Lower Property Taxes July 16, 2007
Posted by Adam Meister in Issues.trackback
The Goal: Lower Property Taxes
The Problem: The property tax rate in Baltimore is currently $2.268 per $100 of the assessed value of the property. What does this mean in practical terms?
If an individual purchases a $200,000 rehab property in Baltimore’s Druid Heights neighborhood, he/she will end up paying $4,536 a year in property taxes to the City of Baltimore. Compare this to the situation in Baltimore County. In the County the property tax rate is $1.11 per $100 of the assessed value. In other words, if an individual purchases a $412,000 house located on a one acre lot in Reisterstown, he/she will end up paying $4,536 a year in property taxes to Baltimore County.
After completing the above math, it is clear why there is little, if any, financial incentive for a family to reside in Baltimore City over Baltimore County. The Baltimore City tax rate is so high that it makes it difficult for those on fixed incomes to afford to own any property in Baltimore City and the rate makes it nearly impossible for renters to qualify for home ownership in the City. Once a renter can afford a $250,000 house they will logically select Baltimore County as the site of their future home since the tax rate there is half that of Baltimore City.
The Solution: We need to have a goal of bringing down the property tax rate to under $2 per $100 of the assessed value of the property by the start of 2010. We should have an identical property tax rate to Baltimore County in 10 years. In order to accomplish this, we must create new revenue streams to make up lost revenue due to tax cuts. Ultimately, we must come up with solutions that do not punish Baltimore residents for choosing to reside in Baltimore City. Below are Adam Meister’s “7 Quick and Simple” revenue-generating plans. Please keep in mind that for every penny per $100 of the assessed value cut the city loses $2.5million:
Plan 1: Every year the state determines what the property tax rate of Baltimore City must be in order to generate the same amount of revenue as the year before. This is called the constant yield tax rate. Every year the Mayor and City Council approve a rate that is higher than this rate! We need to at the very least use the constant yield tax rate as our base. This simple step saves us 4 cents. We are down to $2.228
Plan 2: Commercial property in Baltimore is under-assessed. In Mount Vernon alone there are 100 properties that are under-assessed by at least $100,000 each. It has been said that commercial property underassessment is costing the City $20 million in property taxes each year. Taking a conservative approach, I say we can appeal enough commercial properties in Baltimore to generate $5million in revenue for the City. This will save us 2 cents. We are down to $2.208.
Plan 3: Currently Baltimore does not provide enough transparency in to the housing department for average residents to figure out how many vacant homes there are in Baltimore. Most experts aggress that there are over ten thousand privately owned vacant houses. These vacant homes create many problems for neighborhoods. Owners need to be financially responsible for the negative impact they have on communities. I propose a yearly $300 vacant house fee. This should generate enough money to lower the tax rate by a penny. We are down to $2.198.
Plan 4: In Baltimore, one must pay $18 if they wish to file an eviction notice. There are 150,000 eviction notices filed each year in Baltimore. This fee should be doubled. The additional $18 fee must not be passed on to tenants. This will generate enough money to lower the tax rate by a penny. We are down to $2.188.
Plan 5: The city owns around 10,000 vacant properties (including houses and empty lots). Almost every week a person asks me, “Why can’t I buy property from Baltimore?” Currently Baltimore has Project 5000 which is not an easy process to navigate or understand. Baltimore also has something called the “rolling bid process” that is part of Project 5000. The general public, the every day investor, and even the expert investor does not have time to deal with Baltimore’s baffling and inefficient way of disposing of property. Some of the properties Baltimore owns – like the parcels on Druid Lake Park Drive – are worth over $2 million. Most are worth more than $5,000. The city needs to create an online database of all the properties it owns and list values next to these properties. It should heavily promote this site to potential home owners and investors who want to create home owner opportunities. There should also be a commercial section that favors those who want to bring jobs back to the city (light industry etc.). Bids should be sent in to the City and home owner occupants should be favored on the residential side. All construction must be completed 18 months from the purchase date (mega projects excluded). All purchasers must pay three years of property tax in advance. If this process was started in January of 2008, by the start of 2010 at least $50 million could be generated if only half the city owned property had been sold. Once properties are no longer owned by the city they can be taxed by the city and properly accessed once they are complete.
Plan 6: Non-profits do not have to pay property taxes. Johns Hopkins owns $727 million worth of property. A home owner in Sandtown pays more in property taxes than Johns Hopkins does. Is this fair? Non-profits that own over $100 million worth of property should have to pay some property taxes.
Plan 7: There are some fun ways Baltimore can generate revenue. Bars in uninhabited areas (Powerplant Live, Sonar, Scores, the Side Bar, etc.) should be allowed to purchase new liquor licenses that allow them to stay open and serve alcohol until 4AM. Bars in residential areas should be allowed to purchase licenses (only with neighborhood approval) that allow them to stay open until 2:30 and 3AM. Neighborhood approval would be needed every 2 years to renew the licenses. Making Baltimore a more “night friendly” town, similar to D.C. and New York City, would attract new residents, new business, new conventions, and new hotels, while also increasing foot traffic and revenues at already existing businesses. The economic impact would be substantial.
Adam Meister for City Council - 11th District of Baltimore 2007 
Adam,
I applaud you for taking on the issue of Property Taxes in the City. I am a former resident but I do own 3 properties in the city that I do rent out. I recently looked at a house in Remington being sold for 89,900 but was assessed at 171,000. The tax payment is comparable to almost $40,000 of purchase price at todays mortgage rates. The house is vacant and I would have loved to buy it and fix it up but the taxes alone made it cost prohibitive. As a buyer and a friend of many people who live in the city I know my situation is not an isolated instance. The high rate keeps people from investing in the city.
I like your ideas for bringing the rate down but I do have an issue with number 4, raising the filling fee for eviction. Over the past 3 years policy change has slowly eroded any profit I might make for my investment in the city and hard work I have put in to fix up these houses. First requiring a lead cert test, every time I get a new tenant, $200 each time, having to store or directly take to the dump, a persons belongings if they are evicted, now a proposed rise in eviction fillings?. We are not all land baron slumlords. I care about my houses and tenants and can honestly say I have helped improve the streets where my houses are. An eviction is the only tool we have against a tenant who does not pay. Many times the filing is all that is needed to remind the tenant they entered into a contract to rent my house and they pay the rent. The problem is I can’t tell if the tenant will only be a little late or they simply don’t plan on paying the rent that month. For that reason I have to file for eviction on the sixth day of the month, when the rent is considered late, to protect myself if they don’t pay the rent as the process takes at least 5 weeks.
Investors like myself have helped bring some of these streets back and raise the assessed property value throughout the city. For every bad landlord you hear about there are 10 good ones, like myself, who you don’t hear about. Our pockets are not as deep as the city thinks. A lease is a two way contract, some responsibility has to be placed on the tenant also, it is only fair.
One more suggestion for bringing the tax rate down, examining the cities budget, increase efficiency within departments, and pass on the savings to the property owners.
As I drive around the city, and see the dilapidated housing stock I wonder what Baltimore was like in its heyday. I hope it can be back there one day and again I applaud you for taking on this issue.
I am a Canton resident and I do agree that the property taxes are too high. However, we really need to look at the other side of the equation, which is spending. Every time I hear a councilperson, or the mayor or governor talk about cutting taxes they always say “how are we going to make up this lost revenue?”. Cut spending, that’s how. I know that govt budget is different than the individual budget but when I look at my finances, and I suspect most people are the same, I always look for ways to save. Yes, of course if there is a way to bring in more money, I’m all about it but if you don’t look at ways to cut spending, this “special commission” will only end up being a waste of time and money, much like the last commission that was setup for the very same purpose