Elected leaders in Baltimore want to revisit — and potentially renegotiate — a long-term, multimillion-dollar deal under which major nonprofit institutions make annual payments to the city in lieu of taxes, arguing that looming budget woes from state school reform mandates and other big-ticket expenses will necessitate increased revenues in coming years.
City Councilman Eric Costello, chair of the council’s budget committee, said he will introduce a resolution Monday calling on signatories to the 2016 memorandum of understanding — including the city’s medical and educational anchor institutions — to brief the council on the deal’s “efficacy” and on “options for reopening and renegotiating” its terms.
“This is about having a discussion,” Costello said, noting that any effort at striking a new deal would ultimately have to come from Mayor Bernard C. “Jack” Young, not the council.
Young, who helped negotiate the 2016 deal and at the time said it would help strengthen city services and finances, said this week that he’s glad Costello and the council are revisiting the deal, in which the institutions are set to pay the city $6 million annually through 2026.
“It’s something that really needs to be looked at again, since we’re about to face all these budget difficulties,” Young said. “I’m going to take any recommendations that they have.”
City Council President Brandon Scott said he supports having a public hearing on Costello’s resolution and would encourage Young "to reopen the negotiations with the institutions.”
Scott said he would assign Costello’s resolution to a committee of the whole — meaning the entire council — so it “can have the most open transparent conversation possible and treat this issue with the seriousness that it deserves.”
There is broad support for revisiting the agreement among activists and some unions in the city, including the National Nurses United union and the Baltimore Teachers Union.
“One of the most effective steps Baltimore can take to rectify the tremendous shortfalls in funding education in this city is to reopen and renegotiate Baltimore’s current tax agreement with the major nonprofits,” said Diamonté Brown, the teachers union president. “These institutions absolutely can and must contribute more to ensure a brighter future for our children and our city.”
But the existing deal’s language explicitly precludes the city from assessing new taxes or costs against the institutions until the deal’s expiration in 2026, and representatives of the institutions said there is little appetite to reopen the door.
Maryland Hospital Association President Bob Atlas, whose organization signed the deal on behalf of the medical institutions, said they are “disappointed” by the city leaders’ efforts to potentially reopen it.
“This was a deal negotiated in good faith by the Baltimore City hospitals; it’s critical that the agreement stay intact,” Atlas said.
Tina Bjarekull, president of the Maryland Independent College and University Association and another signatory to the 2016 deal, said she understands why the council might want to revisit it, but her member institutions “are in a hard place, too."
The deal was the result of years of negotiations, and was agreed to only because of the stability and predictability provided by the 10-year term, Bjarekull said. She said it already includes contributions at the top end of what member institutions can afford.
“There is no way we would have agreed to that dollar amount if there were not some agreement for long-term stability, so we could plan on it," she said.
Involved are 10 hospitals and medical systems and four colleges and universities. Johns Hopkins Medicine is by far the largest medical contributor, paying $1.4 million annually, while the Johns Hopkins University is by far the biggest educational contributor, paying more than $1.8 million annually. A spokesman for both entities did not respond to a request for comment Thursday.
Costello said “an agreement is an agreement, and an agreement should be honored,” but “these are also extraordinary circumstances.”
He was referring in part to recent recommendations by the state’s Kirwan Commission, which was tasked with studying and recommending improvements to public education funding. The commission proposed that $4 billion more be spent on education by the state and localities in coming years, including an additional $329 million from the city by 2030.
“At this point I’m not looking to politically pressure anyone," Costello said. "What I’m looking to do is have a comprehensive discussion of everything that is out there with respect to Kirwan, and this is one small piece of it.”
In addition to Kirwan costs, the city expects to see a surge in police settlements in the wake of the Gun Trace Task Force scandal, among other budgetary increases feared, Young said.
Bjarekull, representing the higher education institutions, said net tuition revenue is going down and Moody’s Investors Service recently issued a negative outlook for the sector as a whole. She said "every dollar we give to the city is a dollar that can’t go to student aid and our very public mission,” which includes neighborhood revitalization and local employment efforts.
“What we don’t want to do is to in any way undercut the ability of our nonprofit institutions in the city to be strong and vibrant and part of the solutions,” Bjarekull said.