2.268 per $100 of assessed value. The break approved Wednesday reduces the rate to $2.176 per $100 for owner-occupied homes.

Other area property tax rates (per $100 of assessed value):

•Baltimore County: $1.10

•Howard County: $1.15

•Anne Arundel County: $0.91

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