Baltimore’s financial position has improved somewhat in recent months, a lift that comes even as the city has taken a few major hits from vacancy in its downtown business district.
The city has seen its property tax base shrink by $181 million just since July 1, largely a consequence of updated appraisals to major commercial properties that have lost business and tenants since the pandemic, Deputy Finance Director Bob Cenname told the City Council on Thursday.
One building alone — 100 E. Pratt St., known as the T. Rowe Price building — is responsible for $54 million in losses to the city’s property tax base, Cenname said, after the investment management firm opted to move its headquarters from the Inner Harbor to the Harbor Point neighborhood, further east on the waterfront.
The T. Rowe Price building’s assessed value dropped nearly $80 million with the company’s planned relocation, the Baltimore Business Journal reported in July.
The big drop in property tax revenues from the T. Rowe Price building makes up the bulk of $92 million in projected losses for the city due to commercial property reassessments in the Inner Harbor. Like many other cities across the country, the downtown area in Baltimore has been slow to rebound from the pandemic, with many businesses switching to remote work and restaurants struggling to draw people to the neighborhood.
The large reduction in expected property tax revenues, though, accounts for less than 1% of the city’s property tax base and is in line with what finance officials had expected, Cenname said. Overall, finance officials are projecting a deficit of about $2.3 million in expected property tax revenues.
And even with the hits Baltimore’s commercial real estate market has taken since the pandemic, the financial picture for the city in the fiscal year closing at the end of June appears stable. Overall, finance officials are projecting a marginal surplus of $18.5 million through the second quarter, or a negligible share of the city’s $4.4 billion budget for this year.
Baltimore’s budget is also benefitting from a few unexpected wins in the revenues column, Cenname reported, including somewhat higher than expected income tax revenues and highway user revenues. The city’s investment earnings, meanwhile, are coming in almost $34 million over budget, due in part to the shifting interest rate strategy by the Federal Reserve. The city is also collecting interest on the hundreds of millions of dollars in American Rescue Plan Act currently sitting in city accounts, the finance official said, though he noted that luxury will expire with federal spending deadlines in the next three years.
The longer-term picture for the city’s finances is murkier, however.
Cenname told the council in November that the city is bracing for a structural budget deficit of around $100 million for the next fiscal year, which starts July 1. And if current economic trends and spending levels continue, the city could face a cumulative deficit of $1.8 billion over the next 10 years, finance officials said a month later.
Some of the biggest consequences of Baltimore’s commercial real estate struggles are likely still two years out. Buildings like 100 E. Pratt St. and One South Street received early assessments outside of the typical cycle. The rest of Baltimore’s downtown isn’t due for its scheduled reassessments until 2025, at which point Cenname said the city faces risk of more losses due to vacancy downtown and businesses closing or leaving.
On top of the $93 million shortfall in property taxes from the Inner Harbor, Cenname said the neighboring “downtown” area has seen a $72 million drop in projected revenues across 42 properties, including $20 million from a single building that sold in July for less than half its 2015 value. Charles Village, meanwhile, saw a nearly $50 million shortfall from a single building, circumstances Cenname said the Department of Finance is still examining.
Correction: A previous version of this story misstated the projected surplus’ percent share of the total budget.
