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Clipper Mill tax revenue falls short; city will send additional property bills

Property taxes at the chic Clipper Mill development near Hampden will not generate enough money to cover an upcoming bond repayment, and Baltimore officials say more payments are needed from developers and possibly property owners to make up the difference.

“We expect there to be a special tax required,” said Stephen Kraus, chief of treasury for the city’s Department of Finance. “Those numbers are still being tabulated. We won’t know for another month or so.”

A payment of $534,375 is due in September on the $7.8 million worth of tax increment financing bonds sold to private investors in 2004 to finance Clipper Mill.

TIF bonds are repaid through property taxes from developments in designated districts. The diverted taxes do not go into the city’s general fund, where all other property taxes are recorded.

Property tax bills were just sent to city property owners in late June, Kraus said, and TIF calculations normally occur in late summer.

Tom George, vice president of BB&T, the development’s owner, was unavailable for comment.

News of the need for special tax bills to cover the Clipper Mill TIF bond repayments came as a task force formed by City Councilman Carl Stokes is scrutinizing TIFs and PILOTs, or payment in lieu of taxes, as incentives given to developers at a time when the city budget is strained and cuts in services are routine.

The task force is expected to issue a report this month on the use of TIFs, PILOTs and other such incentives.

Since May 2003, Baltimore has sold bonds for seven TIFs totaling $116.1 million. Those bonds helped finance infrastructure and construction at HarborView, Clipper Mill, Mondawmin Mall, Tide Point and the massive redevelopment near Johns Hopkins Hospital led by East Baltimore Development Inc.

No bonds have been sold for two other TIF districts at Westport and Harbor Point. Both could total another $292 million, city documents show.

Under TIF regulations, developers and property owners are liable for the annual bond payments if insufficient property tax revenue is collected from the development to repay it. If the owner defaults, the land reverts to the city, as is the case with any other tax delinquent property. In that case, the TIF documents state, the bond holders would not get repaid.

Clipper Mill was planned to be a mixed-use community of 90,800 square feet of office space, 122 market-rate apartments and approximately 101 single-family homes. The development is home to the Woodberry Kitchen restaurant, artist studios and other retailers. Construction totaled $60 million.

City documents show Clipper Mill TIF bond repayments are scheduled over a 29-year period by the developer or property owners, according to the documents signed by Clipper Mill’s developer, C. William Struever, principal of Struever Bros. Eccles & Rouse.

The company lost large parts of the property to foreclosure in 2009. Those parcels were purchased at auction by BB&T, its lender, which is the owner and developer for those parts.

Struever said Friday that he and a subsidiary of Struever Bros. Eccles & Rouse, Clipper Redevelopment Co. LLC, remain owners of other buildings in Clipper Mill, including the Stables Building, the Foundry Building, the Poole and Hunt Building and the Assembly Building.

The Clipper Mill TIF of $7.8 million will balloon to $18.9 million with repayment and interest at the end of the term in 2033, according to city finance department documents.

M.J. “Jay” Brodie, president of the Baltimore Development Corp., which championed the Clipper Mill TIF in 2004 before the City Council, also said last week that the development’s property recent tax collections were insufficient to repay the bonds.

Some of the properties in the Clipper Mill park, including a $21 million residential development of 38 ultra-modern homes called The Overlook at Clipper Mill, were undeveloped at the time of Struever’s foreclosure, and therefore the property was assessed at lower rates.

So far, 21 units out of 38 have sold, said Robert Merbler, a partner with Yerman, Witman, Gaines & Conklin, the local realty firm handling Overlook sales at Clipper Mill.

The average sales price is $600,000, which produces a $14,400 annual city property tax bill, Merbler said. That tax bill is subject to a five-year phase-in for total payment under a law passed by the City Council as incentive for new residential construction purchases.

Brodie said at a news conference last week that Clipper Mill property owners would have to pay the special taxes for the TIF. But Kraus said the bills would be sent only to the developer.

“If you bought a house in Clipper Mill, it is disclosed in documents that you might be liable to pay,” he said.

Asked whether property owners might be upset when they received a second bill, Brodie said, “It’s life. Certainly they know about it if they read the documents.”

The special tax bill for Clipper Mill is not the first time the city has had to issue a secondary bill for TIF repayment, Kraus said.

Last year, another Struever development, Belvedere Square, got a special tax bill for about $50,000 to repay the TIF, according to Kraus. The development received a $2 million TIF in 2003 that will be repaid with diverted property taxes through 2023.

Struever paid that bill to the bondholders, Kraus said.

He said Friday night that he was unaware of a pending special tax at Clipper Mill.

“It would be a surprise to me if there would be a special tax this year,” Struever said.