Candidates look in all directions to bail out city Future tied to federal, regional and state help.

THE BALTIMORE EVENING SUN

Bob Malloy, a northeast Baltimore liquor salesman, does not like the view as he scans the city from his middle-class perch.

He sees high taxes, high crime, inferior schools and spiraling auto insurance rates.

When he looks toward City Hall, Malloy sees a mayor he thinks is doing a decent job -- but to little avail. Malloy says Baltimore's problems are insurmountable: The schools are underfunded, the number of unemployed and unemployable residents is too large, and the city's other social problems are too deep.

In Baltimore County, things look much better to Malloy. The property tax rate is less than half the city's. Auto insurance rates are lower, and he perceives the schools and student achievement to be better than they are in the city.

"If the city government wants middle-class flight, they've got it," says Malloy, who plans to sell his house on Rosekemp Avenue, just east of Harford Road. "I've put a contract on a house in the county that is three times the size of this one, yet the property taxes are about the same and auto insurance is half the cost of what I'm paying now."

If Malloy, indeed, leaves Baltimore, he will join a march to the suburbs that has continued for some 30 years. In 1960, the city's population was 939,000, and by 1990 the figure had dropped to 736,000.

Not only has the city's population dwindled, but the exodus has stripped Baltimore of its financial independence. As the city's tax base has weakened, the demand for services has increased because the city's population is poorer. Meanwhile, federal aid to cities, including Baltimore, has been drastically reduced in the past decade.

The combination of a weak local tax base, an increasing number of poor residents and a withdrawal of federal support is a recipe for long-term financial disaster in the city. And fighting those trends will be perhaps the most important battle waged by the winner of this year's mayoral election.

It is a war many cities are losing. Philadelphia teetered on the brink of bankruptcy earlier this year. New York City is in the midst of a fiscal crisis that has prompted talk of draconian measures, including closing municipal pools and the Central Park Zoo and the dimming of one in four street lights. Bridgeport, Conn., is bankrupt.

So far, Baltimore has survived relatively unscathed. The city has retained its A-1 bond rating and it has managed to balance recent budgets through nuisance taxes and a relatively small number of layoffs rather than increases in property taxes.

Likewise, the $2.1 billion fiscal 1992 budget appears to be on the road to enactment. The budget holds the line on services, and its biggest casualty is a 6 percent wage increase for city workers.

While Baltimore's fiscal challenge is clear, how it will be met in the future remains murky.

Mayor Kurt L. Schmoke, who plans to announce his candidacy for re-election Sunday, has pushed to have the state step in to relieve some of the city's financial burden. Also, the mayor has worked to gradually reduce the city's work force.

In addition, Schmoke says the city must pursue a strategy of reducing its property tax rate -- which at $5.95 is more than twice any other in the state -- while not dramatically curtailing services. He says that is the best hope of holding on to what remains of Baltimore's tax-paying population.

The strategy has scored some successes. For example, the state has taken over the City Jail and the Community College of Baltimore and some costs for the Baltimore Zoo and the central branch of the Enoch Pratt Free Library.

But those moves have provided only temporary relief from the city's fiscal strain.

Schmoke says any long-term solution lies in a restructuring of state taxes. But a series of recommendations by a gubernatorial commission to raise taxes and distribute the new revenue to poor subdivisions such as Baltimore was pushed aside for summer study by the legislature during its past session.

"In the long run, we are going to need significant changes in the state tax structure or some kind of renewal of federal support for cities," Schmoke says.

His opponents in the Sept. 12 Democratic primary say, however, that the mayor has not done enough to put his ideas into action.

"One of the sources you can go to is the state," says Clarence H. Du Burns, the former mayor who lost to Schmoke in the 1987 Democratic primary. "What we need to do is fight hard to change the formula of reimbursement of income tax revenue to the city. But [Schmoke] doesn't know how to lobby state government. He doesn't speak to the governor, and that makes a difference."

William A. Swisher, a former state's attorney who is also running in the Democratic primary, says Schmoke should make deeper cuts in the city's 27,000-person work force.

"The only hope in the absence of a major increase in federal and state aid is to have a severe cost-cutting program," Swisher says. "The city government has to be downsized drastically."

Others say Schmoke has handled the city's bleak financial situation as well as can be expected.

State Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee, says the fact that the mayor has been able to avoid large-scale layoffs and disruptions in essential services while cutting more than 1,440 city jobs speaks well of his fiscal management.

"The mayor has earned good marks in that area," Levitan says. "My committee -- and I think major legislative leaders feel the same -- have been impressed with Schmoke's willingness to set realistic goals for what he wants from the state in terms of financial aid."

That willingness, Levitan adds, played a key role in the legislature's decision to take over the City Jail. And, he says, Schmoke's record with legislative leaders will be an asset to the city this summer as the General Assembly examines proposed changes in the state's tax structure.

Another hope for the city is increased regional cooperation. For years, the city and surrounding counties have worked together to provide a limited range of services, including water and waste-water service.

But any moves beyond that have been slow and tentative, despite a continued flow of pro-regionalism rhetoric by a succession of mayors and county executives. The problem is that true regionalism usually boils down to the counties sharing some of their wealth with the city -- a scenario that is political suicide given the anti-tax mood that exists in the counties.

Anne Arundel County Executive Robert R. Neall is one who says that his county's well-being is tied to the city's fortunes.

And Neall acknowledges that if the city's problems continue unchecked, they will affect Anne Arundel County and the other jurisdictions surrounding Baltimore.

"A vibrant city is crucial to the future of our region," Neall says.

Neall also says he sees room for regionalism -- especially in the areas of transportation and economic development.

But when the question of cooperation on such questions as an overhaul of the state's tax structure arises, he balks.

Neall says a major change in the state's tax structure is not the answer to the city's problems.

Instead, he says, he favors state assumption of funding for some agencies, including the Circuit Court and the state's attorney's office.

Neal says he is committed to addressing some regional issues such as the county's support for the region's cultural institutions, most of which are in -- and largely supported by -- the city.

But while those good words have been matched in other counties, they have not been matched by deeds.

The combined contribution to eight major cultural institutions in the city from the five surrounding counties in fiscal year 1992 was projected to be about $1.8 million.

"But that figure might not reach $1.5 million because of the recession," says John N. Snell, principal economist for the Baltimore Regional Council of Governments.

In Baltimore County, Councilman Charles A. Dutch Ruppersberger, D-3rd, says regionalism is important for the survival of the city, as well as the metropolitan-area counties.

"We need regional cooperation and mutual support if all of these jurisdictions are going to get the financial aid they need from the state and federal governments," says Ruppersberger.

But Ruppersberger says he doesn't favor regionalism going as far as, say, having the city and Baltimore County, co-managing their problems.

"We have a different management style in the county than exists in the city and we have different charters," he says.

"But the metropolitan area and the state as a whole has to continue to understand that if the city fails it will be detrimental to everyone."

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