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City Hall task force debates developers’ subsidies

A city task force examining the need for public subsidies to developers debated whether to hold businesses more accountable for those tax breaks through audits and increased transparency during a heated meeting Tuesday.

The task force, formed by City Councilman Carl Stokes, is expected to issue a report with recommendations late next month, said co-chair Wendy Blair, president of W.L. Blair Development Co.

Tuesday’s meeting at City Hall offered a glimpse into the complex arena of public financing for private development projects, which impacts the city’s budget, debt load and bond rating.

For nearly two hours, members of the task force debated the merits of tax increment financing, or TIF, and payment in lieu of taxes, or PILOTs, in structuring development deals in Baltimore.

They wondered how to judge whether the city “lost or gained” in each deal and whether profit-sharing for the city should be part of deals with private developers.

There are now 12 PILOTS and six TIF deals in the city, said Irene E. VanSant, special projects director for the Baltimore Development Corp., which has negotiated many of those deals.

The public subsidies have been granted to developers for low-interest and tax-free financing of large projects such as the Legg Mason tower and the Marriott Waterfront hotel in Harbor East, renovations to Belvedere Square and Mondawmin Mall and demolition of houses in Middle East as part of a $1.8 billion redevelopment by the nonprofit East Baltimore Development Inc.

“There has to be some kind of criteria,” said Tom Marudas, a representative of attorney Peter Angelos, a task force member who was not at the meeting. “Everything has to be done in a public forum. If you avail yourselves of these subsidies, you should open yourself up to critique. Otherwise, there’s a firewall.”

VanSant replied that may be difficult, considering the nature of the city’s development financing deals.

“We don’t have the proprietary right to demand information,” she said.

That prompted Robert C. Embry Jr., president of the Abell Foundation and former city housing commissioner, to respond: “Maybe we should.”

After VanSant said that tracking specific tax data for each project would require staffing that BDC does not have, Joseph T. “Jody” Landers III, executive vice president of the Greater Baltimore Board of Realtors and a former City Council member, said that such a task could be done in “small samples” rather than in-depth audits.

“I don’t think we need an exhaustive analysis of every single deal,” he said. “Just take a small sample and look into it.”

TIF has been used by the city in recent years to help underwrite costly infrastructure installation and upgrades for development. The largest TIF is a $78 million bond sale to help finance the nation’s largest redevelopment project, an 88-acre project in Middle East, just north of the Johns Hopkins Hospital.

The TIF financing centers on bonds sold to private investors. The bonds are repaid to the investors over a period of 20 to 30 years from increased tax revenues at the new development that otherwise would go into the city’s coffers.

That arrangement, Stokes said, adds extra burden to taxpayers and should be made transparent.

“We ought to consider recommending that the taxpayer has the right to know,” he said. “Promises are made and we should be able to track them.”

VanSant presented figures from a controversial city hotel development that has used public subsidies.

The Marriott Waterfront, a 752-room structure in Harbor East owned by bakery magnate John Paterakis’ H&S Properties, received a $5 million construction grant from the city in 2001 and a $5 million loan to be repaid over 25 years from general obligation bonds.

The hotel’s assessed value in 2009 was $135.2 million. Under two 25-year PILOT agreements negotiated by BDC, the hotel’s annual property taxes are $1, VanSant said. The total real estate taxes rebated under the PILOT between 2002-2009 are $21.1 million.

The task force is scheduled to meet again on March 8.

One comment

  1. What is happening with the 160 million that went to Turner Development in Westport. The City is willing to give breaks to developers, but there is no help for residents.