Baltimore City budget analysts predict shortfalls of $20 million to $30 million next year as a result of fewer, and lower-priced, real estate sales.
Given the city?s fervor to sue Wells Fargo and possibly other lenders to recoup lost revenue from foreclosed homes, property tax shortfalls could also loom.
Not slowing down are payments needed to keep solvent city employees? retirement packages.
Last year, payments jumped 18 percent from fiscal 2007 to $118 million, largely because of poor investment performance.
That is up from $25 million in 2000. And it does not count the city?s estimated $2.9 billion in unfunded obligations as of last year to pay for health care for future retirees.
Ed Gallagher, director of the city?s Department of Finance, says the city plans to contribute about the same amount to retirement benefits in 2009 as in this year?s fiscal 2008 budget.
That would make sense if the stock market was performing well. But it?s not. Many 401K holders lost money last year and are still losing money in stocks. The Dow Jones Industrial Average is down 1,358 points since July 1, the first day of the current fiscal year. History tells us investors will make money long-term, but losses in the next few years could mean much higher contributions for city taxpayers to make up the shortfall ? at the expense of funding schools, transportation projects and other essential services. And as we have noted in other reports, the city?s returns have been below average due to poor management by its chosen investment advisers.
Gallagher said the city had not yet finished calculating the new unfunded liability for health care and how much it should contribute to prepare for that obligation. Last year, the city set aside $15 million ? a figure many budget analysts said was inadequate.
What?s clear is that without a major influx of new residents, city taxpayers will be saddled with a mountain of debt in coming years. As we have mentioned, the only way to lure new residents is to lower the property tax rate, which is twice as high as other state jurisdictions, and ask the city?s major nonprofits to contribute a bigger amount for their share of city services.
City taxpayers have spent hundreds of millions of dollars on “economic development” in recent years with no net new jobs to show for it and fewer than 1,000 new residents, if recent census evidence is correct. So clearly the status quo is not working.
Procrastinating may give the city a few more years before it must choose between funding schools and funding city employee retirement benefits, but why must a crisis hit for City Council members and the mayor to do the right thing? Do it now.
