Council committee endorses tax breaks for Paterakis project

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The Baltimore City Council is expected to vote Monday night on a bill that would create a special district in Harbor Point, the slice of waterfront property located between Harbor East and Fells Point, so millionaire developer John Paterakis Sr. can seek $155 million in tax breaks.

The vote follows an endorsement of the 27-acre district by the council’s Taxation, Finance and Economic Development Committee, which voted 3-1 Thursday in favor of the district.

That riled committee Chairman Carl Stokes, who said he plans to push for a task force to study tax increment financing, or TIF, which allows the city to sell bonds based on anticipated property improvements through development. The bonds are repaid by future property taxes diverted from the city’s general fund.

“I thought we should wait,” Stokes said of the committee vote. “I think we need to have a conversation — and we should stop and not give any more out.”

The city currently has eight TIF districts, including Middle East, Westport and State Center. Bonds for Westport and State Center have not yet been sold.

The TIF bonds have been used by the Baltimore Development Corp. as incentive-based financing for developers because they allow cities to pay for infrastructure such as upgraded water and sewer lines, lighting and roadways on undeveloped or blighted urban properties.

Critics, such as Stokes, say the TIF dilutes the tax base of the property because they are repaid over time based on an amortization schedule, limiting the full tax payments for certain properties.

He said Paterakis, owner of H&S Bakery Inc. in Fells Point, already has tax breaks in Harbor East that are affecting the city’s revenues. The 750-room Baltimore Marriott Waterfront, owned by the bakery magnate, for instance, pays only $1 a year in property taxes under a 25-year PILOT, or payment in lieu of taxes, granted by city leaders nine years ago.

“That means that if they had paid taxes, it would be $22 million for the city so far,” Stokes said. “Instead, we have received $9.”

To Stokes, such an arrangement should have a “sliding scale” that would allow for profitable developments such as the Marriott Waterfront to pay property taxes in accordance to their profits.

“On something that is very profitable to have others putting the money into their pockets and to say the city should receive nothing is pretty absurd,” Stokes said.

Michael S. Beatty, president of H&S Properties Development Corp., Paterakis’ development company, did not return a call seeking comment Friday.

Councilman William H. Cole IV, who voted for the TIF district as a member of the taxation committee, said development must continue to move forward in the city despite the recession.

“At the end of the day, if we want to continue to add jobs, we have to do something,” Cole said. “It’s a tough call, but if it’s going to lead to development of that parcel and lots of jobs, there are times when you say you have to look at it.”

Cole said M.J. “Jay” Brodie, president of the Baltimore Development Corp., the city’s development agency, told the committee the TIF district had to be established by the end of the year in order to include the Thames Street Wharf building in the revamped tax rate. Brodie also pushed for the incentive package to help spur the development for Paterakis.

“Jay Brodie’s approach is that he may be rich enough to develop it, but he is not going to touch that property unless we give him something,” Cole said.

Attempts to reach Brodie for comment were unsuccessful.

The full council is expected to consider the TIF bond sale for the Harbor Point property in 2011, Cole added.