Homeowners in Bolton Hill, Mount Vernon, Charles Village and a half-dozen other central Baltimore neighborhoods might have paid too much in property taxes because of the way City Hall has assessed charges for those areas' special benefits districts.
At issue is whether a popular tax credit should be applied to additional levies collected by the Charles Village Community Benefits District and the Midtown Community Benefits District to offer extra garbage collection and private security guards.
For years, the city has applied the Homestead Tax Credit to property taxes that support city services, but not to the benefits districts' tax rate, which might have resulted in small overpayments by thousands of homeowners.
The city solicitor's office said in an opinion this week that any credit that applies to the city's regular property tax should also apply to the benefits districts' tax. But after questions from The Sun about whether that meant prior tax bills were calculated incorrectly, the city withdrew the opinion.
City Solicitor George A. Nilson said he is researching the city code to determine whether the credit should apply.
It is unclear how many people might have overpaid and how much money is at stake. City officials declined to discuss the possibility of a tax rebate, saying it is not clear whether homeowners are entitled to one.
"I think that's a very legitimate question," David T. Hill, executive director of the Charles Village district, said when he was asked whether if homeowners should be entitled to a rebate if they overpaid. "That's something for the legal department and the city to determine."
The ordinances that established the districts state that any credits that apply to the city's regular tax should also apply to the districts' surtax. "All provisions applicable to the assessments, refunds, credits, collections, and enforcement which apply to the regular tax shall apply to the supplemental tax," the code says.
In an opinion dated March 24, the city solicitor's office wrote that the ordinance "clearly states that credits that apply to the regular property tax also shall apply to the supplement tax."
The solicitor's office withdrew that opinion Thursday and said it no longer stood by it. A copy of the memo was removed from the City Council's Internet site.
Nilson, the administration's top attorney, said the city is investigating the possibility that when the ordinance refers to "credit" it means credits for overpayment, not tax credits. He said he expects to learn next week whether that is the position the city will take.
If officials determine that "credit" does not mean "tax credit," the city will argue that residents were taxed correctly. That interpretation could open Baltimore up to lawsuits by homeowners who read the ordinances differently.
The Charles Village district was created in 1995, the Midtown district the next year. Both were immediately praised for providing neighborhood services that the city could not afford, but the surtax was disputed from the start.
The city's finance department calculates and mails the bills to support the districts.
Property tax bills are generally calculated by multiplying the tax rate by the assessed value of a property. In recent years, tax bills in Baltimore have gone up not because of increases in the tax rate but because of large increases in assessed values.
In Baltimore and other parts of the state, the homestead credit has eased increased assessments for homeowners by limiting annual assessment increases for taxing purposes to 4 percent. The credit does not apply to business or rental properties.
Any overpayments for the district taxes would have occurred only in years in which the assessed value of a property grew by more than 4 percent. Because the district's rates are low, it is likely that a homeowner would notice only a small difference if the credit were left off.
In part because the most recent assessment cycle in Baltimore led to large increases to property values, City Councilwoman Mary Pat Clarke introduced in February a proposal that would stipulate that the credit should apply to the Charles Village district.
"Charles Village has been subjected to reassessments that have gone through the roof," said Clarke, who represents parts of Charles Village. "We want that credit applied."
The Charles Village benefits district expects to collect about $546,000 from the surtax in the next fiscal year, 24 percent more than in the current fiscal year. District officials have reduced their estimate of next year's tax revenue by $64,000 in anticipation of the credit.
The Charles Village district covers 100 city blocks, from 20th Street north to 36th Street and roughly between Greenmount Avenue and Howard Street. Parts of the Abell, Old Goucher and Harwood neighborhoods also are within the district's boundaries.
The Midtown district, which includes Bolton Hill, Mount Vernon, Charles North and Madison Park, expects to receive about $897,000 from its tax this year. Peter M. Merles, the district administrator, said he could not project the revenue loss if the credit was applied to its tax rate.
City Councilman William H. Cole IV, whose district includes parts of Mount Vernon and Bolton Hill, said the districts have been beneficial and have spent the money wisely.
He said something must be done to reduce property taxes: "I do think we need to start capping it, because we've taxed people out of this city."
Nilson said the city is researching whether "credit" refers to a return credit for an overpayment. The code might separately account for that circumstance because it includes the word "refund."