Sun Investigates

City homeowners given 30 days to repay tax credits they didn't request

Over the past two years, Maureen Coyle has received $5,700 in property tax breaks that the city admits she never requested for her Patterson Park rowhouse. Now the city is demanding full repayment by month's end.

If she doesn't or can't pay by then, the city says she'll be hit with $990 in penalties and interest. "This will definitely be a hardship to put it mildly," said Coyle, a social worker who doesn't have "a spare $5,700 just hanging around."

Coyle is one of a handful of city homeowners who suddenly owe back taxes after The Baltimore Sun reviewed a random sample of homes receiving a tax credit for renovations to historic properties. The Sun found five erroneous credits, but reviewed just one-sixth of all the credits granted citywide, so there could be more.

The value of the errors, which originated at the state, ranged from $1,700 to $9,200. And the city not only expects repayment, it expects it right away.

Another homeowner, Catherine Parks, got stuck with an unexpected $7,630 bill for back taxes after the city belatedly discovered that a new construction tax credit had been wrongly applied to her Canton home.

"Baltimore's system of accountability is very poor," said Parks. She and her husband are so frustrated that they're moving back to Florida as soon as they can sell their house.

The billing errors are the latest sign of problems involving the state assessments agency and the city's Finance Department — miscues that have likely cost the city millions of dollars in tax revenue over the past several years.

Among other failures documented by The Sun: 465 vacant houses wrongly getting homestead credits meant for owner-occupants, more than 550 owners improperly "double dipping" on the homestead and two cases where the state vastly under-assessed homes after multiple lots were combined.

The city's policy has been to play hardball when erroneous credits are discovered, and seek immediate repayment of any undeserved tax breaks.

But some City Council members want the city to go easier on these owners — and to make tax bills clearer so errors can be caught before the problem festers.

Council President Bernard C. "Jack" Young thinks Coyle and the others should get more time to repay, without penalty. "It's totally unfair," he said, "to have these five homeowners given an ultimatum — 'We made this mistake … but you have to pay by April 30 or else.'"

Councilman James B. Kraft agrees.

"The city needs to work out a reasonable payment schedule for these folks without penalty, without interest," he said. "There's no way these people should have, could have, known that they were wrongfully receiving the credit. And it's not their fault."

Aides to Mayor Stephanie Rawlings-Blake aren't making any promises. After first insisting that city law requires the deadline and penalties — even if the taxpayer isn't at fault — officials said Thursday that Finance Director Harry Black can approve a payment plan and waive penalties.

Mayoral spokesman Ian Brennan said taxpayers must first dispute their bills, adding in an email "that's not [yet] the case here at this point."

The recent examples differ from cases where some owners, found to be improperly receiving two or more homestead credits, said they didn't know they were enjoying multiple breaks. But those owners or their agents had actually declared the homes as principal residences at some point.

By contrast, the owners who now must repay erroneous historic or new construction credits did literally nothing to get their breaks, and they say that's a big reason they didn't realize the mistakes.

Because of widespread confusion among homeowners, Kraft asked the Finance Department to clearly identify tax credits on tax bills and says officials agreed to make the changes. At present, several types of breaks — the historic credit and one for new construction, among them — are listed as "special credits."

Parks' erroneous new construction credit was identified only as a special credit, for instance, so she thought it stemmed from a successful appeal of her home's assessed value. The homestead credit, meanwhile, appears on tax bills as an "assessment credit."

Despite the assurances made to Kraft, the city says it can't easily change the wording on its property tax bills.

"It is not currently possible, without extensive re-programming to itemize individual special credits," mayoral spokesman Ryan O'Doherty said by email. "The system is very old and the City is investing in new software in the future that will help us provide additional transparency on tax bills."

O'Doherty said the Finance Department's billing integrity unit intends to begin systematically auditing all credits. In October the unit asked the state to strip homestead breaks from more than 2,100 properties that were vacant or rented out. The mayor also wants to boost the unit from one employee to three.

The five erroneous historic tax credits came to light after The Sun asked for documentation on 200 credit recipients that were on a list provided by the Finance Department. The city's Commission for Historical & Architectural Preservation, which certifies the credits and informs the state assessments agency, found no record of an application for the five.

It turns out the error began with the assessments agency, where credits are applied to determine how much of a property's value is tax-exempt. Owen C. Charles, the deputy director, blamed a coding mistake. The city Finance Department, which then uses the state's work to compute tax bills, didn't catch the errors.

The number of erroneous credits may be greater. The 200 represent a fraction of all 1,170 recipients.

Coyle recalls noticing when her 2010-2011 bill dropped by nearly $3,000. A friend told her it was probably the homestead credit. In reality, she had already been getting the homestead break. But she says she didn't realize that because it showed up on her bill as an "assessment credit."

Ryan and Marie Moore, who live on North Streeper Street, owe the most: $9,200.

"It's pretty ridiculous," Ryan Moore said. "It's something that would have been paid out through my mortgage over the course of two years. Now they want it in less than 30 days."

When he called the city, "they basically told me in so many words, it's too bad — that's how it goes."

In Canton, Parks and husband Roger Nolan were shocked to receive a notice in February saying they owed $12,078 in back taxes — without any details as to why — and had until the end of the month to pay up or face having their house go to tax sale.

Parks, an attorney, said it was only when she called the city's Bureau of Revenue Collections that a staffer explained that they'd been getting a new construction tax credit they weren't eligible to receive.

Eventually a supervisor acknowledged that the credit had been transferred in error to the couple after they bought the home four years ago from a man who had qualified for the break. The five-year new construction credit can be used only by the first buyer of a new or substantially rehabbed home.

"We apologize for the inconvenience that this error has caused you," wrote customer service manager Dorothy Reed, explaining that the city caught the problem during an audit. Interest and penalties would be waived, dropping the total to $7,630, if Parks paid by the end of February — then just a few days away.

Parks' mortgage servicer paid the sum from escrow, which means she faces higher mortgage payments to make up the difference.

Parks says she wouldn't have been upset to be charged the proper amount at the right time. It's the error and the years it took for the city to discover it that rankle, along with the short window to pay and the looming threat of a lien if she couldn't.

"I lived in my previous [Florida] house for 20 years, and I never had an issue with the city of Coral Gables," she said. "Taxes were rather high there, too. But they were accurate."