Tax break errors cost Baltimore millions, Sun investigation finds
The city of Baltimore has failed to collect millions of dollars in potential revenue because of chronic errors and miscalculations in a program offering tax breaks for historic renovations, a Baltimore Sun investigation has found.

The Sun documented mistakes in the historic tax credit program that in some cases span nearly a decade. Time and time again, errors originating at the state assessments agency got past city officials charged with overseeing Baltimore's finances, even though the officials were alerted to similar problems in 1999.

Two downtown apartment buildings, the Atrium at Market Center and The Munsey, together have been underbilled for property taxes by more than $1 million because of the errors, state officials confirmed after being presented with The Sun's findings. Several other commercial properties have gotten excessive windfalls that reach as high as six figures.

The owners of nearly 1,200 buildings in Baltimore benefit from the historic credit program, which aims to boost preservation by forgiving a portion of property taxes on rehabs for 10 years. In addition to several downtown apartment complexes, beneficiaries of the credit range from affordable-housing buyers in modest rowhouses to well-known former athletes living in luxury condos.

The Sun's findings are the latest sign that the sloppy handling of property taxes is depriving the city of much-needed cash — money that could pay for already underfunded services or help reduce the city's high property tax rate.

Government officials said they don't know how widespread the errors are among historic credits. But within the program's 10 largest tax breaks alone, The Sun found seven with errors totaling around $2 million in uncollected city taxes.

When asked to comment on The Sun's conclusions, Owen C. Charles, deputy director of the state Department of Assessments and Taxation, conceded that his agency has made repeated errors in administering some aspects of the program. "The computations are incorrect," he said.

"Certainly it's unfortunate that this has occurred," he added. "We'll do everything in our power to make sure the rectification does occur, and to ensure going forward that the values on which the credits are computed are done in a manner they should be."

Asked why the city had not been not more vigilant to ensure credits were correct, Baltimore's deputy finance director, Henry J. Raymond, said only that his department performs periodic audits "when resources permit and corrects erroneous credits when identified." He also acknowledged that the city itself has contributed to errors over the past three years.

Raymond said the city would bill property owners for any unwarranted tax breaks from prior years.

Both he and Charles played down the extent of the problems, insisting that most historic credits have been processed correctly. Yet neither could offer detailed evidence to support that assertion.

Earlier articles in The Sun's "Taxing Baltimore" series examined other tax breaks, finding various problems that have also cost the city treasury. For example, lax oversight of the homestead credit program allowed hundreds of homeowners to get multiple tax breaks not allowed under the law.

Problems aren't limited to tax break programs: Artificially low values set by the state for unsold waterfront condos have cost the city more than $10 million in lost taxes.

The Sun also previously documented other troubles with the historic credit: At least five city homeowners received the tax discount without even applying for it. Charles attributed those mistakes to "coding errors," and the city has since worked with the affected owners to set up repayment plans.

The city's historic credit is one of several subsidies available for preservation projects. The state of Maryland offers an income tax credit, and the federal government has a similar program for income-producing properties like apartments.

With its program, the city sought to capitalize on one of Baltimore's obvious assets: the vast stock of decades-old buildings that define the city's character, from the popular waterfront areas of Canton and Fells Point to far less affluent parts of town.

Since 1997 the city credit has helped encourage more than $500 million in investment, said Kathleen Kotarba, executive director of the city's Commission for Historic and Architectural Preservation. The agency determines whether a property is eligible for the historic credit and forwards the information to the state.

From the beginning, the tax breaks have been concentrated in places like Fells Point, Federal Hill and Mount Vernon. But Kotarba said recent applications have come from struggling parts of East Baltimore, many involving vacant buildings. Among the more familiar recipients of Baltimore's program are the American Can Co. retail complex in Canton, and the Stieff Silver building in Hampden.

To qualify for the credit, a property must contribute to a historic district or be a landmark. More than 55,000 properties — nearly one in four citywide — are eligible. Other requirements include a minimum rehab investment equal to 25 percent of the property's present value.