Just 19 days after Baltimore suffered a chaotic night of rioting, the city showed its resilience by hosting a wonderful Preakness Stakes.
Not even a pre-race cloudburst could dampen the spirits of 131,000 racing fans at Pimlico, a 145-year-old track in one of the city’s many economically challenged neighborhoods. Officials considered the nationally televised celebration a key step in repairing damage done to the city’s image — to say nothing of its economy — when protests over the death of Freddie Gray turned violent on April 27.
Of course, Baltimore has more than just marketing problems to solve. Its crushing poverty and all the social pathologies that result from it are a by-product of generations of misguided policies. Exactly how the city’s leaders think and why they habitually take Baltimore down the wrong policy path were on full display in a controversy that surfaced during Preakness week.
The pot started to boil when Pimlico’s owners revealed they were considering relocating the second jewel of horse racing’s Triple Crown to Laurel Park, the other track they own in a suburb between Baltimore and Washington. City pols quickly achieved a state of high dudgeon — one council member proclaimed the very thought “an insult” and vowed to “do things . . . to protect the city.”
Investing in the suburbs rather than the city is a no-brainer, and it has been since 1950, when city leaders embarked on a series of 19 property-tax increases in 25 years, doubling the city’s rate.
It would be nice if those “things” consisted of improving the city’s tax and regulatory climates, which for six decades have caused flight of people and capital to safer havens outside Baltimore. At the city’s current property-tax rate, for example, a $100 million investment at Pimlico — probably less than required to make the crumbling facility world-class again — would cost its owners almost $2.25 million in added annual property taxes. The same investment at Laurel would carry less than $1 million annually in new tax liability.
Investing in the suburbs rather than the city, therefore, is a no-brainer, and it has been since 1950, when city leaders embarked on a series of 19 property-tax increases in 25 years, doubling the city’s rate. Each hike sent residents’ property values downward, expropriating a little bit of their wealth.
And that is the bigger problem here: Historically, the city’s policies have not only damaged cash flows but also made clear that local leaders simply don’t respect residents’ and investors’ property rights. Again and again, if a property owner has even contemplated doing something that annoyed Baltimore’s ruling classes, those rulers’ responses have been swift, punitive, and inevitably counterproductive.
The story of another of the city’s treasured sports provides a graphic example. In late March 1984, the owner of the NFL’s then–Baltimore Colts, Robert Irsay, floated the possibility of moving his football team to another city, in part to gain leverage in ongoing negotiations with city and state officials over a favorable lease on a new stadium in Baltimore.
But the pols played hardball, drafting legislation to allow the state to seize ownership of the team via eminent domain and either operate it “in the public interest” or resell it to local investors. This was like a gun to Irsay’s head. He immediately summoned the moving vans; in the dead of night, with a light snow falling, the team fled Baltimore for Indianapolis.
And just in the nick of time. One day later, then-governor Harry Hughes signed the seizure bill and city officials wired a “purchase offer” to the team. The specified price was $40 million, or about $90 million in today’s dollars — a mere 20th of the current value of the Colts in their new location. Litigation ensued, but a U.S. District Court judge ruled that the caravan holding all the Colts’ property had crossed state lines by the time formal seizure proceedings had begun.
As happened with the eminent-domain threat then, officials today point to a 1987 law that decrees the Preakness can be moved elsewhere in the state “only as a result of a disaster or emergency.” In Maryland, regulators are like co-owners: Not only did you not build that, but you’re not free to run it, either. Of course, there are tracks elsewhere that would surely like to host a Triple Crown race and that are not subject to Maryland’s regulatory dictates.
In this case, however, an accommodation is more likely than flight. Horse racing, unlike football, is in decline, so the industry has already climbed into bed with the state. When Maryland joined the casino gold rush, horsemen lobbied for and won a small percentage of the state’s gambling rake-off to cover some of its losses and “save jobs.” These handouts — millions annually — should give officials all the leverage they need to keep horsemen and track owners in their place.
And that is how things work in the Great Baltimore Collective. Su casa, mi casa; no justice, no peace.
What is remarkable is how many in deep-blue Maryland still think — even in the aftermath of the recent riots — that this formula works. In this view, we simply haven’t done enough; we need to regulate more, tax more, spend more. In short, let’s do it all again — harder.
Even more remarkably, just a few miles down I-95 from Baltimore, we see a wonderful example of how effective it is to protect property rights rather than trample on them. Prince George’s County was, in the 1970s, experiencing population flight just like that of Baltimore; most blamed the county’s escalating tax burden. Its citizens did not riot, though; they joined a tax revolt, voting two-to-one to cap their property-tax rate under 1 percent, less than half Baltimore’s rate.
Presto, the county’s out-migration ceased. Reassured about the security of their investments in real property, new residents and businesses arrived at a healthy clip, and Prince George’s is today the wealthiest majority-black county in the U.S., with a median household income 39 percent above the nation’s and a poverty rate 42 percent below it. Majority-black Baltimore, by contrast, has a median household income 23 percent below and a poverty rate 57 percent above the national levels.
This dismal relative performance cannot be, as the progressive storyline has it, simply a result of systemic racism. It is a function of systemic anti-capitalism, of depraved indifference to its citizens’ property rights. And, sadly, the consequences of Baltimore leaders’ guiding principles were every bit as relevant — if less visible — during Preakness week as they were during the days the city burned.
— Stephen J. K. Walters is the author of Boom Towns: Restoring the Urban American Dream, and a professor of economics at Loyola University Maryland.