Stephen Walters’ long-held beliefs shaped Renew Baltimore’s controversial proposal

Stephen Walters has been sounding the alarm for the better part of two decades: To save itself, he says, Baltimore must slash its property tax rate.
 

“The surprising thing for me about this is how hard this has been, how long this has taken,” said Walters, who sat for an interview in the living room of his Charles Village home earlier this year. “I should have given up years ago.”
 

At the time, his dream of cutting taxes was closer than ever to becoming reality. A group called Renew Baltimore was in the middle of gathering some 23,000 signatures — well over what was required — for a ballot initiative to drop the property tax rate from 2.248% to 1.2% over the next seven years.
 

The mayor warned it would plunge Baltimore into financial ruin. The city sued to keep the issue off November’s ballot, arguing that citizens cannot set tax rates using ballot initiatives. On Thursday the Maryland Supreme Court sided with the city.
 

It was tough news for Walters. If Renew Baltimore had prevailed and voters opted for lower taxes, few people could claim as much a role in shaping the future of Baltimore’s economy — whether it soared or collapsed — as Walters. His theory underpinned Renew’s proposal.
 

Instead, he’s just another outsider with an idea that briefly terrified and enraged City Hall. At least for now.
 

Walters, 70, dresses and behaves like an economics professor, his profession since arriving in Baltimore in 1981 to teach at what is now Loyola University Maryland. He retired in 2019.
 

He wears slacks and button-up shirts. He has gray hair, glasses and a goatee. He lives with his wife on the first floor of a century-old condo building.
 

He loves baseball and intellectual debates. He has a coffee pod machine because it’s cheaper than the nearby Starbucks and he doesn’t really care how it tastes.
 

He is a registered Democrat and the chief economist of The Maryland Public Policy Institute, a right-leaning think tank. He describes himself as a “radical pragmatist.”
 

“I just want what works,” Walters said. “I will crib ideas from across the ideological spectrum.”
 

Baltimore’s flashing neon sign
 

Baltimore has the highest property tax rate of any jurisdiction in the state. It is double the rate of neighboring counties. And it’s one of the highest rates of any major city in America.
 

It’s also one of the least effective, according to a review of 2022 U.S. Census data by the Lincoln Institute of Land Policy.
 

Compared to the largest cities in every state, Baltimore has one of the lowest median home prices, $210,300, on par with Indianapolis and Wichita, Kansas.
 

Yet the typical Baltimore homeowner pays a property tax bill — $4,297 annually — more in line with their counterparts in Denver, New York and Boston, where the median home price is three times higher.
 

To Walters and others at Renew Baltimore, the city’s tax rate might as well be a flashing neon sign telling people to invest their money elsewhere.
 

When people try to explain the decline of cities like Baltimore, they blame racism, the death of manufacturing and Americans’ longstanding preference for single-family homes in suburban communities, Walters said.
 

There’s no way a city can fix those problems on its own, he said, but Baltimore can do something to reverse the effects: cut the property tax rate.
 

Walters said this is most urgent in the predominantly Black communities grappling with decades of disinvestment known as the city’s “Black Butterfly.”
 

Lawrence Brown, an academic who coined that phrase, also studied property taxes and how they impact development. He thinks tax-break programs should be used in those Black neighborhoods to reverse decades of harmful and racist housing policies, but he does not support Renew Baltimore’s plan. He said in an email that a tax cut of such magnitude would reduce city revenue, in turn reducing services in the Black Butterfly.
 

That doesn’t sound equitable to Brown. It sounds harmful.
 

Many share Brown’s squeamishness. Adam Langley is the associate director of tax policy at the Lincoln Institute of Land Policy, the nonprofit foundation that documented property tax rates of cities across the country and how they impact municipal budgets.
 

While he agrees with Walters that Baltimore’s property tax rate is too high, he said, any tax reduction should be as close as possible to revenue-neutral for the city.
 

“It’s an extremely risky plan that’s unlikely to work out,” Langley said of Renew’s proposal.
 

Walters rejects the idea that revenue would drop. Any losses in the short term, he said, would be offset over the seven-year step down as more people move into the city and invest, leading to increased property values, income tax collections, and economic activity.
 

Hooked on urban economics
 

Walters grew up in Salem, Massachusetts, and went to an all-boys school. No one in his family had gone to college. With high school graduation looming, a guidance counselor warned his class to leave the area — Boston was hopelessly in decline.
 

Walters moved to Philadelphia to study economics at the University of Pennsylvania. There he read Jane Jacobs, a self-taught sociologist from New York whose advocacy stopped a highway project from demolishing much of Greenwich Village.
 

To Jacobs, a city was like a wildflower field. It should be allowed to grow and bloom in beautiful and unpredictable ways — not mowed down in favor of a monocultural lawn. But that’s what many cities appeared to be doing in the 1970s, through urban renewal, slum clearances and highway projects.
 

Faced with racial unrest, white flight, and deindustrialization, America’s urban cores looked like they were “melting down,” Walters said, and he wanted to know why. He was hooked.
 

When Penn hired Edward Banfield, a controversial academic who believed federal aid harmed cities, many students protested him. Walters audited his class.
 

Walters chose the University of California, Los Angeles, for his graduate work, largely because it offered him the most financial aid. But it turned out to be fertile ground for his own theories about urban economics.
 

Walters said his colleagues dubbed UCLA’s economics department the “University of Chicago at Los Angeles” — a nod to that school’s embrace of Milton Friedman and others who evangelized free markets and deregulation.
 

Stat-driven baseball
 

After Walters took a job at Loyola in Baltimore, he started indulging another of his obsessions: baseball. That’s how he came to play a tiny role in ending one of the sport’s most infamous championship droughts, “The Curse of the Bambino.”
 

He belonged to a wave of economists and armchair mathematicians whose analysis of baseball statistics upended many of the sport’s long-held beliefs. In the 1990s, Walters said, he fired off letters to major league ball clubs across the country. Almost everyone ignored him.
 

One day, he got a call from Dan Duquette, the general manager of the Red Sox.
 

In an email, Duquette partly credits Walters for the club’s decision to sign Johnny Damon in 2001, one of the last roster moves before a new owner fired Duquette.
 

A few years later, the Red Sox were playing in Game 7 of the American League Championship Series. Damon smacked two home runs — including a grand slam — to beat the Yankees en route to Boston’s first World Series victory in 86 years.
 

Walters watched the games from his home and high-fived his wife.
 

When the Orioles hired Duquette in 2011, he in turn hired Walters as an economic advisor. He held that position for the 2012 to 2018 seasons. According to Duquette, Walters encouraged the team in 2016 to select all-star outfielder Anthony Santander.
 

Digging in on property tax
 

Beyond baseball stats, Walters was sharpening his views on Baltimore’s property tax. It dovetailed with a class he began teaching around 2000, titled “The Economic Problems of Cities.”
 

One of the first students to take that class was Louis Miserendino. Today, Miserendino teaches at Calvert Hall College High School and is the chairman of Renew Baltimore.
 

Walters is hardly the only person who thinks a property tax cut is a good idea for Baltimore, Miserendino said, but his writing gave the idea intellectual heft.
 

“He’s not someone who seeks a lot of attention and credit,” Miserendino said of his former professor. “He doesn’t need to be known as the father of property tax reform in Baltimore.”
 

Walters has penned op-eds, given talks, written academic papers and even authored a book advocating for a property tax cut.
 

A common thread through his writings is that Baltimore is not doomed. Look at San Francisco or Boston, he says, two port towns that were once on much the same trajectory as Baltimore.
 

All three cities were losing jobs and population in the 1950s and ’60s, Walters said, so they ratcheted up their property taxes to bolster their budgets. It appeared to work in the short term, he said, but it encouraged population loss and disinvestment over time.
 

Starting around 1980, Boston and San Francisco began to reverse their fortunes and eventually rebound, while Baltimore continued to decline. What made their fates diverge? Walters argues the revivals came after voters passed referendums that drastically and immediately reduced their property tax rates.
 

This idea became the anchor of his book, “Boom Towns,” published in 2014.
 

According to the book, some city leaders think of themselves as modern-day Robin Hoods: They use property taxes to take from the rich and give to the poor. Walters argues that the real lesson from Robin Hood is that travelers stopped going through Sherwood Forest because they feared getting robbed.
 

Baltimore, more than almost anything else, Walters said, needs people to stop leaving. When fewer people want to live in Baltimore, property values fall. There’s less financial incentive to fix up homes or redevelop old buildings. Neighborhoods decay. Businesses leave. Properties sit vacant.
 

For decades, Baltimore has been combating this cycle with a patchwork of tax breaks and incentives.
 

Today, major development projects and even less ambitious proposals hinge on programs meant to dramatically lower property tax bills. The city offers tax credits to developers who renovate historic buildings, build new apartments, clean up former industrial sites, and much more, but a 2022 report from the city’s finance department called these tax credits “highly inequitable” because they are disproportionately used in wealthy neighborhoods.
 

Kiddie pools of developer money
 

“I don’t know of any developer that wouldn’t be very happy trading these economically inefficient tax credits for a tax rate that is close to Baltimore County’s tax rate,” said Doug Schmidt, the principal of Workshop Development, a Baltimore-based real estate development firm.
 

Developers don’t have limitless pools of money as some seem to believe, he said. More often, they have kiddie pools of money. Private equity funds, pensions and real estate investment trusts have Olympic-sized swimming pools of money.
 

Developers use their kiddie pool of money to assemble a deal, but they need the Olympic-sized pool to finance the deal. Schmidt said those Olympic-sized investors have a fiduciary responsibility to their investors, retirees and insurance policy holders to get the best return possible.
 

These funds are financing new apartment buildings or renovated shopping malls in places like Nashville, Tennessee, or Charlotte, North Carolina, Schmidt said. A lower property tax rate would help lure those big pools of money to Baltimore, he said.
 

While some developers embrace Walters and his ideas — developers and real estate groups largely funded Renew’s campaign — the feeling is not mutual. To Walters, Baltimore burdens its residents and small-business owners with a crushing property tax, while politicians carve out deals for well-connected developers. There should be one property tax rate for everyone, he said, and it should be competitive with the region.
 

Preaching this gospel has made him some enemies.
 

In 2008, he cowrote an op-ed about Baltimore’s property rate for The Wall Street Journal with Steve Hanke, a professor at Johns Hopkins University and a former official in the Reagan Administration.
 

The essay referenced “The Wire” and compared the city to a “hellhole.” The headline — which Walters said they did not write — read: “Blame Taxes for Baltimore’s Rot.”
 

Looking back at that op-ed and others, Walters said his message was correct, but that the blunt delivery of it could be off-putting.
 

“That’s a tough diagnosis for anybody to take, and I should have done it different and better,” Walters said.
 

Despite the harsh language and a willingness to point out negative trends, Walters said he is not a pessimist. He called himself “Mr. Positive,” and he remains optimistic that Baltimore will one day lower its property tax and flourish.
 

“The city has such enormous upside,” Walters said. “I want to let this garden bloom.”

Giacomo Bologna

giacomo.bologna@thebaltimorebanner.com

Giacomo "Jack" Bologna covers business and development at The Baltimore Banner.