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Some on city council pushing for swift action on Port Covington

Some on city council pushing for swift action on Port Covington

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Key members of Baltimore’s City Council want the current council to consider legislation to authorize $535 million, over 25 years, in financing for public infrastructure improvements for the proposed Port Covington redevelopment despite the council facing heavy turnover this election year.

That is good news for Sagamore Development Co., which argues it needs a bill approving tax increment financing for the project through the council and signed by the mayor by the end of the year.

The timeline for the start of construction is being driven by the growth of Baltimore-based sports apparel firm Under Armour. The company intends to build a global headquarters at Port Covington independent of Sagamore Development’s plans for a $5.5 billion mixed-use development of the roughly 260-acre underused industrial site.

Sagamore officials called the redevelopment of a former Sam’s Club at Port Covington into an Under Armour office building the “pressure release valve” for that company, and said they have “no more tricks.” To make the project, work construction would have to begin by 2017 so Under Armour can begin delivering buildings by 2019.

The $5.5 billion Port Covington project is dependent on city authorization of bonding to build public infrastructure facilities on the site, with increased property taxes on the development paying for the bonds. (Courtesy Sagamore Development Co.)
The $5.5 billion Port Covington project is dependent on city authorization of bonding to build public infrastructure facilities on the site, with increased property taxes on the development paying for the bonds. (Courtesy Sagamore Development Co.)

“It’s not an ultimatum at all, it’s a statement, and it’s that for Under Armour to grow here, and to keep pace here in Maryland, we would need to have buildings delivered in a time frame, which leads back to having the TIF approved and through the council by the end of this year,” Sagamore Development President Marc Weller said.

The $535 million in tax increment financing – essentially bonding on the part of the city – would be paid for entirely by additional property tax revenues from the Port Covington development.

First review of tax plan

On Thursday, the Baltimore Development Corp.’s board is scheduled to review the request for tax increment financing from Sagamore, which is backed by Under Armour CEO Kevin Plank. If the city eventually approves the request it will be the largest tax increment financing agreement Baltimore has ever awarded.

Previously the largest tax increment financing packages awarded by the city — and the Baltimore Development Corp. served as coordinating agency — was $160 million for Westport, $155 million for Harbor Point and $17.5 million for the University of Maryland, Baltimore BioPark.

The Baltimore Development Corp.’s Board of Directors will eventually make a recommendation on the proposal to the mayor, and then the Board of Finance must vote on whether to send tax increment financing legislation to the council. A handful of the leading Democratic candidates for mayor have argued any decision regarding the legislation should be left up to a new mayor and City Council.

Despite upcoming elections, which could result in as many as nine of 14 council seats changing hands, current city council members said they believe it’s their job to consider the proposal. The Democratic primary — the city’s de facto election in a town where Democrats outnumber Republican nearly 10 to one — is scheduled for April 26. Early voting starts April 14.

A spokesman for Baltimore City Council President Bernard C. “Jack” Young couldn’t say whether the current council could approve legislation by the end of the year. He said the council hasn’t even seen a bill yet, and added that there are still questions that remained to be answered.

“We can’t get over our skis. We’ve got to let the process work through the Baltimore Development Corp.,” spokesman Lester Davis said.

‘We’re not lame ducks’

But other council members believe there’s plenty of time for the council to consider public financing legislation before a new council and mayor take over in December.

Councilman Brandon Scott
Councilman Brandon Scott

Councilman Brandon Scott, one of the council’s youngest members and one who is not facing a serious primary threat, said it’s not even April yet, so he believes there’s time for the council to “just deal with it now.”

“It’s not like the project will be different from one day in December to the next,” Scott said.

Those sentiments mirror those previously shared by Councilman Carl Stokes, chairman of the Taxation, Finance and Economic Development Committee, which reviews tax increment financing legislation.

“We’re not lame ducks. There will be no ‘lame duckness,’ so to speak, until after the November general election. And just as the U.S. Senate should not deny the sitting American president his right by Constitution to nominate a Supreme Court justice, we should not just sit on our hands for the next seven months or so,” said Stokes, who is a candidate for mayor. “This administration, and this council, should continue to legislate, and continue to act on the issues that are pertinent to the city.”

Councilman Bill Henry, who is the vice chairman of the Taxation, Finance and Economic Development Committee, also feels it’s possible the current council could take up the legislation, but he argues it should only do so if there’s enough time for due diligence on the proposal.

He said he doesn’t have any philosophical objection to building municipal infrastructure for projects. But said there’s a difference between building streets and sewers as opposed to landscaping and “pretty pocket parks.” Especially when there’s a need for those amenities all over the city.

“What I’m hoping for — whether it’s taken up by this council or the future council — what I want to make sure of is that the council has really clearly understood all of the costs and all of the benefits,” Henry said.

How TIFs are used

Baltimore uses tax increment financing to issue bonds so a developer can spend those funds to build or improve public infrastructure such as streets, sewers and sidewalks. Increases in property taxes from the development that benefitted from infrastructure improvements are then used to pay off the debt.

In this case, if the increased property taxes are not sufficient to make the bond payments, then the property owners in the TIF district – Sagamore and its fellow investors – have to make up the shortfall.

Sagamore Development also intends to use the public financing to help leverage some of the $573 million in federal and state funds it’s seeking for projects, such as making improvements to Interstate 95.

But there are limitations and risks associated with using tax increment financing, according to a primer released by the Maryland Department of Planning in 2013.

Those disadvantages include the lack of tax revenue from a project until the bonds have been retired and that tax increment finance bonds are more expensive than general obligation bonds because of associated risks. Use of tax increment financing as a development incentive can also lead to increased demand for public services that aren’t paid for with tax dollars from the specified tax increment financing district.

Ideally, Sagamore Development would prefer not to seek public financing during an election, but argue Under Armour’s growth leaves them no choice.

“When you look at it on its face you say, ‘You guys are crazy. You’re doing this in the middle of an election cycle. It’s like a hyper-political period of time where you’re going to come out and ask for the biggest TIF the city’s ever seen…’ the reason we had to do it is Under Armour is growing so fast. We just don’t have the time,” said Steve Siegel, executive vice president of Sagamore Development.

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