Baltimore wants to borrow $280 million. Analysts warn taxpayers could pay far more.

BALTIMORE — Baltimore needs to fix its aging schools, streets and public buildings. But paying for those repairs could saddle taxpayers with debt lasting decades — potentially long after some of the improvements have worn out.

That’s the dilemma facing voters Tuesday as city officials ask them to authorize $280 million in borrowing for infrastructure, schools, affordable housing and economic development.

The request comes as Baltimore faces a potential sharp reduction in state transportation funding, a shifting tax base and a recent credit rating downgrade. It would also continue a pattern of increasingly large borrowing requests, raising questions about how much debt the city can afford and whether voters know enough about where their money will go.

Cliff Rossi, a finance professor at the University of Maryland’s Robert H. Smith School of Business and former banking executive, said the proposed borrowing would add approximately 9% to the city’s existing debt.

“This is a new debt burden for a city that is already stressed fiscally,” Rossi said.

“When you start digging into the large component of this, allocated toward public infrastructure, that investment, you would think that’s for new construction, new projects,” Rossi said. “Instead, a lot of that money is going to repair and rehabilitate existing infrastructure. It would be one thing if $140 million was going to build new roads and bridges. It’s not. So you take on 20 years of interest on building maintenance and road maintenance that might only last 5 to 10 years. Is that worth it?”

The four separate bond questions on the Nov. 3 ballot would allow Baltimore to borrow $148 million for public infrastructure, $60 million for schools, $50 million for community and economic development and $22 million for affordable housing.

Approval would authorize officials to issue general obligation bonds over time, with repayment coming from future city revenue.

“Taxpayers just need to be careful when they vote for these bonds because it looks good on paper, but in the end, it ends up costing them a lot more in the future because of the interest,” said David Williams, president of the Taxpayers Protection Alliance, a Washington-based organization that advocates for fiscal accountability and reduced government spending.

A growing debt burden

Baltimore has repeatedly sought voter approval for borrowing, but the amounts have increased substantially.

In 2022, residents authorized $160 million in bonds. Two years later, they approved $250 million. The latest proposal represents a $30 million increase over 2024 and a 75% increase from four years ago.

The city’s financial position has already drawn scrutiny.

In August, Moody’s Ratings lowered Baltimore’s issuer and general obligation bond ratings one notch, from Aa2 to Aa3, citing declining fund balances and cash reserves across city government, particularly in utility and internal service funds.

The lower rating means the agency views Baltimore as a somewhat greater credit risk, potentially making future borrowing more expensive.

Moody’s also changed Baltimore’s outlook from negative to stable, indicating that it expects the city’s financial condition to stabilize at its new rating under current projections. The rating remains investment grade.

The downgrade did not establish that Baltimore could not afford the proposed borrowing. But it added another consideration for officials preparing to take on more debt.

“That’s not insignificant,” Rossi said of the $280 million request. “If approved, credit agencies are going to take a serious look at that.”

Why Baltimore says it needs the money

City officials, however, face a different financial problem: The infrastructure needs are not disappearing, and a major source of funding for transportation improvements could soon shrink.

Maryland’s distribution of Highway User Revenue — money generated through transportation-related taxes and fees — is scheduled to fall under state law beginning in fiscal 2028.

The reductions were part of changes to the state funding formula considered during Maryland’s budget negotiations in 2024. After objections from Baltimore and other jurisdictions, the more substantial decrease was delayed until fiscal 2028.

Baltimore has relied on that money for street resurfacing, bridge maintenance, traffic signals, sidewalks and other transportation projects.

An earlier city capital improvement plan projected approximately $91 million in Highway User Revenue available for capital transportation spending in fiscal 2027.

Under the projected reduction, and assuming the proportion devoted to operating expenses remains unchanged, that capital funding would drop to approximately $24.7 million in fiscal 2028, $20.6 million in fiscal 2029 and $16.4 million in fiscal 2030.

That would represent a reduction of more than 70% in available capital transportation funding between fiscal 2027 and fiscal 2028, based on those projections.

City officials have warned that such a decline could force substantial reductions in road resurfacing, alley repairs, bridge work, traffic signal replacements and accessibility improvements.

That puts Baltimore in a difficult position, Rossi said. The city needs a stronger tax base to support services and maintenance, but the condition of those services and infrastructure can influence whether residents and businesses choose to locate there.

“The city, they don’t have the property tax base to do this maintenance on their own,” Rossi said. “And yet, they need to develop that infrastructure and provide these services to attract more taxpayers, which they want to bring in.”

What do taxpayers get?

Williams said he doesn’t feel the city has given enough information about how the money would be spent.

“They really need to make the case to the public, to the citizens, to the taxpayers, because this is just some wording on a ballot. There’s really no explanation why they came up with this amount,” he said.

The ballot questions describe what the city may use the money for, rather than committing specific amounts to individual schools, roads or neighborhood projects.

“They could say, ‘We have X number of schools that need to be refurbished, and this is going to cost X amount of dollars,’ and we don’t see any of that detail,” Williams said.

“Taxpayers don’t see any of that detail. I think there just needs to be a lot more transparency in this process, rather than asking them for $280 million.”

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