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John C. Murphy: A radical solution for Baltimore’s relentless decline

Over the years, we have grown closer to our neighbor to the south, Washington, D.C.

The cities are alike in many ways. Their populations are roughly equal. Many Baltimore residents now commute to jobs in D.C. Many Washingtonians visit our Inner Harbor or Little Italy. We are both part of one big metropolitan region.

But there is a major difference — Washington is growing while Baltimore is continuing its relentless decline. Washington grew by 5 percent from 2000 to 2010; Baltimore fell by 4.6 percent, losing 30,193 residents.

Any resident can tell you there is no sense comparing Washington to Baltimore. Washington is rich, the federal government subsidizes it, and so on. Baltimore is poor and burdened with crime, struggling schools and so on.

But there is another and very important way in which the cities diverge — the property tax rate. Baltimore taxes its residents at $2.38 per $100 of assessed valuation. Washington’s is almost two-thirds less, charging homeowners only $0.85.

A $100,000 house in Baltimore pays $2,380 in annual property taxes. A house of similar value in Washington pays $850.

The regional contrast is even more stark. It is not just Washington that has a tax rate far below Baltimore’s. Washington and every county in the greater metropolitan area have property tax rates far below Baltimore. Here is how it breaks down:

Baltimore City $2.38

Washington, D.C. 0.85

Baltimore County 1.21

Anne Arundel 0.99

Harford 1.14

Montgomery 0.80

Prince George’s 1.07

Arlington (Va.) 0.958

Fairfax (Va.) 1.09

An ominous future

Most Baltimore residents have long known that the city property tax rate is basically twice the rate of Baltimore County’s. But the same thing is not true in the Washington area. There the rates between D.C. and the counties around it are roughly equal. There is no penalty for living in Washington as there is for living in Baltimore.

This situation is ominous for Baltimore’s future. The tax rate here is at least twice what it is in every community in the entire metropolitan area. Given Baltimore’s admitted handicaps, it is hard to see why anyone would move here, or why the decline will stop.

Steven J.K. Walters, a Loyola University Maryland professor, is proposing a radical solution — cut the property tax to $1.

This sounds radical until you realize that all it will do is put Baltimore on the same footing as the surrounding communities. He boldly predicts that once the economic penalty is lifted, Baltimore’s growth in total revenue will more than make up for the reduced tax rate.

Again this sounds radical unless you reflect on the fact that Baltimore was the only community in the entire region to suffer a population loss in the last decade. Many communities grew by double digits, while Baltimore lost.

This situation did not happen overnight. Baltimore raised its property tax rate 18 times in the last 60 years, at the same time its population plummeted.

But the future is ominous. People can move and they do. We are priced out of the market. The region’s residents are not buying Baltimore.

Insurance needed

To cut the tax rate to $1, you need to appreciate the effect of Baltimore’s current tax burden. It is a blight on the city. It keeps values low and retards growth. The 40,000 vacant properties in the city will never get redeveloped facing this kind of tax burden.

But the reverse is also true. Remove the tax penalty, Baltimore will share in the region’s prosperity and growth. The trick is how to bring it about. There will be a short-term gap while the tax base rebuilds.

Walters has a proposal — lower the tax rate to $1 to take effect several years in the future. As values rise in anticipation of the new tax rate, take that extra income and bank it to fill the gap.

But like all economic projections, the Walters proposal is necessarily “iffy.” We need some insurance.

The Greater Baltimore Committee is proposing that the city and state spend $400 million to expand the convention center. We just spent $300 million on a convention hotel. So the city knows how to spend money for a bold idea.

Now we need city leaders — the mayor and City Council and the General Assembly delegation — to turn their attention in a different direction. They need to create a backup fund to assure that the city can pay its bills while the benefits of the new tax rate take hold.

The process starts with everyone buying into the bold idea. For the good of the city and its residents, we need to remove Baltimore’s tax penalty.

John C. Murphy, Law Offices of John C. Murphy, specializes in eminent domain. He is a resident of the Wyndhurst neighborhood of Baltimore. His email address is jcmurphy@verizon.net.


2 comments

  1. Sure. Cut the tax rate and I’ll rush with my family to move to Streeper Street. The tax rate is the only thing stopping me from doing that.

  2. Mr. Murphy is right: Professor Walters’ proposal is radical. And everyone can agree that our property taxes are too high.

    However, count me as skeptical. The risks of attempting to implement this idea are enormous. Proponents appear to believe that it is only the high tax rate which hurts Baltimore. And they ignore the history of the tremendous changes that have occurred in the city over the years due to crime, suburbanization, the collapse of manufacturing, and poverty, as well as drug abuse.

    As Isolde snarkly says, above, just lowering the tax won’t entice her to move to Streeper Street.

    Baltimore has been saddled with a terribly high crime rate for many years. And though there have been great inroads made in that rate in recent years, we started at a very high level, and even a significant reduction leaves us as one of the highest crime cities in the country. And other jurisdictions have had similar decreases–but no one seems to know why.

    Baltimore schools, for those who wish to send their kids to public schools, present significant obstacles. While most elementary schools provide a reasonable education, the trouble starts in middle schools, with only a handful of decent ones. And if your child doesn’t get into one of the city’s handful of elite high schools, the outcome is not good.

    Baltimore, for a variety of reasons, is home to a huge number of residents residing in poverty, and that has something to do with the 40K+ vacant homes, as well as the persistent amount of substance abuse leading to huge numbers of addicted residents (the numbers vary, but one often hears 40,000-60,000 addicts in the city).

    Baltimore is home, for better or worse, of a huge number of non-profit institutions, which previous administrations encouraged. Some employ a large number of our citizens. But their properties aren’t subject to property tax.

    Suburbanization has been going on for a long time in this country, and poor, mostly black, post-industrial cities have found it difficult to maintain services and keep residents of means.

    Washington, I think, is not a good example because since 9/11 and our several wars, the agencies of the federal government have a huge number of positions based there.

    So, reducing the tax rate to $1, though embraced in some form by one or more mayoral candidates strikes me as a bit simplistic. And the biggest risk of all: suppose they don’t come? We reduce the city’s budget over several years, reducing services of all kinds, and hoping all sorts of investment will take place. I suppose that is possible. But suppose it doesn’t occur. The obstacles to raising taxes for the operating budget would be formidable.

    The political, economic and social obstacles facing such a reduction seem to be a bit formidable to me. There are many reasons people do not move to the city, property taxes being just one of them.

    Yes, the city built a convention center hotel, but it’s mostly just barely paying its bills.

    Do we need new ideas? Yes, but this tax reduction, except at the margin probably isn’t one of them.