The Baltimore Development Corp. board Thursday gave a critical boost to a plan for $535 million in public financing for redeveloping Port Covington but also raised concerns about the sprawling project’s impact on education funding and the city’s bonding capacity.
The BDC board voted to recommend to the mayor the use of tax increment financing to provide public infrastructure for Sagamore Development Co.’s $5.5 billion project. The proposal will now be reviewed by Board of Finance, which will decide if the City Council can consider legislation.
“This is the first step in a process. The BDC board doesn’t approve anything — they make a recommendation — and the project committee and the board made a recommendation to move forward with the process,” said William Cole, president of the Baltimore Development Corp. “There’s still Board of Finance and ultimately the only body that can approve this is the City Council.”
The board, in a voice vote, unanimously supported the recommendation after members asked two questions about the proposal. But that support did come with several stipulations.
The recommendation included requirements, such as including profit sharing, and that the sprawling project not negatively affect the city’s bond capacity or have an adverse impact on school funding. Colin Tarbert, deputy mayor for economic and neighborhood development, said the city is also negotiating with the company on some other issues, such as minority business involvement and providing affordable housing at the development.
The Baltimore Development Corp., the city’s quasi-governmental economic development agency, performs the initial “but for” analysis of the tax increment financing request, examining whether the project could be built without public financing for the infrastructure — roads, sewers, water lines and the like. The decision was made based of an analysis by the Columbia-based public finance consulting firm MuniCap Inc.
Keenan Rice, president of MuniCap Inc., said the project would provide an average $34 million a year in net tax revenue for the city over and above paying for the bonds, public safety and other costs.
“We can see from this number that the TIF is really providing a foundation, making an investment, of very, very positive financial impact on the city down the road,” Rice told the board.
Sagamore officials say that when development is complete Port Covington will support $4.3 billion in economic activity annually, 26,500 jobs and $209 million in state and local revenues.
It’s unknown what the total cost of the $535 million in public financing, which will be dispersed in tranches over 25 years, will be because details regarding costs of issuance and debt service have not been released publicly. A spokeswoman for the Baltimore Development Corp. said that information will be addressed when the tax increment financing plan goes before the Board of Finance.
School funding concerns
There’s also some concern the tax increment financing could hurt school funding. Those worries come on the heels of the city losing more than $24 million in school funding because tax increment financing for other projects, combined with a drop in school enrollment, artificially boosted the city’s tax revenue, leading to a decrease in state education support.
Del. Maggie McIntosh and Sen. Nathaniel McFadden, both Baltimore City Democrats, have introduced legislation that would mitigate the impact of tax increment funding on the school funding formula.
But if that bill isn’t passed by the General Assembly it could mean the board would no longer recommend approving the public financing for the project.
“Well, the board is not comfortable with a recommendation that would have an adverse impact on school funding. So, either they would have to find a way to bridge that gap, they being the developer, would have to bridge that gap, or we would have to go back to the drawing board,” Cole said.
In an emailed statement, Sagamore brushed aside concerns about the bill not passing and possibly disrupting public financing for their project.
“Maryland House bill 285 has been introduced by Delegate McIntosh and Senator McFadden to fix the current State education funding formula. The bill has passed the Maryland House of Delegates 135–3 earlier this month, and is expected to pass the Senate and become law this year. At this point, the bill seems to be on track for approval.”
Sagamore, which is backed by Under Armour CEO Kevin Plank, wants to revitalize a roughly 260-acre, underused industrial area into a mixed-use project expected to cost $5.5 billion, with $4.39 billion in private investment. Under Armour also intends to independently build its global headquarters at the site. The project would also provide acres of waterfront park.
Sagamore says that the public financing is needed to build out public infrastructure. The bonds to finance that work will be paid off using increased property taxes in the special tax increment financing district, taxes that are borne only by the development properties therein.
None of the tax increment financing bonds, Sagamore says, will be used to finance infrastructure work at the site of Under Armour headquarters. But Under Armour’s properties will contribute to paying off the TIF bonds.
The project calls for the development of between 9 million and 13 million square feet of building that will include office, retail and residential. It also would create 40 acres of public park and green space.
The project’s master plan is under review by the Urban Design & Architecture Review Panel.
Sagamore wants to have the tax increment financing legislation through the City Council by the end of the year. That timeline is being driven by the need for Under Armour to accommodate its growing workforce. Sagarmore would like to begin infrastructure work by 2017 so Under Armour can begin delivering buildings by 2019.