Use development incentives judiciously, Fry urges

Development incentives are necessary, but city government has to make sure it’s being judicious about how those inducements are awarded, according to the head of a local business advocacy group.

On Thursday, in a wide-ranging interview, Greater Baltimore Committee President and CEO Donald C. Fry argued developments must meet the “but, for test,” which measures whether a project needs assistance to succeed.

“But I think there may be more to it than just the ‘but, for test,’ because, again, the city only has so much. We need to be careful that we’re not just giving everybody [an incentive] and delaying [receiving] money forever,” Fry said.

Baltimore’s use of development tools, such as tax increment financing, payments in lieu of taxes and tax credits, have been criticized as giveaways to developers, while residents pay the highest property taxes in the state. Baltimore’s real property tax rate is $2.248 per $100 of assessed value, more than $1 higher than the next highest, Charles County.

These inducements have also been attacked for being inefficient and selectively awarded to connected developers. Councilman Carl Stokes, a longtime critic of the use of those tools said Baltimore feels compelled to sweeten the pot for developer because of an inferiority complex.

“We should dramatically reduce the property tax rate for Baltimore City so that we start at a more level playing field… that one thing would increase economic development and home ownership in Baltimore more than any one thing we could do,” Stokes said.

Groups such as 1,ooo Friends of Maryland argue they want to see incentives used for smaller projects that will revitalize older commercial main streets and communities throughout that city, not just massive new buildings.

“The city has not had a lot of focus on small business, but I think that’s beginning to turn around,” said Dru Schmidt-Perkins, president and CEO of 1,000 Friends of Maryland.

Richard Hall, executive director of the Citizens Planning & Housing Association, said he understands why critics would be upset when incentives are awarded to developers of gleaming towers in thriving neighborhoods, while other communities struggle with disinvestment. The counterargument is that Baltimore is not an island and needs tools to compete for investments with surrounding counties for growth and higher-end development in office, residential and retail.

“I do think it’s a reasonable request to have an open discussion about this issue,” Hall said.

Fry argued that without a mix of incentives to help make projects profitable, Baltimore would be without developments such as Tide Point, Harbor East or many of the mass of conversions turning former office space downtown into apartments.

“But the reality is that you are going to have to have some sort of [incentives] from the city of Baltimore because … whether it be the real estate taxes, some the fees, some of the development costs — they are higher in the city then they are in other areas so you need some sort of [incentives],” Fry said.