John Paterakis is one of the richest guys in Baltimore. His bakery supplies supermarkets and fast food joints from New England to North Carolina, and he owns a good deal of the waterfront east of the Inner Harbor. Oh, and just last year, he pled guilty to violating campaign finance laws and paid a $25,000 fine.
So does he deserve a $155 million tax break for an $800 million development in Southeast Baltimore, called Harbor Point? Councilman Carl Stokes is not so sure, and he's using the occasion to raise questions about the city's entire redevelopment strategy.
Mr. Stokes recently became head of the council's Taxation, Finance and Economic Development Committee after a campaign finance imbroglio involving Mr. Paterakis cost Councilwoman Helen Holton that position. Mr. Stokes is concerned about the city's policy of awarding immense subsidies to big developers, and he's especially wondering why such treatment is needed for this prime waterfront real estate between Harbor East and Fells Point.
Few in City Hall acknowledge that Baltimore's exorbitant property tax rate — more than double the rate in any Maryland county — makes it foolish for investors to build anywhere in the city without some sort of incentives package.
Nor will city officials admit that they're fond of the status quo because it enables them to act like toll collectors. They, alone, can remove the tax obstacle that's the difference between a profitable project and an unprofitable one — and the more corrupt among them will do it for the right price. For Ms. Holton, that was the cost of an election-year poll, while for former mayor Sheila Dixon it was travel expenses and gifts from a developer friend.
Wealthy, savvy and well-connected developers know how to get the big deals done. Afterward, with another shiny skyscraper overlooking the water, they and their political friends pat themselves on the back for revitalizing a few blocks in a city of more than 80 square miles.
But as Councilman Stokes asks, "What about the rest of the city?" Cutting deals with big developers does nothing for Baltimore's many thousands of ordinary property owners who pay unsubsidized property tax rates. As a result, dozens of communities suffer from chronic disinvestment — and the poverty, blight, crime and abandonment that follow it — as they wait for special treatment that never comes.
It's time for Baltimore's overtaxed home and business owners to demand more favorable property tax rates in their neighborhoods. There should be no more special tax breaks — only reasonable tax rates. They should be competitive with those in the rest of the state, and they should apply in the same way to everyone.
This would reduce the temptation for developers and politicians to strike corrupt bargains. More important, it would finally address the root cause of Baltimore's long-running disinvestment crisis. After all, if property tax relief is necessary before John Paterakis will develop waterfront property, it's even more important as an incentive for less-well-financed property owners to invest in communities away from the water.
City Hall will tell us that cutting property taxes significantly is a nice idea that's simply unaffordable; the short-term loss of revenue would wreak havoc on the budget. They know that reduced rates will eventually grow the tax base more than enough to recover that lost revenue — that's the logic they've used to justify subsidies for every major redevelopment project for decades, after all — but they argue that the tax base won't grow fast enough to head off near-term budgetary disaster.
But we can build a budgetary bridge before we have to cross that river.
Baltimore should promise a major cut in its property tax rate that will take effect in three years. That would unlock a wave of new investment immediately and attract new residents who will pay piggy-back income taxes into city coffers. City Hall could therefore set aside enough cash to cope with the reduction in property tax receipts when the lower rates actually take effect. (For details, see "How to Make Baltimore a Superstar City," in the forthcoming Maryland Journal, available at: http://www.mdpolicy.org/.)
We need political leaders who understand that cutting everyone's property tax bill is the only way to create the kind of citywide renaissance that Baltimore's "pay to play" redevelopment system has failed to produce. It's encouraging that someone of Councilman Stokes' standing is questioning that flawed strategy. That's the first step toward replacing it with something both fairer and more powerful.
Louis Miserendino is a member of the Social Studies Department at Calvert Hall College High School in Towson. His e-mail is email@example.com.