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Laslo Boyd: The Exelon deal’s implications for downtown

Kirby Fowler definitely has a point. The president of the Downtown Partnership of Baltimore has argued that the Inner Harbor would have received a real boost if the new office building that Exelon is promising to build in Baltimore were located in one of the sites in that area.

A major new building would have brought new economic activity to what some are now referring to as the historic core of downtown and reinforced the businesses already there. Moreover, a decision to build on, for example, the long vacant McCormick site at Conway and Light streets would have filled in one of the missing pieces in the Inner Harbor mosaic.

Fowler, in trying to make the case for an Inner Harbor location, also suggested that Exelon would be making a “favorable business gesture.”

But major corporations don’t make decisions about $120 million buildings as a gesture. And, apparently, Exelon saw the Harbor Point proposal from John Paterakis’ Harbor East Development Group LLC as the best option in pure business terms.

Before commenting on some of the significant public policy issues raised by Exelon’s choice of locations for the new Constellation Energy building, it’s worth celebrating the point that the decision to build the facility in Baltimore is a huge win for this city and the region.

Energy trading floors, like the one that will be a prominent feature of the new building, exist in only two other cities — New York and Houston. Baltimore was the winner, not Chicago or Philadelphia or even Owings Mills.

The commitment to build here was part of Exelon’s negotiating strategy to win approval from Maryland for its merger with Constellation, and state officials should be congratulated for getting that provision included. A new signature building will rise on a former Brownfield’s site, and Harbor East will get an infusion of new employees which will likely help both restaurant and housing activity in that part of the city.

However, none of those positive outcomes contradicts Fowler’s original point. Much of the attention about why an Inner Harbor proposal was not selected has focused on the absence of tax incentives in that area as contrasted to the availability of existing credits for the Harbor East location.

Policy questions

You might ask as a matter of public policy why new construction on the waterfront needs tax incentives. It is also reasonable to be concerned about the possible ripple effect as Constellation moves from Pratt Street to Harbor East, opening up its current site to tenants from older buildings nearby.

The broader point has also been raised by public officials. Does the city have an overall strategy for using a range of tools, including tax incentives, to try to shape development patterns downtown?

For example, Fowler would like to see tax incentives used to assist in the conversion of old office buildings in the core area to residential. Similarly, thinking about how owners of older buildings in the downtown core, who pay significant city taxes now, stay competitive with newer construction is a major challenge.

An examination of existing policy on tax incentives is definitely needed, although it shouldn’t proceed on the assumption that tax incentives were the only factor in Exelon’s decision to build at Harbor East.

There is another important question to consider in thinking about the implications of this case. When Exelon announced its decision to construct a new office tower downtown, many in Baltimore jumped to the conclusion that downtown meant the Inner Harbor. It’s clear that corporate officials from Chicago did not have the same understanding of what “downtown” means.

Moreover, it’s actually been a while since “downtown” was wholly defined by the Inner Harbor. Harbor East, for example, didn’t start with this building. It traces its origins to the 1980s when Mayor William Donald Schaefer prevailed on baking magnate Paterakis to acquire parcels of land to keep them from being haphazardly developed until the city could purchase them. That purchase never happened and eventually Paterakis became a major developer himself.

Ambitious hopes

Since then, Harbor East has become a Baltimore success story. Has it taken economic activity away from the Inner Harbor? Absolutely. Is that bad for Baltimore? That’s a much more complicated issue.

Similarly, there are ambitious hopes for future development on the West Side. The University of Maryland, Baltimore is expanding constantly, the Hippodrome may become the magnet for a Baltimore theater district and there is a significant growth of residential properties.

Is that bad for the Inner Harbor and Baltimore, or is it an example of a vibrant city moving in more than one direction?

All of this would be much easier if we weren’t still suffering the effects of a major economic recession. You can understand the logic of Exelon’s decision to select the Harbor East site while at the same time appreciating Kirby Fowler’s point that the traditional core of downtown Baltimore is vulnerable to being undermined by new developments in other parts of the city.

Now that Mayor Stephanie Rawlings-Blake has been elected to a full term, she has both the opportunity and the responsibility to set out her vision for the future of “downtown” and her strategies for achieving that vision. That would be a very positive outcome from the Exelon debate.

Laslo Boyd writes a monthly column for The Daily Record. His experience in public policy includes government, higher education and consulting. His email address is lvboyd@gmail.com.