A Baltimore developer has written a blistering letter to City Hall disputing proposed tax breaks for the $150 million Superblock project downtown.
The May 1 letter from David H. Hillman, chairman and CEO of Southern Management Corp., to Mayor Stephanie Rawlings-Blake and the 14 members of the City Council, states that a plan to give Atlanta and New York-based Lexington Square Partners a 95 percent property tax break for 15 years with lower tax breaks for five more years under a payment in lieu of taxes, or PILOT, is “unfair” and that the overall development is ill-planned.
Rawlings-Blake sent the proposal to the council late last month. The proposal is set to receive public hearings in the Taxation, Finance and Economic Development Committee this summer.
The Superblock PILOT could total up to $35 million over the two decades.
Hillman’s letter said that could be detrimental to the city’s tax base.
“Gigantic PILOTs have subsidized the development of Harbor East and as a result, the [central business district] has been decimated,” the letter says. “The city receives minimal tax benefits from those projects while revenue from the downtown diminishes.
“The city needs to ‘bite the bullet’ and stop granting PILOTs for dubious projects. History has shown that most of them do not work economically and result in diminished tax revenue from other sources due to increased vacancies and more challenges down the road.”
Hillman said his company owns and manages nearly 2,000 apartments in the city, which pay property taxes that total more than $2,000 per unit, per year. Southern Management also owns and manages 200,000 square feet of retail and office space.
The Superblock project, also known as Lexington Square, has been a controversial project for years.
Last month, developers received an eight-month extension from the Board of Estimates to complete their financing and planning package. That extension was granted just after the Baltimore Development Corp. board sent a proposal to Rawlings-Blake seeking the PILOT for a 296-unit apartment tower at the project and a 650-space parking garage.
Another tax break in the form of enterprise zone tax credits is being sought by the developers for 217,444 square feet of retail space.
BDC officials said last month Lexington Square Partners had asked for a larger PILOT for the entire Superblock project. But the BDC’s board scaled it back in a closed meeting.
The residential and parking garage PILOT would total $17.6 million, based on a current assessment of $64.5 million of the site today, said Irene Van Sant, a BDC analyst. The local news blog Baltimore Brew reported that the PILOT total was about $35 million.
“We appreciate Mr. Hillman’s projects that contribute to the renewal of downtown,” BDC President M.J. “Jay” Brodie said in a statement. “BDC and the city have assisted Mr. Hillman in his redevelopment of Charles Plaza, which was tied up in a messy financial situation with the previous owners. We also offered real property tax rebates for his redevelopment of historic and vacant buildings into new apartment complexes.
“Furthermore, in any BDC project, we apply our own independent analysis of what is a reasonable level of assistance for the developer and the city. This was the path we took in analyzing the Lexington Square development today.”
In his letter, Hillman, who has redeveloped and manages several downtown apartment and parking projects including Charles Towers, Park Charles, Marlboro Square, the Atrium Garage and Redwood Square Apartments, said he had received no tax breaks on those projects.
Hillman said he had heard back from only one council member, Helen Holton, whose reply he termed “non-committal.”
Rawlings-Blake did not respond to a request for comment Monday.
Councilman Carl Stokes, who chairs the taxation committee, said he didn’t want to comment directly on Hillman’s letter. But he did say he has been hearing similar sentiments from other businesspeople in the city.
In an interview, Hillman said Monday the PILOT for the Superblock would present an “unfair advantage” to other developers when compared to developers who invest their own funds into city projects.
“If a project needs that much, it’s going to be a failure,” he said. “Why? Because the project doesn’t work and they are scampering around. It’s a bad project.”