Baltimore on Brink of Bankruptcy?

The city's government is creating major reforms to save its imbalanced financial structure.

Posted: 02/06/2013 09:34 AM EST
Baltimore on Brink of Bankruptcy?

Baltimore's financial future is shaky. The city's government is implementing major reforms to avoid bankruptcy in the future as a 10-year forecast showed the city will accumulate $745 million in budget deficits over the next decade, according to the Associated Press.

The widening gap between Baltimore's projected revenue and spending has caused the city to have the highest property and local income taxes in Maryland.

In turn, the city's population has been declining. Blacks are 63.6 percent of the population, according to the U.S. Census Bureau. But African-Americans have been leaving the city in significant numbers over the past decade, according to the Baltimore Sun.

The Associated Press reports:

In Baltimore, the erosion of the tax base is easy to see. The city's population has dropped from a peak of 950,000 in 1950 to 619,000 today, and while the decline has slowed, there have been few signs of the trend reversing. The median income is $40,000, and 22 percent of the city's residents live in poverty, according to Census data. The city also has 16,000 vacant properties.

Baltimore already has the highest property taxes in Maryland — twice as high as in neighboring Baltimore County. The city's local income taxes are the highest allowed under state law. While the city enacted some new taxes to deal with the 2010 deficit — including taxes on bottled beverages and higher hotel and parking levies — city officials say they can't tax their way out of the problem without driving away residents and businesses.

"We've got to go from a vicious cycle to a virtuous cycle. That starts with a good, stable fiscal foundation for the city government," said Andrew Kleine, the city's budget director. "When you've lost so much population and the tax base has shrunk, it's very difficult to deal with."

Read the full story here.

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(Photo: Courtesy Baltimore Transporation Service)

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