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Rawlings-Blake rejects moratorium on TIFs, PILOTs

Melody Simmons//Daily Record Business Writer//November 10, 2011

Rawlings-Blake rejects moratorium on TIFs, PILOTs

By Melody Simmons

//Daily Record Business Writer

//November 10, 2011

A city task force examining taxpayer incentives to developers is recommending new criteria for the awards, including profit sharing on all projects, independent monitors and possible use of such inducements to help rebuild Baltimore’s middle class.

Mayor Stephanie Rawlings-Blake

During a hearing at City Hall Thursday, members of the task force endorsed a plan to institute a moratorium on granting tax increment financing (TIFs) and payments in lieu of taxes (PILOTs) until the task force recommendations are aired by city officials.

That plan was immediately rejected by Mayor Stephanie Rawlings-Blake, whose spokesman released a statement that called it “puzzling.”

“To hold up TIF or PILOT legislation would be reckless, and threatens to kill job creation in the city,” said Ian Brennan, a spokesman for Rawlings-Blake.

M.J. “Jay” Brodie, president of the Baltimore Development Corp., the city’s nonprofit development arm, declined to comment on the moratorium.

The task force’s report was released Thursday by City Councilman Carl Stokes, who formed the group in January, and chairs the council’s Taxation, Finance and Economic Development Committee.

At a committee hearing Thursday, the 11 recommendations — excluding the recommendation for the moratorium that was offered verbally during the hearing — were introduced. The report is expected to be considered by the entire City Council early next year, Stokes said.

The task force met nine times beginning Jan. 11. It was chaired by local developer Wendy Blair and businessman Calman “Buddy” Zamoiski and included Baltimore Orioles owner and attorney Peter G. Angelos, Abell Foundation President Robert Embry and Morgan State University Urban Affairs Professor Linda Loubert.

Stokes had said the task force was formed because the city had no clear policies regarding TIFs or PILOTs, the main incentives given to developers to spur economic development in Baltimore.

“The use of commercial PILOTs and TIFs to support private investment in Baltimore is relatively recent and largely unstudied,” the report said. “The proposed use of TIFs has accelerated in the past five years. The Mayor and City Council and the Board of Estimates have not adopted a detailed policy for the use of these subsidies, however, the Baltimore Development Corp. and the Board of Finance Commissioners have separately put in place policy guidelines.”

Stokes said the incentives are intricate, and often involve deals lasting up to 30 years that grant property tax breaks to developers in return for large-scale developments.

“This is a big one,” Stokes said, of a recommendation for the city to become partners in the developments in exchange for the tax breaks through profit sharing. “The city is an investor in any one of these projects — it is not a gift.”

The recommendations of the Task Force on Baltimore City Public/Private Development Financing Efforts include:

-Establishing policies and procedures that foster greater transparency.

-Establishing standard criteria for profit sharing on all projects.

-Establishing independent systems to evaluate and monitor proposed and active TIFs and PILOTs, including an independent advisory body with staff support independent of the development agencies. TIF and PILOT commitments should expire after a reasonable amount of time if the developer has failed to move ahead on the project; transfers should be subject to city approval.

-Prioritizing the economic development goals of the city and examining the use of TIF and PILOTS for “public goods” projects as well as building a larger middle class.

-Developing an economic development incentive program to advance area specific goals.

-Fostering better coordination between the city economic development agencies and the Department of Planning.

Baltimore has 11 TIF districts, with debt that totals $135 million. TIFs are set up by the city and funded through the sale of private bonds — repaid to investors from diverted property taxes over a period of up to 30 years.

The city’s largest TIF is with East Baltimore Development Inc.’s $1.8 billion redevelopment of 88 acres in Middle East, for which $78 million in bonds has been sold to help fund infrastructure and development. So far, $564 million has been spent on the project, $212.6 million of that in public funds.

PILOTs are payments negotiated with developers in lieu of property taxes. The city has 90 PILOTs outstanding. There are 11 downtown PILOTs that exempt real property tax totaling more than $12.8 million, the task force report states.

For example, a PILOT granted in 2009 for construction of a parking garage in Harbor East in the new Legg Mason Tower led to the exemption of $667,523 in property taxes last year for its owner, H&S Properties. The company paid $78,893 of its total tax bill of $711,501, according to the BDC.

Nearly all TIFs and PILOTs must be approved by the City Council, Board of Estimates and the mayor.

The task force also found that TIFs are included in the city’s general credit debt load, and therefore, are calculated as part of the overall credit rating.

The study found that developers request publicly supported incentives to help finance large projects — and that has in some cases created a backlash in community support.

“The City of Baltimore has many economic development goals. The absence of any stated prioritization of these goals gives the appearance that the process is developer driven and thus reactionary,” the report said. “Additionally, a negative bias regarding the marketability of Baltimore exists, which seems to perpetuate the status quo. For example, comments like ‘no one is banging down the door to develop in Baltimore’ or ‘you take what you can get’ promote a sense of passivity.”


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