Proposed property tax cut would be ‘catastrophic,’ Baltimore argues to MD Supreme Court

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The Maryland Supreme Court on Wednesday heard arguments in a case that could allow Baltimore City voters to cut their property tax rate by nearly half in less than a decade.

UPDATE: Baltimore property tax cut charter amendment blocked from November ballot

City lawyers argued Wednesday that Renew Baltimore’s proposed city charter amendment, which would reduce the city’s property tax rate from 2.248% to 1.2% over seven years, would usurp the power of elected officials and would be “catastrophic” for city finances.

Renew Baltimore argues the proposal is “proper charter material” that leaves discretion to local elected officials.

“There’s no hiding the fact that Baltimore City has the highest real property tax rate in the state, and the voters of Baltimore should have the opportunity to amend that — to cap that — at a reasonable rate,” attorney Gus Themelis told the court.

The Supreme Court has just days to decide if the proposed amendment can appear on November ballots. The case was fast-tracked because of the upcoming deadline to finalize ballots for the November election.

The Baltimore City Circuit Court earlier this month ruled against Renew Baltimore, affirming a July decision by the Baltimore City Board of Elections.

Themelis said the proposal leaves “tons of discretion” to city officials, and made a distinction between tax revenue — which he said is not affected by the plan — and the tax rate. He argued the rate, by far the highest in Maryland, keeps people and businesses from buying in the city, and that a lower rate would pay for itself via increased investment.

“It’s not a drastic immediate cut; it’s a gradual cap,” Themelis said. “The hope is that the revenue grows and that this improves Baltimore City.”

The proposal would cut the property tax rate by about 5 cents per $100 of appraised value, to 2.2%, in July 2025. It would drop another 10 cents in 2026, and then 18 cents per year until hitting the permanent 1.2% cap in 2031.

In testimony on Wednesday and in a brief filed Monday, the city focused much of its argument on the stakes of the property tax cut.

Attorney Mike Redmond, director of the Baltimore City Law Department’s appellate group, argued the rate cut would prevent the city from holding up its end of contracts and funding statutory requirements, such as education and pensions. In its Monday brief, the city argued it would be “unable to perform basic functions.”

“(It) would be catastrophic to the city’s ability to meet its statutory and common law obligations,” Redmond said. “It really is a legislative scheme to cut tax rates.”

The city Finance Department projected the plan would create a budget hole of nearly $900 million per year by 2034, requiring “massive service reductions.” It estimated the city would have to reverse a half-century of gradual population loss in less than a decade — adding hundreds of thousands of residents — in order to offset the revenue lost with the lower rates. The city’s annual budget exceeds $4 billion.

The income tax rate, furthermore, is tied to the property tax rate, and the two account for about 70% of the city’s revenue, the brief states. It contested Renew’s assertion that the cut would cause economic growth.

“The unavoidable reality is that most of the City’s expenses are legal obligations,” the city’s Monday brief stated. “And contrary to the Renew Report’s wildly optimistic fortune-telling, nobody wants to move to a city where local government is cutting funds to the schools, to the fire department, to the police, and to the other essential services that make life in an urban environment work.”

While the city argued the plan should be blocked because of the fiscal consequences, it also argued the plan is “legislative in nature,” removing the discretion of the mayor and City Council to determine the tax rate.

It also noted the city charter states residents do not have “the right to initiate any legislation, laws or ordinances relating to the classification and taxation of real and personal property within the limits of said City.”

Asked by Justice Angela Eaves if the plan would “tie the city’s hands,” Themelis questioned the city’s analysis.

“That’s based on lay opinion, lay opinion, not expert opinion,” he said. “You can’t just say, ‘If you cap the rate at a lower amount, you’re going to have less money.’ ”