A new group wants to slash Baltimore’s property taxes in the name of equity. City Hall calls it ‘absurd.’

Originally published in the Baltimore Sun

MPPI in the News By Giacomo Bologna and Emily Opilo Jun 21, 2022

A new group called Renew Baltimore is pitching a plan to slash the city’s property tax rate in hopes of rebuilding the city’s population, bringing about “greater economic equity” and increasing revenue and stability.

Like almost all cities, Baltimore’s largest single source of revenue comes from property taxes. The city has a property tax rate more than double that of neighboring counties, and Renew Baltimore said it has been killing economic growth and driving residents to leave for decades.

The biggest loser, according to Renew Baltimore? Low-income, predominantly Black homeowners who pay a higher share of their income toward property taxes.

Experts told The Baltimore Sun cutting property taxes would almost certainly spur economic development. However, some balked at the use of the word “equity,” arguing that the biggest winners would be wealthy, predominantly white homeowners and out-of-town investors gentrifying neighborhoods. Still, several said lowering property taxes could be a good idea — with some caveats.

A reduction over six years

Renew Baltimore’s ambitious plan to cut the tax rate from 2.248% to 1.25% over six years could go ahead without input or approval from elected officials. Renew Baltimore said it is gathering signatures — 10,000 are needed — for a possible referendum this November that would bypass City Hall and put the question directly to voters.

Renew Baltimore bills itself as a grassroots organization, but the group has the support of some high profile former city officials. Former U.S. District Court Judge and city Solicitor Andre Davis is backing the initiative, as are former Councilmembers Rikki Spector and Carl Stokes.

The group’s treasurer, Anirban Basu, is the CEO of the Sage Policy Group, an economic policy consulting group in Baltimore.

“There are many folks who would love to live in the city. They want to live in the city,” said Basu, a former city resident who lives in Baltimore County. “They can’t afford the tax payments. Retirees are forced out. Why not create a situation where more people are invited in?”

Renew Baltimore’s plan calls for dual amendments to the city’s charter. The first would implement a six-year schedule for the reduction of property taxes, capping them at 1.25%. The second would strike a provision in the city’s charter that could be interpreted as a ban on charter amendments related to taxation.

 Davis said to his knowledge the charter provision has never been used. “The prudent thing is to delete that language,” he said.

Trading revenue now for growth later

Baltimore had about $3.3 billion of revenue in fiscal year 2021, according to the city’s annual audited financial report. Almost 30% of that money — nearly $1 billion — came from the property tax.

Over that same time, Baltimore gave about $125 million in property tax breaks for enterprise zones, historic properties, brownfield remediation and more, as well as tax credits for homeowners.

If the change was put in place tomorrow, it would cost the city hundreds of millions of dollars in lost tax revenue from homeowners, landlords, businesses and investors. But proponents say phasing it in over six years would ease that blow and eventually generate more revenue as people return to the city and grow the tax base.

“If you unleash the beast and allow property values to rise, something that is more akin to suburbs, wealth is generated in the process,” Basu said. “My very strong suspicion is well before we implement the tax reduction, you’ll have people racing into the city both to live in the city but also to restore properties in the city.”

The Baltimore Sun asked Renew Baltimore to provide projections for the revenue increases they envision. They declined. “We’re not taking on the responsibility to devise solutions, to devise policy and plans,” said Greg Tucker, a spokesman for Renew Baltimore.

Mac McComas, who studies urban economic growth at Johns Hopkins University, said the proposed tax cut could strain the city’s budget for a few years, especially as the city is legally required to increase payments toward city schools as part of mandates from legislation known as the Kirwan bill. A $65 million allocation has been set aside in Baltimore’s proposed fiscal year 2023 budget. That is projected to jump to $77.2 million by fiscal year 2024 and to $155.4 million by 2030.

McComas said he thinks the tax cuts would spur some development and are unlikely to harm the city’s budget in the long term, but he’s not convinced it will automatically reverse population decline or lead to better social services.

“I don’t think there’s any real silver bullet here,” McComas said.

‘Drastic reduction in city services’

Mayor Brandon Scott’s administration called the proposal “absurd.” The proposed reduction in taxes would be a $455 million cut to the city’s budget over six years or $75.9 million on an annual basis, spokesman James Bentley said.

“Renew Baltimore dresses up its proposal with language such as ‘economic justice’ and ‘equity,’ but the reality is that its proposal would require a drastic reduction in city services and would acutely affect the most vulnerable residents,” Bentley said.

There is a valid argument to make about cutting taxes to lure more development to Baltimore, but don’t call it equity, said Nicole King, chair of American studies at the University of Maryland, Baltimore County. To King, it sounds more like wealthy people using the word “equity” to get a tax break. True equity would mean ending all the tax breaks and public financing for private developers, she said.

“This is performative inclusion which makes me very frustrated because it uses the language of inclusion and equity to essentially mask things that are inequitable,” King said.

Renew Baltimore was established as a political committee, which means funders must be publicly disclosed. The only donor so far is Matthew Wyskiel, a wealth manager who has contributed $10,100 to the group, according to public records. Wyskiel said he is a lifelong Baltimorean who grew up in Roland Park and now lives on the edge of Roland Park and Guilford. According to Renew Baltimore’s estimations and public records, Wyskiel would save about $8,000 annually if the tax were fully phased in.

“I feel that a property tax cut is the best way we can help Baltimore City and many, many residents in Baltimore City,” Wyskiel said. “ … Renew Baltimore literally helps every single neighborhood.”

Much of the argument put forth by Renew Baltimore is outlined in a 2010 paper co-authored by Stephen Walters, a Loyola University economics professor, and Louis Miserendino, a Calvert Hall high school teacher and co-chair of Renew Baltimore.

Parallels with post WWII San Francisco?

The paper argues Baltimore in the 1950s and 1960s was on the same downward trajectory as San Francisco in the post-World War II era. Both cities were losing population as well as manufacturing jobs while grappling with increases in crime. Thanks to a statewide initiative in 1978, San Francisco cut its property tax rates about 60%. Instead of bankrupting San Francisco, the city flourished in the subsequent decades, spurred by new waves of redevelopment and repopulation.

Meanwhile, Baltimore has steadily lost more than 350,000 residents since its population peak in 1950 and frequently gives large tax breaks and public financing to lure projects in the city.

Walters said that in his research he has seen residents of Sandtown-Winchester, a low-income predominantly Black neighborhood, paying a property tax rate 20 times higher than the effective tax rate of some major developments downtown. Walters called that “unconscionable.”

Lawrence Brown said he likes much of what Walters and Miserendino have written on “predatory taxes” and their effects on Black Baltimoreans. Brown wrote a book on segregation in Baltimore called “The Black Butterfly.”

Brown also finds San Francisco an instructive model, but for a different reason. “Although they did lower taxes overall,” he said, “they did not implement a racially equitable tax plan or equitable urban planning for Black San Francisco.”

“As a result, we see Black San Franciscans being uprooted and the Black population in rapid decline.”

‘This is a gentrification cocktail’

John Kern thinks a massive property tax cut in Baltimore followed by a “total bonanza” of development could actually harm some longtime homeowners in Black neighborhoods if guardrails aren’t put in place.

“To me, this is a gentrification cocktail,” said Kern, a leader of the SOS Fund, which helps residents who have fallen behind on their property tax bills.

China Boak Terrell, CEO of a nonprofit development firm called American Communities Trust, called cutting the property tax rate the “foundational issue for bringing about fairness,” saying it is essential to bring development and residents back to Black neighborhoods.

“If Baltimore City had high taxes and it was a very safe city and had the best schools in the country, everyone would be comfortable paying the higher taxes. But that’s not our present reality, right?” Boak Terrell said. “ … More than any other group in the city, the high property tax most affects the Black working class individual.”