Construction of a new public school in East Baltimore may be partially funded with Tax Increment Financing bonds earmarked for demolition of vacant row houses in Middle East, according to officials involved in the redevelopment.
The $50 million East Baltimore Community School is expected to open in 2014 on seven acres at Chester and Eager streets. Johns Hopkins University President Ronald J. Daniels and East Baltimore Development Inc. CEO Christopher Shea have said that funds to build it were originally intended to come largely from private sources.
During a meeting Tuesday of a city task force examining TIF bonds, Andrew B. Frank, a former deputy mayor who is now special advisor to Daniels on economic development, said part of the unspent TIF bonds, until now designated for demolition, relocation and site preparation, could be used to build the school.
Frank had said in January that private contributions for the new school had reached nearly $20 million, well short of the amount needed.
With demolition of vacant houses on the site expected to begin later this year, officials at Johns Hopkins and EBDI are hoping to complete financing and break ground soon after the site is cleared. Hopkins and EBDI officials have said the state-of-the-art school is the linchpin of the revised plan for the massive East Baltimore redevelopment project.
Douglas W. Nelson, chairman of the EBDI board, told The Daily Record late last year that he planned to seek construction funds for the school from the city school board.
But school system CEO Andres Alonso said then that the system would not contribute any money to build the school, explaining that the city’s existing schools had more pressing needs for repairs and upgrades.
At Tuesday’s task force meeting at City Hall, Frank said, “We would take the TIF in place used to acquire the property and apply it for vertical construction.”
But Shea, EBDI’s CEO, later denied that a change in financing structure was under consideration.
Shea said in an e-mail Wednesday “it is unlikely that TIF funds would be used for vertical construction” of the school.
He declined a request for a telephone interview.
Other city officials said they were aware of the possible use of TIF funds for the school construction.
Comptroller Joan M. Pratt said she knew a shift in funding is being considered for the EBDI project.
“Maybe what they are trying to do is take the money for site preparation to partially construct a new school,” Pratt said. Private attorneys hired by the city at the law firm McGuireWoods LLP reviewed the 2007 TIF enabling legislation for EBDI on Wednesday at her request, she said.
Pratt said any shift in the funding structure of the EBDI project with TIF bonds would have to be reviewed by the city’s law department.
City Council member Carl Stokes, whose district includes a small portion of the EBDI site, said he is against using TIF funds to construct a public building because it poses a risk to city taxpayers for repayment of the bonds to private bond holders.
“I don’t think TIF bonds should be used for schools,” Stokes said. “I believe in the greater good theory, but the greater good should produce revenue.”
TIF bonds have been used in Baltimore for nearly a decade to finance large development projects, such as Mondawmin Mall, Clipper Mill, Westport and Harbor Point.
The bonds are sold to private investors and then repaid over a period of up to 30 years from diverted property tax revenues, based on the increased property values from the redevelopment.
Joan Youngman, senior fellow at the Lincoln Institute of Land Policy in Cambridge, Mass., and a national expert on TIFs, said she was unaware that any TIF financing had been used in the U.S. to help build public schools.
“TIF spending is generally for job-related construction,” Youngman said, adding that the theory that a good public school will help foster an increase in property values is risky to TIF bond repayments because of the uneven economy.
“When we’re going into an era of revenue shortfalls, it raises the bar on the assumption that the increase in values that will follow will pay for themselves,” she said. “You are borrowing from the future and it [the TIF] may have to be paid back from higher taxes.”
Wendy Blair, the TIF task force co-chair, said the group plans to study whether TIFs can be used to finance public school construction.
Developer John Paterakis has raised the possibility of building a Living Classrooms school at Harbor Point after he receives a $150 million TIF bond, she said.
At EBDI, a $1.8 billion project that is the largest urban redevelopment effort in the country, a total of $78 million in TIF bonds have been sold — the largest amount in the city to date.
Most of the money has been spent to pay for infrastructure upgrades and relocation costs for 725 households and demolition costs for many of those homes.
Phase I of the EBDI project is a 33-acre site north of Johns Hopkins Hospital where EBDI and Hopkins officials had planned to build a world-class biotech park. So far, one life sciences building has been constructed in 10 years and large swaths of land remain cleared where other buildings were planned.
In a presentation downtown to a group of real estate officials Thursday, Frank said much of that space now will be converted to “central green space under a new plan.”
Last fall, EBDI officials reported they had set aside $13.4 million in TIF bonds for Phase II demolition and relocation. Phase II is a 55-acre parcel now littered with dozens of vacant and blighted row houses following the relocation of hundreds of families by EBDI over the past four years.
Plans originally called to raze all 55 acres, Shea has said. But a request for proposals released by EBDI late last year included demolition of only seven acres of the Phase II site — the school footprint.
Shea would not comment Wednesday on when the remaining 48 acres would be cleared for development.
Rogers Marvel Architects of New York was selected in December to design the new 120,000-square-foot school. The school will hold 540 students in grades K-8. Shea said in an e-mail Thursday that the design costs were “still under negotiation.”
The school was originally slated to cost $40 million. But in a presentation Thursday to the real estate officials, Frank reported that the school’s cost would be $50 million.
“In order for this community to succeed and grow, this needs to be the best school in the entire [city public school] system,” Frank said. “If that can’t happen, shame on us.”