The deal obligating Baltimore to finance its Affordable Housing Trust Fund becomes official after a ceremonial document signing at City Hall on Wednesday.
Mayor Catherine Pugh and representatives from Baltimore Housing Roundtable, United Workers and Community Development Network are set to sign a memorandum of understanding. That memorandum eventually directs $20 million annually to the housing fund voters approved in 2016.
Activists and Pugh announced the deal to subsidize the fund in August. The pact follows years of campaigning, and political arm twisting by the city’s affordable housing advocates.
The agreement is predicated on the Baltimore City Council passing an amended version of the so-called Fund the Trust Act. Councilman John T. Bullock in April introduced the legislation raising transfer and recordation taxes in the city by 1 percent. The bill earmarked revenue from the tax increase for the trust fund.
During a hearing scheduled for Thursday, amendments to the bill are expected to be submitted. Tax increases in the bill will be reduced to a 0.6 percent excise tax on transfer of real property, and a 0.15 percent charge for recordation. The tax boost applies to the sale of non-owner occupied buildings with price tags of $1 million or more.
Baltimore will offset lower revenues from reduced taxes to the fund by directing general obligation debt or other revenues to the trust fund.
Revenue from the tax increases are projected to reach $13 million annually. Starting in 2020, the city will contribute $2 million to the fund through an Ordinance of Estimates or via additional legislation. That amount, as spelled out in the agreement, will increase to $7 million annually by 2023 and subsequent years.
Not everyone will celebrate the deal’s signing. Building industry advocates, developers and commercial real estate brokers oppose raising the transfer and recordation tax. The deal adds to the tax burden of commercial property owners, they argue, especially when considering their share of city services.
Baltimore already has the highest property taxes in Maryland. The city’s property tax rate is roughly double that of neighboring Baltimore County. Increasing the taxes, opponents contend, only serves to scare away investment, particularly from older office stock downtown in need of new life.
“Research and our past experience here in Baltimore city shows raising transaction costs … have a negative overall effect on property tax revenues,” Josh Greenfeld, vice president of government affairs at the Maryland Building Industry Association, previously said.
Advocates project during a 10 year span, at $20 million annually, the fund will create or preserve 4,120 permanent affordable housing units, rehab 1,596 vacant properties, and support six community land trusts. Based on data from a similar program in Philadelphia projects paid for by the fund are expected to employ roughly 8,500 construction workers.
Baltimore voters approved the creation of the Affordable Housing Trust Fund nearly two years ago. But the fund was approved without a mechanism to pay for projects.
Since that time activists have sought to establish a revenue source. Along with allies on the City Council, they’ve advocated for tax increases to pay for the fund, and pushed to have $20 million in general obligation debt pay for affordable housing. Those efforts, however, all failed.
Bullock, with the support of fellow council members and activists, introduced his bill to fund the trust in April. But after the legislation failed to be scheduled for a hearing, activists pushed to amend the City Charter dedicating property tax revenues to the fund.
The charter amendment proposed dedicating 5 cents of every $100 of assessed property value to the trust fund. By early August, activists had collected 15,000 signatures. Maryland law only requires 10,000 signatures for the amendment to qualify for the ballot.
There was no guarantee the proposed amendment would’ve made it before voters. Rules governing what the Board of Elections considers a valid signature are notoriously stringent.
Still, the potential for the amendment to make the ballot increased pressure on Pugh’s administration to cut a deal with activists. The potential to mandate that much spending presented a potential headache for Pugh and future mayors.
Much of the mayor’s power comes from the executive’s control of city purse strings. Setting aside that much money from Baltimore’s major revenue stream would handicap a mayor’s ability to steer funds to executive priorities.
On Aug. 9, three days before the deadline to put the amendment on the ballot, word emerged that Pugh and activists had agreed to a deal. Pugh would support the Fund the Trust Act with a reduced tax increase. The city would eventually provide money to offset the loss of funds resulting from lower taxes.
In exchange, activists agreed not to submit the proposed charter amendment for placement on the November’s general election ballot.