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The Port Covington Bailout

We’ve all seen the Port Covington commercials all over local television. And now you’re going to have some skin in the game even if you don’t live in Baltimore City.

I’ve talked here about Baltimore and it’s addiction to bad ideas, particularly government handouts to private business. In April 2015, I wrote:

Equally damning is the fact that city government and the Baltimore Development Corporation is robbing themselves of future tax revenues in order to finance these schemes. Payment in Lieu of Taxes (PILOTs) see businesses pay an agreed-upon tax rate instead of the regular tax rate. Tax Increment Financing (TIFs) see the city actually float bonds for private businesses to build things and hope that the property taxes make up for the bonds later. So the city is screwing over the taxpayers coming and going: by artificially reducing the amount of tax revenue the city brings in, while also paying debt service on bonds issued to private businesses.

One of the ways the Baltimore’s elected officials continued to screw themselves on tax revenue had to do with public school funding. State aid in K-12 funding is partially calculated based on property tax revenues. So by reducing the tax revenue that a particular business has to pay, the city schools across Baltimore by jeopardizing school funding.

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So since the Democrats in Baltimore are addicted to handouts, taxpayers across the rest of Maryland are going to get stuck with the bill thanks to Senate President Mike Miller and Speaker Mike Busch:

State legislative leaders have promised Baltimore officials that they will enact a long-term fix to make sure the massive special tax deal for the waterfront Port Covington development won’t cost Baltimore schools millions of dollars in state aid.

House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr. assured city officials that they are committed to fixing the state’s education funding formulas by holding city schools harmless while enabling the development.

“The poorest of our jurisdictions … should not have to choose between job creating projects and State education aid,” Busch and Miller, both Democrats, wrote in a letter to City Council President Bernard C. “Jack” Young made public on Wednesday. “We are very proud of the fact that whenever Baltimore City is confronted with a significant challenge — particularly in the area of public education — the General Assembly steps up to partner with the City to find answers.”

Over the past two years, Baltimore has faced a predicament. The city’s economy has been growing faster than that of any other jurisdiction in Maryland, thanks in part to a wide array of tax subsidies used to spur development. But that growth has cost Baltimore schools $50 million in state funding over the past two years under a formula that gives out more money for poorer school systems.

So because Baltimore’s Mayor and City Council can’t stop themselves from giving politically connected donors handouts in the form of PILOTS and TIFs, taxpayers from the other 23 counties are going to get stuck holding the bag and seeing more of their tax dollars sent to Baltimore to make up the difference in dedicated school funding.

This also brings up serious questions about the state formulas for funding education. Why are funding formulas linked not to the number of students or the cost of doing business, but to property tax revenues? Since the state is ultimately responsible for education, shouldn’t there be a uniform per pupil spending number as opposed to a complicated formula involving tax rates? Because if the formula were not as complicated, Baltimore would be able to make these type of silly mistakes with no effect on its state funding and no additional monies taken from the public treasury. And that’s a question for the gentlemen, Messrs. Miller and Busch, who are virtually guaranteeing this bailout in the first place.

While we all can agree that economic development for Baltimore is a positive and necessary thing, doing so through sweetheart deals that adversely affect the city budget and its school system are not a net positive for Baltimore and unfairly shifts the burden of their bad decision making to taxpayers across Maryland.  All Marylanders deserve better than this.

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