I think the idea of raising City taxes is utterly ridiculous. I still can't believe how much I pay, and can't even fathom adding additional taxes. You can’t just tax people to death. The city housing market will crumble even more if they add to the property tax. I really like the quote from a couple days ago, “Oh, Anne Arundel County, half the taxes and twice the services”.

I'd love to see the city look at cutting more rather than raising taxes and I don't mean cutting fire and police, but things that are unnecessary right now. Example is the repair work on Lombard. It that really a priority right now?

I think that raising of city taxes nowadays is one of the ways how to make people much annoyed than they already are. The only good solution is to take a very close look on expenditures and cut all ways of spending that are not necessary. And regarding the house prices I have to agree with comment of Charlie, high taxes have direct impact on decreasing of prices of houses. That means bad news for house owners.

Regards,
Jay

While I do agree that taxes are ridiculous, I don't see why anyone would move AWAY from the city because of it... I live in rowhouse and have owned my house for about five years now. My tax assessment in that time has gone up 5X what I paid for the house (I was in an up-and-coming area that actually up-and-came), but as a homeowner who lives in their house, my taxes only went up the 4% amount allowed by the homestead. As long as I stay in the house the city can only collect 4% more than they did the last year, so I don't see why anyone would move because of a 4% increase in taxes?? It just seems like a disproportional response to something that is not really that big a deal for people who are current residents...

What increasing the tax rate will really do is stifle growth (and move people out who don't understand the tax rules apparently...). Sure, I have a house that I love and got it at a price I could afford, but now I have to ask the next person who wants my house to not only to pay the fair value of the house, but to also pay 5X the taxes I'm paying, which is a substantial increase in monthly expenses.

I think Baltimore needs to find a way to increase taxes on vacant houses, which are owned by absentee landlords who aren't concerned about the city anyway, and use the proceeds from that to decrease the taxes on occupied dwellings, making the prices in the city a bit more reasonable and making the city a viable living option for people.

The people who are running the city need to take a long-term view of this situation. Baltimore will never become fully revitalized as long as the tax rate remains double the surrounding jurisdictions. Even the "hip" neighborhoods like Fed Hill & Canton are nothing more than a temporary stop-over for most people. There's very little incentive for people to stay long-term.
Drastic measures are needed. Eliminate all non-essential city services to cut spending to the bone. Then lower the property tax rate to a level that is commensurate to the rest of the counties. It will be painful for a while, but home buyers will flock to the city in droves. More people = more tax revenue = an eventual increase in city services = a more dynamic & vibrant city.

I'm a life-long liberal but I must say that after moving to Maryland I feel myself becoming more and more conservative the longer I stay here. You cannot tax people to death! The city needs to cut services however these cuts CANNOT include a reduction in the number of police and firefighters. What Baltimore really needs in an influx of solidly middle class residents. This will never happen with sky high property taxes, poor schools and deplorable crime rates. I hate to say it but I'm ready to just give up on this place and move back down south in the next few years.

However you do the math... by raising the assessment basis or raising the rate per dollar of assessment... there is a limit in cold hard dollars of how much people will pay. I suspect that point has already been reached.

The resources available to the State and city to enforce that payment through coercive means will only work when it is applied to a small minority of the whole.

If a few home owners attempted to protest the current high levels of tax they would soon be martyred and in tax court;

but... If most every City mortgage payment were to have the escrow portion reduced to reflect the RE taxes due and every tax bill payment were discounted (-30%?)... then pretty soon you'll have the mortgage comanpy lawyers showing up at City Hall to fight it out.

http://www.youtube.com/watch?v=iLqSwEqgxkQ&feature=related

otoh... if all this is just so much pissing and moaning and you aren't actually going to move out (along with your middle class income taxes) or mount any substantive protests and will still pay whatever the tax bill says...

Move along people, nothing to see here.

I think the city may soon have a big problem on its hands if taxes are not lowered, much less if they are increased. My wife and I bought our rowhouse knowing the taxes would be substantially higher than the surrounding counties. Many of our friends and family warned us that it was a bad idea. But we reasoned that the benefits of city life -- walkable neighborhoods, nearby entertainment, etc. -- justified the higher monthly payments. Plus, times looked good then, with home values projected to rise, or least stay flat. It was a lifestyle we wanted, and seemed like a perfectly acceptable financial move.

Now, having been at it for a few years? No way. Yes, we enjoyed city life. But times are tough for us financially right now with the economic downturn, and the high taxes simply make our monthly payments unaffordable for us. It's not our mortgage payments, which we can afford. It's the extra $6,300 a year we simply can't swing ($525 per month in taxes!!). We will soon sell our house in this horrible market, at a loss because values have declined, because it makes no financial sense to live in a city with such a high tax rate. We can easily rent and / or buy a similar home a few miles away for significant amount less per month, where the neighborhoods are greener, cleaner, and safer, and there are schools we would actually send our kids to.

It's sad. I don’t want to leave, and we would otherwise stay. But it's a bad investment, which we can no longer afford. We pay a premium to live here, and the benefits we receive in return are simply no longer worth that premium.

As Basu notes, the high taxes will eventually drive out residents like us, and will keep new ones from coming in. It's that simple.

30 cents of every $1 of property tax revenue goes to pay the pension benefits of someone who no longer provides anything to the city residents who pay for those benefits, an amount approximately equal to the entire education budget.

And Josh pops up with another non sequitur that allows him to again bash on pensions.

Here's an idea: how about stop handing out ridiculously high pensions to elected officials? If Dixon is getting $83K/year for being a self-serving crook, chances are a lot of former city politicians are getting a nice annual pension also. I contribute to a 401(k) and IRA and am pretty sure I will never see $83K/year when I hit retirement. So, instead of cutting necessary services and taxing the residents through the roof to the point that they're forced to leave, how about scaling back on all of the pensions to a lot of former city workers who are also most likely getting social security?

It is intellectually disingenuous to talk about cutting taxes or even holding them steady in the face of a 150M shortfall without talking about spending cuts. Pensions are by far the biggest, and least painful spending cut and until recently they were deafeningly absent from public debate or even awareness.

You could close the entire budget gap without raising taxes once cent and without cutting city services one bit simply by no longer paying people who don't work for the city anymore.

Back when the Mayor came out with her "Blue Ribbon Committee on Property Tax Reform" she did not allow the committee or people at the committee's public presentation to talk about budget cuts. Then when the report was final she took none of the tax advice the report gave. She used it as a show to impress naive voters. Just like Stephanie is going to "research" pension and budget problems. Yea right. Just another useless report.

Anyway spending cuts need to be on the table. Pensions would be a great place to start like Josh suggests.

While I don't agree that Shelia Dixon deserves to collect over $80K a year from Baltimore taxpayers, I have to strongly disagree with Josh Dowlut's statement:

"You could close the entire budget gap without raising taxes once cent and without cutting city services one bit simply by no longer paying people who don't work for the city anymore."

There are people who have worked for the city and retired, who deserve every penny of their pensions. Cutting pension funds for law-abiding decent employees isn't the answer. Also, even if you took away Sheila's pension -- it's hardly going to make a dent in the City's budget shortfall.

The city needs to stop giving away tax dollars to developers, and raise property taxes on those developers and others who insist on letting their properties rot.

Thankfully, the City took the first step in passing the split-level property tax resolution, and hopefully the State will see the wisdom in this as well.

"Mr. Rational", you make some of the most obnoxious comments I have ever heard in my life. Jamie, can we get some kind of filter on that guy? Geez.

M, I prefer it when everyone is scrupulously polite in comments here, but I do allow some leeway. We all have our obnoxious moments, after all, and individual definitions of "obnoxious" vary.

Nothing but cursing, name-calling and general nastiness, on the other hand, will get a commenter banned.

The city has 3 basic choices to close this 150M gap:

1. Raise taxes, and likely property taxes as they alone account for about half the general fund revenue.
2. Cut services, and don't think you can close a 10% gap painlessly through "eliminating wasteful spending." If it was so obviously wasteful, it wouldn't be spent in the first place.
3. Eliminate a benefit that 80% of the public sector gets, while 80% of the private sector doesn't get it (yet pays for it for the public sector) that goes to pay people who provide no service to city residents.

Until public sector compensation (to include retirement benefits) are cut to a point that you can't fill the positions, they are being overpaid and that overpayment is coming at the expense of the private sector.

Does anyone have any ideas that fall outside those 3 categories?

Josh,

You forgot to include your idea to revoke Legg Mason's tax credit.

Dixon pension aside, I certainly cannot in any way condone cutting pensions of city workers. The real question is, why the heck (or any stronger wording of choice) are property taxes supporting pentions to begin with? Maybe I'm stupid but I never heard of such a thing given that penions are supposed to be based on the workers contributions. Are there any other jurisdictions where property taxes support pensions rather than schools or city services?

I would hate to make this a political debate, but the City of Baltimore needs a conservative in office to turn things around. Government and its bureaucracy are the least efficient in spending money. What really needs to happen is for the city to spend less than what they bring in from revenue. The answer is simple: cut the spending IMMEDIATELY!!!!!!

The problem will only continue when you have a budget deficit. If there are cuts that need to be made, let the PRIVATE SECTOR pick up the slack. Not only will that balance the budget, but it will promote and sustain job creation. Government jobs are not real job growth. We need job creation from the private sector since that is the true creator of wealth and prosperity in this country.

Just think if the Government were a business and you were spending more and more than what you make. Eventually you would go BK. The city is on a path to financial ruin if they do not balance their books. Even when the economy was in good shape, the city still did not have things under control. This mess has been going on for YEARS. It did not just happen all of a sudden.

The sad thing is NOTHING will change unless we get some new blood to lead the city. The deficit spending will continue and tax increases will continue to go up in a time when many people are hurting financially.

Mr. Basu was my economics professor when I attended Towson University. He has it right. If you want people to move to the city, you absolutely have to lower property taxes. The Laffer Curve is a perfect example of how raising taxes can actually LOWER revenue due to people leaving the area for a more affordable property tax. The city needs to ATTRACT people to the city, not make them want to leave. Basu is correct that you will earn MORE revenue by having more residents living in the city. The only way to attract more people to the city is to lower taxes. By having more people live in the city, tax revenue will actually increase, even if you lower the tax rate.

It is time to vote for a fiscally responsible Mayor and Governor in this state. The elections this year hopefully will change the way things are done in the City of Baltimore and the State of Maryland.

Thanks Matt,

Yes, Bmore creates about a 5M/yr hole by granting a huge water front office tower tax free status for the next 15-25 years and that hole must be picked up by everyone who is not a Legg Mason.

As for property taxes supporting pensions, money doesn't have a label or a memory, but 50% of the general fund revenues are property taxes, 14% of the general fund expenses are pensions, and for comparison, 17% of the general fund expenses are education.

Workers do contribute some through payroll deductions, but it is a pittance compared to the benefits they receive, and that difference is paid for by the taxpayer. In Dixon's case the 83k is actually a net benefit after subtracting what she contributed over the years. She stands to collect over 2M over the coming years but contributed less than 100k.

This is how unfunded liabilities such as government pensions and for that matter Social Security work, there is no pot of principal/savings created by prior years workers paying in. Current year payouts are paid by current year tax revenues.

Relative to SS, government pensions contribute less for a shorter period of time and take out more for a longer period of time. Think about it, we all know SS is unsustainable and it is unsustainable based on 12.4% pay in for your entire working life, and a 12k-24k payout from 65 on. Government pensions are (depending on which one) 1.5%-5% pay in for a shorter time, up to 83k pay out, for a longer time. If SS isn't sustainable these government pensions are uber-unsustainable.

Sorry MCG, but you can't break a contract, such as the one between Legg Mason and the city on tax credits. It is not going to happen. Although, the city could find a way to impose a different type of tax such as the one Obama wishes to implement on the banks that received TARP funds which were paid back with interest to make up for the autos who won't be able to pay their share. Is that really the kind of policy you want to shove down the throats on private sector companies? You think that will promote business in the city? I don't think so...

Josh, your three points are not manageable either. Raising property taxes is not an option. It will not help narrow the deficit. If anything, it will widen the deficit. Cutting service spending by 10% will not get the job done. You have to cut the amount by the deficit amount, $150 million. Your third point really does not make a whole lot of sense. If anything, the city should layoff more State employees. Yes it is painful, but Gov't job creation does not help the broader economy.

Any ideas outside the 3 points you made? Sure, legalize marijuana and tax it just like 13 other states are doing right now. In fact, California will be the first state to legalize it statewide. They expect to bring in $2 billion+ in revenue from it. I am not advocating drugs, but the truth is people are going to do it anyway. That will more than make up for the budget deficit. Also, they can just easily approve slots and casino gambling in the city to boot.

Frank,

I didn't endorse the idea of revoking Legg Mason's tax credit. I don't think it's realistic either, and I can see the benefits of luring businesses to the city with tax credits. I mentioned it because I know that revoking business tax credits is part of Josh's crusade. He has proposed this as a solution before- I was just pointing out his omission.

Frank,

Do you know how TARP was repaid?

1. Borrow from the public at 0%. lend back to the public at 3.5%
2. Buy bonds at 20 cents on the dollar and then sell them to the P-PIP (one of the alphabet soup of bank bailout programs) at 50 cents on the dollar.

And in case you missed my meaning, I wasn't advocating tax increases or service cuts, simply showing that if you don't want to cut public pensions, those are the alternatives you're left with (with the exception of some of your more creative solutions that do fall under that category of tax increases). And as for the Laffer Curve, care to empirically show me what point of that curve Bmore City property taxes are currently operating at?

Since the door has been opened to considering differentiated tax rates for vacant homes, why not take the concept a step further. The city, with State support, could set up a new opt-in real estate tax category. In exchange for certifying that a home has a sprinkler system, a working security system, and an executed deed restriction that states that no one residing at that address will send a child to the local public school, a home would get a reduced real estate tax rate. In essence, those in the city who use less fire, police and educational resources will pay less in taxes and will be incentivized to stay in the city. Those who use more than they contribute in taxes will be incentivized to leave for the county.

A tough problem takes a creative solution and dang good spreadsheet model.

The problem is how to maintain or increase tax revenues while significantly lowering tax rate. The problem is further complicated since the rate is only one of the many features of the complicated system employed to determine property taxes.

The historic tax credit rewards renovating old buildings. It's a HUGE savings for 10 years. But when the party is over, folks leave.

Homesteading and the three year assessment schedule rewards buyers for purchasing renovated properties and non renovated properties that are in the middle of the assessment phase so their taxes don't go up to market rate.

Conversely, new construction is penalized because buys start at the top of the assessment and pay the higher taxes. Even the 5 year new construction phase in doesn't provide enough of a long term "discount" to compete with the two above examples.

This, plus crime, drugs and a general lack of jobs in comparison to other nearby cities has created a situation that is unworkable and coming to a head with the current national housing crisis.

So perhaps the "bridge" between what we have now and what we need to encourage home ownership and development in the city is more about other factors than the rate itself.

Here are a few ideas I've had in my head. Some are based on what I've seen in other jurisdictions and a few twists on them after leaving here in a less than charm city.

1. Empowerment zones. A fancy names for designating areas with no retail but a high desire to create shopping centers. Businesses pay the state 1/2 of the sales tax thus creating an automatic "sale" every day. New Jersey did this in Elizabeth and now has a huge IKEA and other businesses. It can sunset after a significant period of time. It creates jobs and makes living in these areas better. New sales taxes are raised that can be designated back to the City for property tax relief. Political currency needed is high...but so is popular opinion. Jobs and a sale on everything!

2. Jobs. Jobs create everything else. How about these empowerment zones also provide an incentive for businesses to locate jobs in the "dead" areas of Baltimore that is so good that they are willing to consider locating there. No corporate taxes for a while, sweetheart deals on their own property taxes AND the property taxes of their employees as long as the median salaries paid to employees is enough money to afford a median priced home. The employees get a big break on property taxes as long as they work for the company. Helps to retain good employees. Of course there a lot of details to be debated and worked out, but the goal is more high paid tax generating home owners in Baltimore.

3. More than higher taxes on vacant properties. Developers that want to build new properties must build in an empowerment zone, tearing down or renovating those vacant properties, in order not to pay for permits and other reasonably forgivable fees. Property taxes for new construction are discounted for a period of time.

But here is the rub in all this and where the guy with the spreadsheet model and the guys who are elected have to figure it all out.

A "sale" on property taxes can only last so long. The tipping point between job creation and discounted home ownership costs through property tax abatement programs has to be figured out so the rate can be lowered without causing social or economic harm to individuals, developers or the City. Call in the MBAs!

my 2 cents, your opinion my vary.

Yes Josh, I know how TARP was repaid.

"1. Borrow from the public at 0%. lend back to the public at 3.5%"

Actually, the banks borrowed (and still do) from the Fed at 0%, not the public. Also, the money was not used to give loans to the public. Instead, the money was used to buy Treasuries. This is one of the problems many people have with the TARP. Instead of banks lending money, they are hoarding cash. They have plenty of money to lend. Reserves are at an all time high, while lending is near an all time low.

2. Buy bonds at 20 cents on the dollar and then sell them to the P-PIP (one of the alphabet soup of bank bailout programs) at 50 cents on the dollar." Again, banks are buying Treasuries. The P-PIP is Public-Private Investment Program. It was set up to "clean up" the balance sheets of the banks. In other words, the banks are selling their non-performing loans to the Fed for more than what the open market would value them. This paper is worthless. The Fed stepped in so the banks can sell them.

Back to your original question. How was TARP paid back? The money the banks earned on interest from the Fed by NOT LENDING played a big role. Also, some of the banks decided to raise capital through the market by issuing more shares of stock. Also, not every bank needed the TARP money. The only reason banks were forced to take the money is because the Treasury did not want the public to know which banks were in trouble. The healthier banks were able to pay it back right away.

The big question is if the banks get in trouble again (still insolvent), will they be given more money in bailouts? I hope not. Let them fail.

I pay roughly 11k in property taxes in the county--did they honestly expect me to pay 22k in the City?

I paid roughly 14k in local income taxes last year--did they honestly expect me to pay roughly 17k in the City?

By going after too much they got nothing. Rather than accept 25k they wanted 39k and ended up with zero.

"Relative to SS, government pensions contribute less for a shorter period of time and take out more for a longer period of time. Think about it, we all know SS is unsustainable and it is unsustainable based on 12.4% pay in for your entire working life, and a 12k-24k payout from 65 on."

Your point is completely spot on. Match their 401k to 6% and be done with it. The status quo will most likely get worse.

Did anyone in City Hall break the 1000 mark for the SATs? Apparently not.

Lower taxes and the rest will come. It's a no brainer. Why is there still a question about this? Baltimore has the 7th highest tax rate in the entire nation people. We are in the same tax league as Potomac, NY City, Cupertino, Laguna Niguel, San Fransico, and on and on.

When we should be in the same league as Detroit. THIS IS NOT A UPPER CLASS CITY. I don't care where you live in this city, you're a spit away from the ghetto, or are in the ghetto.

BRING TAXES DOWN TO MIDDLE CLASS RATES, SO THEY CAN MOVE HERE or STAY HERE. WHY IS THIS SO DIFFICULT?

Un-friggin-believable!!

Amen OZ! I can fathom why this is so hard for city leaders to understand. Until things change Baltimore City will always be second rate.