As of last night, 92 percent of you poll-takers said you agree with Baltimore economist Anirban Basu that the city's rate of $2.268 per $100 of assessed value needs to be cut now.

Six percent said not now, but when the economy's doing well.

Just two percent opted for the straight "no."

And one person felt so strongly about this that he or she skipped over the "yes" option to write in an answer: "Hell yes."

People usually like the idea of having less taxes to pay, so that was a pretty easy question for you all to answer. Now I challenge you to tackle a harder one: What cuts or adjustments should the city make to account for the (at least short-term) drop in revenue? What can the city do to avoid counteracting the "come on in" message of lower taxes with the unwelcome-mat of decreasing quality of services?

Proponents of rate reductions say a big cut would bring more residents, increasing the sources of revenue, but let's assume for this exercise that tens of thousands of people won't immediately drop everything to move in. (Also, you'll want to take into account that the city is already grappling with reduced revenues. Mayor Sheila Dixon announced in September that the city would have to "immediately reduce spending" to deal with a $60 million decline in revenue and state aid.)

Extra points to anyone with an idea more specific than "reduce waste." Here are two proposals from commenters to get you started.

Continue reading "Your take on city property taxes" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (15)
Categories: Property taxes
        

Baltimore economist Anirban Basu is convinced the city's property tax rate is to blame.

The city's rate -- $2.268 for every $100 in assessed value -- is more than twice as high as the property tax rates in Maryland's counties. Baltimore County comes closest, at $1.10 per $100. The difference has for years frustrated residents, given city real estate agents indigestion and prompted talk that "something must be done." (The rate is six cents lower than it was in 2002, but most of the Baltimore suburbs lowered their rates, too.)

"We know that people who transact on the basis of an $8,000 tax credit care deeply about their tax exposure," said Basu, who has called for a steep drop in the city's rate. "It's unlikely that people who are looking to minimize their tax bill would choose the city first. It's not that nobody bought in the city, ... it's that not as many people bought in the city as had been anticipated by analysts."

He called on city leaders to lower the property tax rate now, despite the tight budget situation.

"The point is, you can't tax people who don't live here," Basu said. "What the tax is doing is keeping people who would want to live here from being here. ... There's now growing pent-up demand to move out of the city, and this demand is motivated by a desire for greater value."

Read on for a chart, a poll and Basu's thoughts on what drove buyers to the city in a big way during the bubbly years.

Continue reading "Economist: Lower Baltimore's property tax rate now" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (29)
Categories: First-time buyer tax credit, Property taxes
        

The city recently gave frustrated homeowners who missed the window another chance, but that amnesty period is swiftly coming to a close. The deadline is Aug. 28, next Friday. If you went to settlement on a new home after Oct. 1, 2004 and it's still your principal residence, you can apply. You might also be eligible if your home was substantially rehabbed after being vacant.

More details from the city Department of Finance, including the application form, in this PDF document.

Baltimore resident Matt Gonter, who applied last week, suggests submitting your form in person. That way you get a time-stamped copy for your records, proof that your application was in time.

Amnesty aside, new-home buyers now have two windows to apply rather than one: within 90 days of settling and within 90 days of getting the first tax assessment notice.

Posted by Jamie Smith Hopkins at 8:47 AM | Permalink | Comments (2)
Categories: Property taxes
        

Matt Gonter, Baltimore resident and Wonk reader, doesn't like it when people wrongly get the benefit of the homestead property tax credit. It irritates him that absentee landlords on record as owner-occupiers are paying less in taxes than they ought to be, especially because he suspects the city's high tax rate could be lowered if no one was cheating.

I wrote about his crusade last year. Now he has an update: He says he's finished checking out homes listed as vacant by Baltimore City and has found 1,148 that are on record with the state as principal residences. That means their owners could be collecting the homestead credit.

"I believe that this type of cheating runs rampant across the state," he told me, noting that a Montgomery County resident had similar results with a project there.

Continue reading "Unearned property tax credits" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (11)
Categories: Property taxes
        

Wonk reader Wick asks, "If I buy a Baltimore City home that is assessed at 100k for a purchase price of 200k, and the home was just assessed (11/08, at 100k) so is not due for re-assessment for 2 more years, will they reassess as soon as I buy the home? Or, will the 100k assessment hold until next 3-year assessment is due, and by then I'll be protected and can apply for homestead credit?"

I put the question to the state Department of Assessments and Taxation. Henry Sikorski, state supervisor of assessments, said Wick doesn't need to worry -- unless there's recent new construction on the home that the state hasn't assessed.

The state will do assessments out of cycle for major work on a home, typically over $100,000 in value. It will also reassess if a vacant lot is built upon or if the property use changes, say from commercial to condo, Sikorski said.

Paying $200,000 for a home the state assessed at $100,000 doesn't in itself prompt the state to come swooping in. "We don't go in and reassess on sales," he said.

Hope that helps, Wick (and anyone else out there pondering the same thing). Oh, and don't forget to apply for that homestead credit. New buyers have a six-month window.

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (7)
Categories: Property taxes
        

If you went to settlement on a new home after Oct. 1, 2004, you can apply for the city’s new-construction tax credit through Aug. 28, when the amnesty period ends. Homeowners in properties that were substantially rehabbed after being vacant may also be eligible.

You can find more details from the city Department of Finance, including the application form, in this PDF document. (You can also read my original post on the topic here.)

Why should you care, you ask? Because the credit reduces a homeowner’s property tax bill by half and then phases in the full amount over a five-year period. Yeah. That's why.

The City Council also changed the process going forward so new-home buyers have two windows to apply: within 90 days of settling and within 90 days of getting the first tax assessment notice.

Posted by Jamie Smith Hopkins at 1:13 PM | Permalink | Comments (0)
Categories: Property taxes
        

Long before there was an $8,000 income tax credit for new buyers, there was Baltimore's property tax credit for newly constructed homes. It makes a real bottom-line difference for buyers, who get their property tax bills phased in. First year, half off. The amount due rises to 60 percent the second year, 70 percent the third, and so forth, which means it's not until year six that someone with the credit is paying the full amount.

Unless the new buyer didn't apply for the credit within 90 days of purchase.

You can imagine how some residents felt when they found out -- too late -- that they had been eligible for a substantial discount on property taxes in the jurisdiction with the state's highest rate.

Now you folks have a second chance.

The City Council has just passed a bill, signed into law Tuesday by Mayor Sheila Dixon, that offers a "one-time amnesty period." It's for people who would have been eligible in 2005 or later had they met the original application deadline. (There's a gray area there, thanks to the law's use of the word "eligible": Certainly you would have been eligible if you bought Jan. 1, 2005. But you also would have been eligible if you bought in the 90 days before that date.)

Continue reading "New chance to get Baltimore new-construction tax credit" »

Posted by Jamie Smith Hopkins at 11:22 AM | Permalink | Comments (5)
Categories: Property taxes
        

Harford County homeowners rejoice: Your property tax rate is going down July 1.

Well, all right, it's going down less than 2 cents per $100 in assessed value -- from $1.082 to $1.064. On a $200,000 house, the new rate adds up to a bill of $2,128, or $36 less than the old rate. But I'm guessing you'd prefer that to a change the other direction.

On a related note: Harford's homestead cap, which limits how much an owner-occupant's tax bill can increase each year, dropped this year from 10 percent to 9 percent. That's still the highest in the Baltimore metro area. But County Executive David R. Craig says on his blog, "The next step is to reduce it from 9% to 5% by the FY11 budget (calendar year 2010)."

Values aren't going up 10 percent or 9 percent or even 5 percent right now. Still, homeowners whose housing-boom values haven't been fully phased in (even accounting for dropping home prices) could see an impact from this change.

I've heard a lot of grumbling about property tax rates over the years, particularly from Baltimore residents, but some Harford Countians went beyond grumbling and started protesting. Harford Property Tax Revolt organized rallies this spring, complete with signs like "Will Work for Lower Taxes." (This Dagger article about a May rally drew 45 comments.)

The old debate during a recession is (a) lower tax rates to help residents in their time of trouble, (b) leave tax rates alone to try to avoid big cuts in services that residents need in their time of trouble or (c) raise taxes to maintain or increase services that residents need in their time of trouble.

What argument do you prefer?

Posted by Jamie Smith Hopkins at 8:49 AM | Permalink | Comments (10)
Categories: Property taxes
        

You may have run into this before: real estate ads trumpeting property-tax bills that aren't anywhere near what you -- the prospective buyer -- would pay, because they're what the seller is paying after years of homestead-credit protection.

Maryland's tax break for owner-occupants keeps the property tax bill from rising more than a certain amount each year. In Baltimore, for instance, the homestead cap is 4 percent. But the credit doesn't transfer from one owner to the next, so a new buyer will get a bill that reflects the full assessment.

This can be a nasty shock if you didn't realize it and weren't budgeting for it.

As Julie Bykowicz reports, city real estate ads will have to take that into account in about three months. That's when a new ordinance goes into effect to put the kibosh on "misleadingly low figures." (We could call it the "read my lips: no old taxes" rule.)

The ordinance, the story says, requires that "tax figures in ads must be a reflection of the property's most recent assessment multiplied by the city property tax rate of $2.268 per $100 of assessed value."

What do you think of that?

Posted by Jamie Smith Hopkins at 9:31 AM | Permalink | Comments (7)
Categories: Property taxes
        

The city's rate of $2.268 per $100 in assessed value is the highest in the state -- more than twice as high as other jurisdictions' rates. (It's also a continued source of complaint for residents and angst among folks who want more people to move into Baltimore.)

The Dixon administration points out that the cut won't be immediate -- and it relies on slots performance. From today's story:

Under the agreement, the casino would provide ground rent to the city via a profit sharing agreement on gross gambling revenues, and those funds won't begin to flow until the casino is operating, which city officials hope will be in 2011. The money from slots must be used for either property tax reduction or school construction, so those funds cannot be used to eliminate expected budget shortfalls in those years. ...

According to the deal, the bidders will pay the city $20.8 million when the casino opens, which includes ground rent, property taxes and other revenues, said First Deputy Mayor Andrew Frank. That would provide a minimum five-cent reduction in property taxes. Since the revenue is based on the casino's performance, Frank said, the city's share could grow.

To allow an eight-cent reduction, the parlor would need to produce about $25.4 million a year in revenue. That's what the city is forecasting within five years.

If all those if's come to pass, a city resident paying taxes on a $200,000 assessment would see his or her property tax bill drop from $4,536 to $4,376, a $160 savings.

Thoughts?

Posted by Jamie Smith Hopkins at 9:56 AM | Permalink | Comments (8)
Categories: Property taxes
        

This is the flip side of the Homestead Credit, which caps annual property tax increases. When home prices are skyrocketing, your taxes reflect only part of that rise. But you'll be catching up with the unpaid part of the increase later when prices stagnate -- and even when they drop. (It's only when your property assessment and your tax burden equal out that your tax bill figure stays put.)

As Larry Carson reports, "a house that jumped 50 percent in value when it was reassessed in 2005, for example, would take 10 years to reach full value if the annual cap is 5 percent or less, as it is in 15 of Maryland's 24 jurisdictions." His article notes that "virtually all" of the 700,000-plus property owners recently reassessed will have a bigger tax bill this year.

Carson, property tax reporter extraordinaire, reports in another story that Baltimore City's reassessed neighborhoods saw a big increase in taxable values even as some parts of the state declined:

While appraisals were nearly flat statewide for property overall - and even dipped in the more prosperous suburbs - values for homes in the third of Baltimore that will receive the notices rose 21.4 percent since their last assessment in 2005.

State assessors said home values rose 9.7 percent in eastern Baltimore County, 5 percent along the U.S. 40 corridor in Harford County, and 2 percent in the reassessed area of Carroll County. Home values dropped 4.2 percent in Anne Arundel, 7 percent in Howard and 16.3 percent in Montgomery County.

Think your reassessed value is wrong? You can appeal.

Read a How-to from the end of '07 on property tax appeals or go to the state's appeal page for information.

Looking for tax information specific to your community? Go HERE for homestead caps across Maryland and HERE for local property tax rates (as of July 1, 2008).

Posted by Jamie Smith Hopkins at 1:00 AM | Permalink | Comments (6)
Categories: Property taxes
        

The city will send letters to residents in the next two weeks. Exactly how many will receive the letter is not yet clear, but a Dixon spokesman said it will likely be shy of 2,000.

The city expects the refunds will cost between $250,000 and $300,000. It was not clear Thursday how the city will pay for that unexpected expense.

Posted by Jamie Smith Hopkins at 9:05 PM | Permalink | Comments (0)
Categories: Property taxes
        

He can't help but notice that his notice urges him to apply within 60 days, and he saw a reference in the Maryland code that failure "to provide the requested information within 30 days from the date of a request shall result in a dwelling being designated as non-owner-occupied for purposes of the Homestead Property Tax Credit."

C. John Sullivan Jr., director of the state Department of Assessments and Taxation, says it really, honestly and truly is 2012 -- for everyone who bought their house by Dec. 31, at least. After that date, new home purchasers have six months to apply.

Sullivan said the state will send out a series of reminder letters to those in the owning-by-'07 crowd who haven't applied. He said he meant it when he told homeowners not to panic.

"When tax bills go out July 1 in the various counties, no one's going to lose their homestead credit because we do not have an application," Sullivan said.

"But the response has been unbelievable," he added.

The department has already received six duffel bags worth of applications by mail, and he expects the online tally will hit 10,000 by Monday.

Posted by Jamie Smith Hopkins at 10:01 AM | Permalink | Comments (0)
Categories: Property taxes
        

The industrious John Fritze, who got an early copy of the report, reports today that the change "could cost many city homeowners thousands more a year."

If all of the panel's short-term recommendations were adopted, the rate would be cut to $2.017 per $100, which would still be the highest in the state. Officials say the reduction could be made within two years. ... A proposal to lift the annual cap on the increase in assessments on principal residences, known as the Homestead Tax Credit, from 4 percent to 10 percent is likely to be among the most controversial of the panel's ideas. It would cost taxpayers $24.2 million, the report says. That money, in turn, would be used to reduce the tax rate by about 4 percent.

Even with a reduced rate, that plan would force many residents to pay significantly more if their home values continued to climb as they have in the past several years. Under one scenario presented by the committee, the owner of a $300,000 home that increases in value by 25 percent every three years would pay thousands more in taxes.

If I understand the recommendations correctly, the plan would seem to be better for homeowners in a low-appreciation housing market and worse in a high-appreciation one. And it would be better overall for small landlords, who don't get the homestead cap anyway. (This doesn't take into account a proposed increase to the income tax rate to 3.2 percent from 3.05 percent, since I can't easily factor in that effect.)

But -- as a smart co-worker pointed out -- many homeowners are taxed on much less than their full assessed value right now because all those big increases during the housing boom were capped at 4 percent a year. In other words, it'll take some time to "catch up." That means plenty of folks would see 10 percent increases a year for a while if values don't plummet.

Well, Wonk readers? What do you think? The report is being pitched as "ready for public comment" rather than a done deal.

Posted by Jamie Smith Hopkins at 9:37 AM | Permalink | Comments (10)
Categories: Property taxes
        

 Sun photo 

If you have a house, you have a property tax bill. Any day now, a third of Maryland property owners will be getting letters about a reassessment of the value that helps determine that tax.

You may have it in hand already, if your mail person is swift: The state Department of Assessments and Taxation sent the 728,185 notices out on Friday. The parts of the Baltimore area that are being reassessed this time 'round are northwestern Anne Arundel; the middle section of Baltimore City; the north and middle parts of Baltimore County; northeastern Carroll; the middle part of Harford; and both southern and western Howard. (You can find maps HERE.)

There's always some anger and frustration when new assessments hit, but the odds of furious screams are much higher in this time of slumping sales and soft prices. Why, you might wonder loudly, doesn't your new assessment reflect the fact that prices are stagnant or in some cases falling?

Continue reading "How-to Monday: Assessments and appeals" »

Posted by Jamie Smith Hopkins at 4:00 AM | Permalink | Comments (4)
Categories: How-to Mondays, Property taxes