Feb 20, 2017
Baltimore’s economy has been growing faster than anywhere else in the state, at more than a 5% rate compared to 2.6% for the rest of the state. Why is this happening in Baltimore? Luxury homes and condos are under construction.
If you can afford a townhouse with a $320,000 mortgage, you can move in, just one block from what was until recently the heart of Baltimore’s drug trade. And you have income above the average for the rest of Baltimore: $33,800 median income for black families and $63,400 median income for white families, none of whom could afford that mortgage. Even more expensive real estate has gone up around the Inner Harbor.
Does all this new real estate translate into more revenues from property taxes for Baltimore? It does not. Property taxes are the largest single revenue source for the city. Yet seven of the ten most recent expensive real estate additions to the Baltimore tax rolls have special tax breaks. That means the money doesn’t get to the city in property taxes collected, sometimes not for 10 or 20 years. So despite more construction, less property tax money is coming in than would be expected. The city has announced a deficit in the budget. And the poorer parts of town are still waiting for the demolition of blocks of boarded up houses.
To add to Baltimore’s deficit, city officials just approved the most expensive tax deal in Baltimore’s history, the new Port Covington expansion. The Port Covington TIF, a special kind of tax break that is paid for by more than 600 million dollars of city bonds, does not return regular property taxes until the bonds bought for the project are paid off – sometime in the next 30 years!
What’s even worse, Baltimore City public schools are funded by a formula based on the value of property. So while the value has been rising, the actual collection of taxes doesn’t show a similar increase. So over the past three years, the city has lost 75 million dollars in funding to the public schools.
That’s thanks to an agreement made by the politicians of both parties in the state legislature, with the Democrats the majority in the Maryland legislature for decades.
The whole tax arrangement is great for luxury property developers. It is anything but great for the children of Baltimore City public schools, who need far more funding than even the rise in property values would allow.