Mayor Stephanie Rawlings-Blake vigorously defended the use of city inspectors to examine vacant lots and empty buildings in search of businesses that may be trying to evade city licensing fees.

The practice, revealed in an audit presented to the Board of Estimates yesterday, results in no more than 10% of city inspections covering known license holders.

The other 90% involve inspectors examining vacant lots and knocking on empty buildings, residential properties and even churches in search of license scofflaws, according to the audit.

The mayor told city auditor Robert McCarty Jr., whose report criticized the practice, that if the city only inspected businesses with known licenses, “that would create an incentive for people never to register” for a license.

“To suggest that there was waste by inspecting these vacant properties would suggest that we would forgo potential revenue,” the mayor said after McCarty presented the audit findings to the Board of Estimates.

The mayor then posed a series of questions to McCarty.

“If we only inspected the known businesses without investigating the other and we would miss out on revenue opportunities, then that would be a [critical] audit finding? Correct?” she asked.

“It could be,” McCarty replied.

“It would be,” the mayor said.

She continued, “If we did not inspect all of the businesses, and through your audit you determined that there was a significant number, any number, of businesses that were operating outside the known entities, missing revenue from that, would that or would not that be an audit finding?”

Based on the way the inspection unit currently operates, McCarty said the number of unlicensed businesses could not be determined.

“If we didn’t do it, even you wouldn’t have the ability to determine if there were businesses operating outside the license?” the mayor asked.

“That would be outside the scope of our audit,” McCarty said.

“So that further supports my point,” the mayor declared.

Fees and Licenses

At issue is how the Finance Department determines whether an array of fees and licenses required for businesses operating in Baltimore are paid and valid.

These include licenses for businesses operating simulated slot machines or other “amusement devices” plus licenses for pawnbrokers, junk dealers, street vendors, auctioneers, dance academies, towing services and retail stores in 10 districts of the city.

The Department of Finance dispenses these licenses and collects fees based on various criteria, such as the size of the store or the number of amusement devices.

Five other city agencies – Health, Housing, General Services, Transportation and the Liquor Board – handle other licenses, such as restaurant, building and alcohol sale permits, and collect “minor privilege permit” fees for private signage placed above city rights-of-way.

In his report, McCarty criticized Finance for using an overly broad list of 17,000 possible properties that need licenses – a list based on the city’s water billing system – and then deploying inspectors to check out the properties.

Inspections are not conducted “in an efficient and effective manner,” the audit report says. “Current system does not readily identify the number of businesses or establishments with each type of license and the number of times each business or establishment was actually inspected during the year.”

Looking at 1,001 inspections during one week in 2014, the auditors found that only 53 businesses were subject to inspections, or 5% of the total.

The rest were categorized as “No License Required,” “Out of Business,” “Residential” or “Unknown,” the latter typically meaning that the property was a vacant lot or empty building.

No Data from City

Neither Rawlings-Blake nor the Department of Finance presented information yesterday about how many people are caught trying to evade city fees and licenses.

Such information was not in yesterday’s audit and has not been disclosed by Finance in budget documents to the City Council or other public information.

Auditor Milton Wolinski told the board that Finance could root out license evaders by less costly measures, such as assigning an inspector once a month to examine “vacant lots to see if anything is there.”

Finance Director Henry J. Raymond said he would take the audit recommendations under advisement, but said the current system of searching for license evaders was a critical part of his department’s inspection services.

Raymond and the mayor stressed that the audit report did not find waste or abuse in the department – although the report noted that one inspector performed inspections on only 81 of 251 days in 2014 – and they characterized the report as a “clean bill of health” for the Finance Department.

At a press conference with the mayor after the meeting, Raymond characterized the report this way: “These are relatively minor findings related to administrative recordkeeping.”