City finances the unspoken issue; Mayoral candidates face rising costs, declining tax base


It has been called the mayoral campaign's unspoken issue.

Mayor Kurt L. Schmoke's successor will take office in December saddled with a projected $153 million deficit over the next four years.

The problem is simple: City spending will exceed yearly income because of a leveling off of property taxes from families moving out. The solution, as mayoral candidates know, is anything but elementary.

The Baltimore Homeowners Coalition, a citizens group that over the past four years has tried to focus attention on the problem, recently published a 32-page booklet pinning the mayoral candidates down on how they would deal with the city's financial woes.

The fiscal challenge for the next mayor, the group contends, is to maintain city services while trying to reduce the $5.83 per $100 of assessed value property tax rate that is twice as high as any other jurisdiction's in the state.

"It is one of the most important issues, and it's being obscured," said the group's president, Karen M. Footner.

Democrat Carl Stokes, a former city councilman, said that if elected mayor, he would cut the property tax rate by $1 over the first four years of his administration. The former school board member supports making city workers bid against private companies for contracts to provide city services, a program pioneered by Indianapolis Mayor Stephen Goldsmith.

Republican candidate David F. Tufaro also supports the policy, dubbed "competitive re-engineering."

"We intend to reward city workers for jobs well done and take action to reduce the city's employment rolls where it makes sense to do so," Stokes said in response to the coalition questionnaire.

City Councilman Martin O'Malley, a Democrat who served as chairman of the council's Finance and Taxation Committee, considers Stokes' tax cut pledge unrealistic. O'Malley, who pushed for a 12-cent cut in the $5.95 property tax rate in place when he joined the council in 1991, said the tax rate could be reduced by 6 cents, to $5.77, over 4 years.

O'Malley would cut middle-level managers to help reduce spending, saying that already stretched city services are unable to support further cuts. Instead of cutting the budget, O'Malley suggests that the city could raise its property tax income by improving public safety and thus stemming the tide of departing residents.

"We are already cut near the bone with regard to the front-line employees that actually deliver city services," O'Malley said.

City Council President Lawrence A. Bell III asserts that the budget forecast is not as grim as officials in the Schmoke administration contend. Bell, a Democrat who helped push through a 3-cent property tax cut last year and boasts of the 17-cent reduction in the rate since he joined the council in 1987, notes that the city balanced its budget over the past four years of his council presidency.

"We have afforded those employees we do have," said Bell, who as council president leads the city's powerful Board of Estimates spending agency.

Cutting the work force

Bell says the key to improving city finances is reducing the number of city employees by offering an early retirement package. In 1996, 1,100 city workers accepted early retirement, and Bell believes a similar offering could further reduce the ranks.

Reducing the number of government workers has been suggested by city budget leaders as the key to turning around the city's finances. Over the past 12 years, Schmoke has cut about 4,000 city workers, mostly through attrition.

Yet a study released last year by the Calvert Institute, a conservative think tank in Baltimore, asserts that the city has 5,500 more employees -- at a cost of $224 million annually -- than cities of similar size nationwide. The institute listed the Department of Public Works as the most bloated agency, with four times as many workers as those in similar cities, despite criticism -- most recently from Gov. Parris N. Glendening -- about filthy streets.

City leaders challenge those findings, saying the comparisons are unfair. For example, the Public Works Department, the city's largest with 6,000 employees, operates the regional water and wastewater systems for surrounding counties.

Two years ago, Schmoke created a group to study privatizing city services. His Millennium Group hired a consulting firm that is expected soon to recommend city services that could be better provided by private contractors.

From the outset of his campaign, Stokes said he would open city services to bidding by private companies, a move that would put him at odds with city unions, which support Bell.

"As we have said repeatedly, one of the key objectives to the Stokes administration will be to make the government work smart," said Stokes, who contends that he can find up to $100 million in wasted city spending, although he acknowledges not knowing where the savings would be found.

O'Malley opposes privatization, siding with critics who call it an excuse for poor management. He supports a program implemented by Philadelphia Mayor Ed Rendell, who created a panel of labor leaders and city administrators to work together to determine the best way to manage city services.

"In most cases, [privatization] is simply trying to achieve efficiency by threat," O'Malley said. "The front-line workers who actually provide municipal services can often be the best source of ideas for increasing efficiency, if they are simply asked."

Bell has been the most actively opposed to the city's flirt with privatization. Shortly after Schmoke's group began pilot programs last spring to privatize city services such as trash collection and management of city cars, Bell introduced a bill that would require the city to prove it could save at least 20 percent through any private contract.

In the past, private companies have been able to perform work cheaper by paying employees less than a city worker earns. The situation has been partly addressed by the adoption of the city's first Living Wage law, which requires any company doing business with the city to pay workers at least $7.90 an hour and provide health benefits. Stokes sponsored the 1994 legislation, which Bell and O'Malley supported.

Bell has benefited politically from his stand against privatization, gaining the endorsement of major city unions, including those representing police and firefighters. Yet he acknowledges that across-the-board salary cuts and health plan changes that would require higher contributions from city employees must be explored as a way of cutting costs.

Tax proposals

"We will need to find ways to cut costs and increase the revenue stream without increasing the property tax rate," Bell said.

Meeting that goal would likely require state help. The General Assembly has rejected a commuter tax on city workers who live in the county. But several candidates want the state to pass a tax under which surrounding counties would aid Baltimore, where 350,000 noncity residents work daily.

Stokes wants the Assembly to consider a "one state-one rate" that would create a uniform property tax rate across the state, which would likely result in a tax cut in the city and an increase elsewhere.

O'Malley supports statewide legislation that would direct a percentage of the current income tax, or piggyback tax as it is known, to the jurisdiction where it is earned. The legislation, introduced by state Sen. Barbara A. Hoffman, a Baltimore Democrat, failed to get out of committee due to opposition from Prince George's and Montgomery county officials who worried that the legislation would redirect county tax funds to the District of Columbia.

"Passing legislation of this sort will only be possible after we get our house in order and restore our credibility with state officials," O'Malley said.

Bell said he would seek to create a new plan for tax-base sharing through the region. Democrat Mary W. Conaway, the city register of wills, said she would push the state to provide more lottery money to Baltimore, which generates most of the proceeds.

Tufaro supports some regional taxation but worries that taxing county residents who work in the city would give Baltimore companies another reason to move out.

Halting the exodus

The bottom line to shoring up the city's budget, all agree, is to halt the exodus of city residents who pay property taxes.

O'Malley and Bell would do so by making the city safer and taking advantage of the federal Community Reinvestment Act of 1977, which requires banks to invest in struggling neighborhoods.

"Some people will grudgingly pay high taxes; some will put up with mediocre municipal services," O'Malley said. "But no one will place their children or themselves in harm's way, at home or in school."

Stokes contends that improving city schools is Baltimore's best marketing tool to attract new residents.

"The homicide and other violent crimes we see in our city is a symptom," Stokes said. "We must understand the interrelationships between crime and education, crime and poverty, and crime and drugs."

The coalition report with the full answers from candidates is available at the reserve desk of the Enoch Pratt Free Library or on the group's Web site at:

An article published in yesterday's editions of The Sun listed the wrong sponsor of the city's 1994 Living Wage law. Former City Council President Mary Pat Clarke sponsored the law. A similar law was sponsored on the city school board by Carl Stokes. The Sun regrets the errors.
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