Proposal to overhaul tax sale fails to pass after Baltimore City pumps breaks on own legislation

City officials voiced concern about the financial impact of ending tax sales after learning of the need for a $79 million increase in education spending -- an unanticipated cost that Mayor Brandon Scott likened to a ‘gut punch.’

Published 4/7/2023 7:32 p.m. EDT, Updated 4/11/2023 4:36 p.m. EDT

Exterior of the Maryland State House in Annapolis, as seen on Friday, March 31.

A bill that advocates and elected officials said would empower Baltimore City to tackle its vacant housing crisis died after city officials raised concerns about the cost of the legislation.

On Monday night, the state legislative session came to a close with the bill not getting a final vote. The House and Senate had passed their own versions of their measure, but they needed to be reconciled.

The bill would have allowed the city to overhaul its controversial tax sale system, an annual auction of homeowners’ property tax debt, which can leave residents owing thousands of dollars to investors or risk losing their homes. The city’s legislation would have given the mayor broad latitude to cancel the sale for owner-occupied homes, according to the amended version of the bill.

Advocates and elected officials have also criticized the tax sales for prolonging vacancy by tangling properties in legal limbo.

Councilwoman Odette Ramos, a leading advocate for tax sale reform, said the Scott administration flipped its position on the tax sale bill after its Department of Finance stressed the city’s limited capacity to take any additional budget hits in light of new dues for education. Finance officials expressed concern that tax sale reform would take away city revenue from the collection of delinquent taxes and bring new costs for developing a revised system.

Ramos also pointed to the influence of a small but influential group of tax sale investors, who testified aggressively against the legislation, in contributing to the bill’s demise. “The tax sale purchasers put all these doubts in their [legislators’] heads,” Ramos said. “It’s disappointing because we have a lot of momentum.”

The hesitations about the bill were raised in the eleventh hour of this year’s General Assembly session and a day after City Hall officials presented a budget that included a $79 million increase in education spending — an unanticipated cost due to a change in a new school funding law that Mayor Brandon Scott likened to a “gut punch.”

The surprise cost increase in the budget stemmed from a change to the state school system’s method of calculating child poverty, which will put City Hall on the hook for funds that officials say they did not expect to owe until fiscal year 2029. Still, the first-term Democrat said at a Thursday news conference that he is committed to fully funding the Blueprint for Maryland’s Future.

The bill was introduced on behalf of Scott’s office based on the suggestions of a tax sale work group convened by the mayor to develop proposals for “comprehensive” reform.

In a statement, Scott spokesman Cirilo Manego stressed that eliminating vacancy and protecting homeowners is a top priority of the mayor, citing two other bills that the administration sponsored in Annapolis to address issues with the tax sale. “After deep consideration, we determined that one of the three pieces [of] legislation, HB867/SB766 [the legislation to overhaul tax sale], needs additional work before the City can move forward and implement such a transformative program.”

Manego had said Friday that the bill could still move forward on the last day of the legislative session on Monday.

Officials with Baltimore’s Department of Finance did not respond to inquiries on Friday. A spokesperson for the Maryland Department of Assessments and Taxation said the agency is a “strong supporter” of the legislation, but did not respond to a question about the city’s reversal.

Some advocates expressed disappointment last week that the bill had stalled.

“The Mayor’s unprecedented commitment to tax sale reform gave us tremendous optimism that the changes we seek would be coming sooner rather than later,” said Allison Harris, an attorney with the Pro Bono Resource Center of Maryland who serves on the tax sale work group, in a message. “The fact that this opportunity to implement the reforms may be delayed at least another year means another year that low-income homeowners in Baltimore may continue to lose homes and the precious little wealth they have to third-party investors who don’t care about the health of our city.”

Del. Stephanie Smith, the chairwoman of the city delegation in Annapolis, did not respond to a request for comment last week.

Sen. Cory McCray, a Democrat who represents Baltimore, noted the contentious debate in recent weeks.

Expressing concern about the city’s ability to handle all of the blighted properties with past-due taxes on its own, McCray introduced an amendment in March that would have limited the legislation to apply only to properties classified by the city as homeowner-occupied. Just the week before he introduced it, tax sale investors had testified in support of such an amendment, as previously reported by The Baltimore Banner. Advocates argued that the amendment would leave residents who may not have full title to their properties vulnerable and fail to provide Baltimore with more sweeping powers to develop new tools for handling tax-delinquent properties.

Another amendment was added to the bill last week that would have pushed the enactment date back by a year. Still, this was wasn’t enough to ease the Scott administration’s concerns about the legislation at this time. .

While the tax sale reform legislation ended up on the chopping block, a crucial bill that will expand the city’s ability to acquire vacant properties passed both chambers last week and is awaiting the governor’s signature. That legislation will allow the city to expand its use of a legal tool called “judicial in rem foreclosure” to obtain ownership of any vacant property that has had liens in arrears for at least six months. The city was authorized by the state in 2019 to use the tool to obtain properties where the value of the property’s liens — unpaid property taxes, citations and water bills — exceeds the value of the property.

“The expansion of this effective tool is one of the most significant steps to address vacant properties I have seen in the 25 years I have worked in Baltimore,” said Dan Ellis, executive director of Neighborhood Housing Services of Baltimore and a member of the mayor’s tax sale work group.

The legal process got off to a halting start last year but has picked up pace, with the city acquiring upward of 20 properties in the last five months, Ramos said. City officials hope the city can acquire 200 properties per month, pending increased capacity within the Department of Housing and Community Development.

The costs of the city’s vacant housing have become increasingly stark in recent years. A September report by Johns Hopkins researchers found that Baltimore loses $100 million in tax revenue from vacant properties every year and spends another $100 million annually maintaining them. Earlier last year, three firefighters died battling a blaze at a vacant home in West Baltimore.

Two other bills that advocates hope could help the city address the vacancy crisis also did not come to a vote before the end of the legislative session Monday night. One bill would have allowed heirs to put properties into their names without having to pay off the liens first. It was intended to ease a financial burden that can lead some properties to fall into vacancy. A separate bill that would have allowed the city to set higher tax rates for vacant and abandoned property passed the House but did not come to a vote in the Senate.

This story has been updated to include the status of legislation at the end of the 2023 General Assembly session.

Baltimore Banner reporter Pamela Wood contributed reporting.

This article has been updated to reflect that Baltimore City has not asked for the bill to be pulled.

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