Baltimore’s spending board Wednesday approved issuing $148 million in debt to finance infrastructure work supporting the proposed $5.5 billion Port Covington development.
Baltimore’s Board of Estimates, controlled by Mayor Bernard C. “Jack” Young, who supports the project, approved the first tranche of what could be up to $660 million in tax increment financing for the project over the objections of progressive groups, including the ACLU of Maryland.
“We are pleased with the Board of Estimate’s approval today, and excited about the continued momentum for Port Covington. … We look forward to continuing our work and partnership with our neighboring communities in South Baltimore, as well as with the current and future city administrations and elected officials,” Marc Weller, of lead developer Weller Development Co., said in a statement.
The ACLU protested issuing the debt, arguing a lack of public involvement in the project, that developers are not living up to a pledge to provide affordable housing units, and that the company should be on the hook financially should the development collapse.
To the contrary, the developer’s representatives, including residents from surrounding neighborhoods including Cherry Hill said. They pointed out numerous public hearings on the project and the City Council bill approving tax increment financing as evidence of public involvement in the project.
While Sagamore Development Co., which initially struck the deal with the city for the financing, is no longer the lead developer, according to the project’s supporters, it remains the joint-owner of the venture with Goldman Sachs Urban Investment Group, operating as Baltimore Urban Revitalization LLC.
The tax increment financing bonds, however, will be issued by the Maryland Economic Development Corporation. Baltimore, if all goes as planned, will repay that debt with property taxes generated from the development.
The Maryland Economic Development Corp. is an instrumentality created by the Maryland General Assembly 35 years ago with real estate development and bond issuance powers. The entity has issued $5.4 billion in bonds and conduit financing for 172 projects, according to the state.
Tax increment financing, often referred to as TIF, is a development tool envisioned as a way to encourage investment in economically distressed areas by providing financing for public infrastructure work needed at a development site.
The process works by a city creating a special tax district covering a development site. Then a government entity issues bonds paying for the infrastructure work in that district. If all goes as anticipated the debt is repaid via increased property tax revenues stemming from new development.
Critics of the tool argue the development attracts residents who increase demand for city services, such as schools, trash collection and police. But the property taxes from the development instead repay debt instead of covering costs of increased demand for public services.
A large contingent of activists in the city opposed the proposal to use tax increment financing to overhaul Port Covington, a 235-acre slab of underutilized industrial property along the Patapsco River.
On the other hand, supporters of using public financing for the project argued public dollars represented a fraction of the project’s cost, and in turn leveraged $4.4 billion in private investment. Once the debt is repaid, according to supporters, the boosted tax revenues will raise city revenues.
Last spring Weller Development Co. celebrated the ceremonial start of construction on the latest round of building at Port Covington.
That first portion of construction includes the 273,000-square-foot mixed-use Rye Street Market, which features a 45,000-square-foot market space with 228,000 square feet of office space.
When “Chapter 1” of construction is finished, Weller Development’s plans call for 912 residential units, 293,000 square feet of retail space, 1.95 million square feet of office space, and 165,000 square feet of hotel space in that portion of construction.
The development team secured financing and appeased many of its initial critics by signing community benefits agreements with the neighborhoods surrounding the development as well as a separate citywide pact.
Those deals direct millions of dollars to surrounding communities for neighborhood projects, including pledges to meet local hiring goals and to contract with minority- and women-owned businesses to build the project.
Goldman Sachs Urban Investment Group in 2017 said it would invest $250 million in the project. The massive redevelopment also received a boost when it was granted status as an opportunity zone. The federal program allows for investors to reinvest capital gains in return for paying lower taxes on that income.
Plans for the peninsula also include Under Armour independently building a global headquarters at Port Covington. Under Armour founder and former CEO Kevin Plank remains a major investor in the project through Sagamore Development Co.