Over the last few weeks, Baltimore’s mayoral candidates are firming up their stances on one of the election’s most hot-button issues – the city’s property tax rate. The city’s rate is more than double that of other counties at $2.268 per $100 of assessed value, compared to $1.10 in Baltimore County and $0.91 in Anne Arundel County.
The leading candidates agree that the high rate proves a disincentive for potential homebuyers and an irritant for current homeowners, equating to stifled home buying in the city. Until last week, Mayor Stephanie Rawlings-Blake had not offered a remedy. She finally unveiled a tax relief plan July 20, after weeks of dubbing her contenders’ proposals “pie in the sky.”
Otis Rolley, former city planning director, released the details of his property tax plan July 26, but had made his intentions of drastic tax reduction clear prior to the announcement. Two other major contenders – former executive vice president of the Greater Baltimore Board of Realtors Joseph T. “Jody” Landers and State Sen. Catherine Pugh – have also announced ideas.
Rawlings-Blake’s proposal calls for a 20 cent reduction of the property tax rate for Baltimore City homeowners by 2020. That means a homeowner with a house assessed at $200,000 would have an annual property tax reduction of $40 in 2013 that would gradually increase until it reaches a $400 reduction in 2020. The plan only alters the tax rate for owner-occupied homes, not vacant or rented properties.
One economist says the plan doesn’t go far enough. “Based on the Census data from 2005, almost half of the homes in Baltimore are less than $100,000,” said Linda Loubert, an economics professor at Morgan State University. “So this means that over 60,000 homeowners would see a few dollars in this tax reduction plan, probably not enough for a couple to go the movies.”
The mayor vows to allocate 90 percent of revenue generated from the planned slots casino to property tax relief, and also funds from cuts in city spending. Rawlings-Blake’s team asserts that any further reduction of the tax rate “would cripple services” and “likely bankrupt the city.”
In comparison, her plan cuts the property tax by 9 percent over nine years while Rolley and Pugh’s plans cut the tax by 50 percent and Lander’s cuts the rate by 30 to 35 percent over a four-to-six-year period.
All plans would require approval from the state legislature.
Loubert says a plan that offers “incentives for people to buy vacant properties and become the primary homeowner at some reasonable tax rate seems like a better plan.”
Both Rolley’s and Lander’s plans outline restructured systems with higher tax rates for vacant and blighted structures and are modeled after Washington, D.C.’s tax structure.
Rolley proposes reducing the property tax rate by 0.146 percent over 10 years until it caps at 1.1 percent target rate for the first $200,000 of assessed value and 1.75 percent for value over $200,000 for residential homeowners.
Non-blighted land would be taxed at the current tax rate, while blighted land and properties would see a 5 and 10 percent tax, respectively.
“Right now, investors will sit on them because there is no economic incentive to fix them. An increase in the property tax rate encourages them to act,” Rolley said.
He would also offer incentives for rehabbers, owners that clear vacant lots or those that convert vacant office space into residences.
Similarly, Landers has presented a multi-tiered tax system that is more costly for owners of vacant or blighted properties, but he plans to reduce the rate by 30 to 35 percent over a four-to-six-year period with the targeted rate between $1.45 and $1.60 per $100 of assessed value.
The system includes separate rates for inhabited residential properties, occupied commercial properties, all vacant properties, and blighted properties with rates as high as 10 percent.
Property tax reduction has been central to Lander’s campaign. He proposes to reduce the rate through the implementation of immediate spending cuts and taxes as outlined in a blue-ribbon commission he co-chaired in 2007 under then-Mayor Sheila Dixon to reduce the city’s tax rate. The panel also suggested the city utilize slots revenues for property tax reduction, as the current mayor has proposed.
Landers’ and Rolley’s plans may not do much to uplift less affluent areas as “tax rates are generally higher in property-poor areas while the demand for city services also tends to be higher than property-rich areas,” according to Loubert. “This, of course, is problematic and many urban cities struggle with this dilemma.”
Pugh has not officially released a plan but says she will cut the rate in half over four years. She will appoint a committee of business and community leaders to formulate a new tax structure. Pugh has also pledged to reinstate the $1 house program, first established by the late William Donald Schaefer, when he was mayor of Baltimore.
Under the plan, those who purchase vacant buildings would not pay a property tax, but a set annual fee not to exceed $2,500 over a 10-year-period. Her goal is to sell at least 15,000 homes. The extra funds would aid in property tax reduction.