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Task force debates priorities for public financing

A task force studying public financing for large city developments on Tuesday debated how to prioritize such projects to share the wealth across Baltimore’s communities.

The Task Force on Baltimore City Public-Private Development Financing Efforts is expected to release a report by mid-April. The group was formed in December 2010 by Baltimore City Council member Carl Stokes to study Tax Increment Financing, or TIF, and payments in lieu of taxes, or PILOTs, two major resources the city uses to lure developers.

Members of the group, headed by local developer Wendy Blair and philanthropist Calman “Buddy” Zamoiski, met at City Hall to consider requiring annual audits and profit-sharing plans from developers who are given future tax incentives.

“The question is: Should we be looking to prioritize the different economic development opportunities we have in the city?” asked Blair.

Other task force members include Robert C. Embry, president of the Abell Foundation, and Andy Frank, former deputy mayor and now special advisor for economic development to the Johns Hopkins University, and Mark Sissman, president of Healthy Neighborhoods.

The group also discussed how TIFs affect the city’s debt load and status through review by bond rating agencies. Having the Maryland Economic Development Corp., the state’s development arm, sell bonds for TIF-funded projects at Westport and Harbor Point could be an option if it eases the debt burden on the city, said Zamoiski.

City officials have used TIFs to help rebuild areas of Baltimore, including near the Inner Harbor, at the 88-acre East Baltimore Development Inc. site, and at Clipper Mill in North Baltimore.

TIF funding is set through bonds sold to private investors that are repaid with future property taxes from the new development, usually over a period of up to 30 years. In doing so, those payments divert tax revenue from the city’s general fund.

In the past, the city has also granted PILOTs as tax breaks for developers. But over the past several years, TIFs have been used more frequently to offer cash infusions for infrastructure and other development costs for projects that would not have moved forward without them, said Steve Kraus, chief of the city’s Bureau of Treasury Management.

Following a December 2010 vote to create a TIF district in Harbor Point, between Harbor East and Fells Point, additional construction can move forward, said M.J. “Jay” Brodie, president of the Baltimore Development Corp., which proposed the district in Harbor Point.

“It’s up to the developer to come along now,” Brodie said of millionaire developer John Paterakis, who is now able to request up to $150 million in TIF financing for construction at the site.

To date, Baltimore has sold bonds for seven TIF districts, Kraus said. The largest TIF was to help redevelop the New East Baltimore; two bond sales, in 2008 and 2009, raised $78 million.

TIF financing began in 1952 in California. Over the next three decades, the funding was used in other states to underwrite development as state and federal funds became limited, according to researchers at the Lincoln Institute of Land Policy, in Cambridge, Mass.

Joan Youngman, a senior fellow at the Lincoln Institute, said Wisconsin has 1,300 TIF districts. In Chicago, there are 159 TIF areas, according to a recent article in the Chicago Reader.

Youngman said Tuesday that, nationally, TIFs are beginning to receive public scrutiny. Because they do not require voter approval, they are not on the radar screen of the average taxpayer, she said.

“In California, the governor [Jerry Brown] has called for the end of TIFs,” Youngman said of recent action proposed because of that state’s budget crisis. “This is huge. TIFs started out there. This is a signal and we are all watching with bated breath.”

In Baltimore, the City Council sets TIF districts first before voting on the amount of TIF bonds to be sold to help pay for development costs within that district.

“We know that TIFs have become the single most important vehicle for redevelopment projects nationwide today,” Youngman said. “They are in place in 49 of the 50 states.”