Feedback

Developer seeks $41 million in tax breaks for new Exelon building

BDC acts on Questar's request for a PILOT to build downtown at former McCormick spice site.

January 26, 2012 at 1:04 pm 23

mc cormick spice site

The former McCormick spice plant, one block from Harborplace, has been a parking lot since the mid-1980s.

Photo by: Mark Reutter

  • Story Link
  • 23

Categories

A Pikesville developer has requested $41 million in property tax breaks as part of his bid to build a skyscraper for Exelon Corp. at the former McCormick spice plant in the Inner Harbor.

Stephen M. Gorn, principal of Questar Cos., is seeking the tax break through the PILOT (Payment in Lieu of Taxes) program that recently came under criticism by a Baltimore City Council task force as being without clearly defined objectives and giving the appearance of being “developer driven.”

Gorn’s proposal, made last month, appears to have met with a favorable reception by the Rawlings-Blake administration, including the Baltimore Development Corporation (BDC) and Kaliope Parthemos, deputy mayor for economic development.

An effort is now underway to gain quick approval of the tax break from the City Council and the Board of Estimates.

This would fly in the face of efforts by Councilman Carl Stokes, chairman of the City Council’s economic development committee, who has called for a moratorium on PILOT and related TIF (Tax Increment Financing) programs until the council has had time to incorporate the recommendations of the task force.

Competing with Four Other Sites

Gorn is seeking the tax abatements to attract Exelon Corp., which promises to build a regional headquarters building in Baltimore as part of its proposed buyout of Constellation Energy.

M.J. “Jay” Brodie, president of the BDC, said the PILOT needs to be acted on quickly because Exelon wants to move into its new space by no later than June 1, 2014. The PILOT tax break would be in effect for 20 years.

Brodie also revealed today that four other downtown sites are being explored by Exelon for the new building.

They are Harbor Point (controlled by John Paterakis’ H&S Properties), 1 Light Street, the Baltimore City Community College building on Marketplace (affiliated with the Cordish Companies), and 300 East Pratt Street, site of the former News-American building.

Jay Brodie, president of the BDC, says the Questar tax break would "need to move quickly" to meet Exelon's move-in date. (Photo by Mark Reutter)

Jay Brodie, president of the BDC, says the Questar tax break would "need to move quickly" to meet Exelon's move-in date. (Photo by Mark Reutter)

None of these developers are presently seeking PILOTS for the Exelon project.

However, 1 Light Street, the BCCC property and Harbor Point are in enterprise zones, which reduces property taxes on new construction over a 10-year period, Brodie said.

BDC Goes into Closed Session

At a meeting of BDC’s project review committee last week, the abatement was reviewed, according to committee minutes open to the public.

In attendance at the meeting were three top officials from the Rawlings-Blake administration – Parthemos, her assistant Colin Tarbert and Paul Graziano, Baltimore housing commissioner.

This morning the PILOT proposal went before the BDC’s board of directors at its monthly meeting.

Before discussing the details of the proposal, the BDC voted to close the meeting to the public and media, saying confidential information would be revealed.

Only one member of the public and media was in attendance (this correspondent).

The proposed building on the former McCormick lot would include six floors of parking, a seventh floor devoted to an Exelon trading floor, about eight more stories for Exelon offices, and an apartment tower.

The building would compromise 711,000 square feet, of which 394,000 square feet would be occupied by Exelon, making it one of the biggest structures in central Baltimore.

Tax Breaks  to be Passed Through to Exelon

Under a PILOT, a developer pays taxes on the original land value of the property, plus 5% of the assessed value of the improved property.

According to BDC records, Gorn estimates that the skyscraper would cost $264 million in addition to the land, which an affiliated company, 414 Light Street Associates LLC, obtained a year ago in a foreclosure auction for $11.5 million.

The PILOT would require the Gorn group to pay taxes on the raw land, but would rebate up to 95% of property taxes on the new building. This would include the parking garage, Exelon offices and the apartment units. Only a small portion of the structure reserved for retail space (13,000 square feet) would be taxed at the city’s regular rate.

Brodie said today that Exelon has specified in its request for proposals from developers that all city and state tax breaks on its new building “must be passed along” to the company.

New Building Needed Amid High Vacancy?

Exelon’s plans for a new building have disturbed some downtown business interests, which have questioned its need when nearly 25% of downtown Baltimore’s office space is vacant. (A vacancy rate of under 10%  is considered healthy.)

Exelon plans to vacate Constellation Energy’s current headquarters at 750 East Pratt St. and the former Candler Building.

The reasoning behind this decision, Brodie said today, was that the company wants at least 30,000 square feet of open space for an energy trading floor.

The McCormick site has been used as a parking lot since the mid-1980s, when the historic spice plant was torn down.

ARCWheeler, a Philadelphia-based developer, planned to build a 59-story  tower – Baltimore’s tallest – on the site, but the plan fell through and the land was foreclosed by a bank.

Last January the two-acre lot was sold to the Gorn/Questar group, which specializes in building suburban residential apartments, such as Greenwich Place at Town Center in Owings Mills and Concord Park at Russett in Laurel.
————————————————————
CHECKLIST of some other Brew articles on developers and tax breaks:

Cordish Co. seeks $3 million in rent relief for Inner Harbor properties (6/23/11)
Cordish funneled cash to mayor’s campaign (8/30/11)
Tax breaks for developers – economic development or corporate welfare? (7/14/11)
A taxing tale of two Baltimore hotels (11/15/11)
Subsidies to developers should be better monitored, task force says (11/9/11)
Behind the dry debate about tax breaks: juicy political maneuvering (11/11/11)
City pushes ahead with Paterakis Harbor Point (11/23/11)
“We cannot support another subsidy,” BUILD protesters chant (11/14/11)
City grants third extension to “Superblock” (12/20/11)
—————————————————–

  • http://twitter.com/MairZdoatz Mair

    I really could use a pilot and ‘quickly’ would be nice.  Multi-year break would be a big budget helper.

  • Ktrueheart

    I am hopeful that 2012 will bring increased transparency from our Mayor Rawlings-Blake.  When this item comes before the Board of Estimates, Mr. Brodie should be required to give a project overview briefing prior to the matter being considered which tells US how we benefit … TRANSPARENCY SRB! 

  • westside resident

    I didn’t realize the BDC was on this developer’s payroll and had to accommodate them ASAP. Isn’t there s a process in place that would ensure a transparent review of the specs and weigh the costs and benefits of this particular project – or, is it as Councilman Stokes argues – simply another example of the BDC throwing money at a project as quickly as possible in order to spur any (as opposed to sustainable, practical and desired) development in the city?

  • http://profile.yahoo.com/NEZNWUIT2KTQCSQ4S64EHHI4ZE Brian

    Offer developer A tax breaks and you’ll be hearing from developer B, C, D…. It’s never ending. Somehow I fear that this will office project will evolve into another convention hotel.

  • Bmorepanic

    Exelon is required to locate in Baltimore City, but yet we have to subsidize their operation by $40 million dollars?  I don’t get why we would even consider it.  Let them take the enterprise zone credit.  It’ll cost us less.

  • Gerald Neily

    Kirby Fowler makes the rationale for this very clear in his recent op/ed piece. The worst case scenario would be for Exelon to move out of downtown, exacerbating its chronic vacancy problem. Fowler talks of other advantages such as restaurants and networking, but obviously he knows these are insufficient in themselves. So as he recommends, the city must therefore give Exelon a massive subsidy to avoid putting its jobs and economic muscle elsewhere (such as Harbor Point, Port Covington or Westport). Downtown must succeed over the rest of the city and region. This is the latest application of the “Two Baltimores” model which has operated for about half a century and has led to the city’s current status.

    • Bmorepanic

      Those are also part of Baltimore City.  I’m thinking the point in Harbor Point is to exacerbate the vacancy problem – umm, in downtown, where its located.  Port Covington, in comparison, is merely extremely urban.  

      Westport has its tower of power from burning trash. Wikipedia says it shoots mercury and other pollutants all over,  adding that zest of real danger – good environment for traders.  

      Honestly, the city should re-evaluate how much money it can lose in that few blocks.  We’re standing to lose $200 mil on the old convention center, $500 mil on the new one, $300 mil on dat hotel.  And I haven’t even started on the cost of the vig.  Hasn’t the billion dollar block seen enough taxpayer funding?  

  • Ktrueheart

    Making a PROGRESSIVE recommendation to our Mayor … Establish a Citizens Benefit Corporation (CBC) tell all businesses contemplating coming to Baltimore they must first establish a citizens benefit agreement before they step foot in Mr. Brody’s office … no exceptions.  Citizens must be treated/respected as the first priority of this government!!!

  • Unellu

    This is no more than egomania on the part of Exelon.  Energy trading floor my left foot.  That is so reminiscent of ENRON–do you remember the rolling black outs in California when Enron was involved in the energy generation, energy distribution and energy trading business–all three?  Enron devised a false demand versus supply discrepancy, brought about a power crisis and benefited on the energy trading side by manipulating the energy supply side.  30,000 sq.feet for trading in energy stocks when people have no food to eat and people have no jobs! 

    What are the jobs that Exelon will create in Baltimore–more traders sitting on their butts and wheeling and dealing in moving money from here to there.  These finance jobs are not real jobs– like shadow boxing and unethical to boot in my opinion.  And what does the city plan to do?  It plans to genuflect to the overlords of Maryland energy, at the behest of the BDC.   It plans to say, “Welcome masters!  We’ll find you those shiny new sq.feet, you cannot exist without.  We’ll give the guy who will construct those sq.feet a big fat tax break and pass that on to you Exelon.” 

    Gorn gets this piece of property for a song and a dance.  He then squeezes all he can from the city in tax breaks through the inane PILOT–a misnomer to say the least–payment in lieu of taxes.  It should be “pittance in lieu of taxes”.  How they pull wool over the eyes of the public!  I understand the Obama Administration hired wordsmiths to sell their health care law to others.  The Affordable Care Act should be more accurately called the Unaffordable Care Act–but you see the potency of the former versus the latter–illusion versus truth.  Similarly the euphemism “medical home”.  What fool would want a home in his doctor’s office, but some canny advert guy told Obama and Co. that the word home will conjure up images of mama and apple pie and patients would readily sign away their choice in health care if that lack of choice is sold to them as a parking space in their very own medical home.  Ditto for PILOT–a euphemism.  It sounds like a PILOT STUDY–not something written in stone but an initial experiment to see if something would work but in matter of fact it IS written in stone–once EXELON signs this deal, it is all very legal. There is no turning the clock back. 

    Why can’t Exelon work out of an old doddering building?  Why does it need so many sq.feet?  These guys go to the bathroom like we all do–they get sick like we do and they die like we do.  The guys who are in the field climbing poles after tornadoes and hurricanes, who risk their lives, so we can get our electricity back can’t park their exhausted bodies in this obscenely lavish Exelon space for a minute, I bet. 

    I just read about Building 20 at MIT–it housed some of the most brilliant minds in this country.  It was cold and rickety, it was simple and spare and yet, out of that building came some of the most innovative research in science and technology.  Exelon’s traders can work out of garages and do their jobs well if they set their mind to it.  The absolute gall and arrogance of these companies!  Their audacity lies in drawing blood from every jurisdiction by playing hardball.  And our collective misfortune lies in a supine political class that panders to the autocratic whim of these companies. 

    We have no real studies that show us how many good jobs are created by these socially unconscious companies for whom profit is sole god.  PILOT should be scrapped.  BDC should throw its doors open to public input.  It is a public body subject to Maryland law, I hope.  Why all the cloak and dagger shenanigans and why the hurry with the PILOT?  Jay Brodie, President of BDC, presides over opaque proceedings and “PILOTS” the tax status of Maryland to to an ethos of extorting from the poor and middle class while catering to the fat cats.  Exelon will move its fat cat butt somewhere else–is that the fear?  Let it.  No big loss.  Let some other jurisdiction lose out big in tax revenues and become the repository of an empty profession called “energy trading”.        

    • Curtis

      Unellu, my unsolicited advice to you: deal with the world as it is, not as you’d like it to be.

      Your questions like “Why can’t they work out of a doddering building?  Why do they need so many square feet?” and statements like “trader jobs aren’t real jobs”  and “at MIT they create jobs in a rickety building” are sentences motivated by anger and sentiment without an understanding of what sophisticated business need and expect.    

      The country’s conversation, including our President’s main focus, has shifted towards investment and raising standards.  Jump aboard!  You can romanticize and next say something like “my grandpa didn’t need a bathroom, he had an outhouse” but that would be your logic irreflective of other people’s modern day preferences.   

      FYI. Traders at energy companies, amongst other responsibilities, obtain the fuels and commodities around the country and globe necessary for Exelon to create and provide energy.  It’s not voodoo.  They are necessary jobs, and they may as well be in Baltimore.  

  • Curtis

    Kirby Fowler’s article in the Baltimore Sun, as well as other reports, confirm that Exelon will move.  They need more space.  The question is where?  Steering them to a location that benefits the city and local businesses is strategic and practical.    

    Economist Anirban Basu loves asking the question:  ”when was the last time a Fortune 500 company made a sizable investment in new jobs in the Baltimore metropolitan area?”  He makes the point that at first it makes no sense, given location and an educated workforce, but dig a little further and you see higher taxes, more bureaucracy, and a general culture that puts Maryland in the bottom 20 of “best states to do business.”

    There is currently zero (0) square feet of commercial office space under construction in Baltimore.  We’re stuck with stagnant office space absorption and a construction industry workforce that drives south to DC for work.  If a company wants to grow and invest in downtown Baltimore, let’s roll out the red carpet.  
      

      

  • Curtis

    Kirby Fowler’s article in the Baltimore Sun, as well as other reports, confirm that Exelon will move.  They need more space.  The question is where?  Steering them to a location that benefits the city and local businesses is strategic and practical.    

    Economist Anirban Basu loves asking the question:  ”when was the last time a Fortune 500 company made a sizable investment in new jobs in the Baltimore metropolitan area?”  He makes the point that at first it makes no sense, given location and an educated workforce, but dig a little further and you see higher taxes, more bureaucracy, and a general culture that puts Maryland in the bottom 20 of “best states to do business.”

    There is currently zero (0) square feet of commercial office space under construction in Baltimore.  We’re stuck with stagnant office space absorption and a construction industry workforce that drives south to DC for work.  If a company wants to grow and invest in downtown Baltimore, let’s roll out the red carpet.  
      

      

  • Unellu

    Curtis,
    The conversation, also occurring in this country, are about the jobs in finance.  How real are these jobs?  How much do they contribute to society as opposed to taking from society and hoarding for a handful of folks?  America has created but a few manufacturing jobs in a long while. The same President you speak of has been, from to time, concerned about wild speculation in the oil  market and manipulation of prices, by all parties involved.  You have not said a thing about Enron, Curtis.  This is a business that went to pot and folded.  Its best top folks went to jail.  For nothing?  They were clearly involved in speculating in the oil market when they were also involved in storing, producing and supplying energy.  There is immense conflict of interest in how these energy companies operate.  Enron failed because people refused to deal with the energy world as it was then, instead they demanded more transparency, more regulation and more accountability from companies like Enron.  Have we not learned from the operations of Enron and how it laughed all the way to the bank before it cried all the way to jail, that these energy companies are full of sham artists who demand luxuries from every jurisdiction and use their blackmailing clout–for that is all it is–blackmailing–to get what they want–giving little in return.  Your disparagement of my romantic standards does not dishearten me Curtis.  People like you cannot see the forest for the trees.  I may not know all the mysteries of the oil futures market but I do realize that oil trading consists of buying cheap and selling high and having enough to sell etc etc–that it is considered an integral part of the energy sector–that  Exelon cannot exist without it.  Yet, it is no more than gambling.  And it is no societal good.  It needs to be regulated.  It needs to be watched.  It needs to be transparent and the regulators and the politicians have no business rolling over and dying for the folks who do this low class business with high brow pretensions when they–the politicians– do little to help teachers, engineers or scientists.  And I assert again,  Exelon does not need obscenely large and luxurious digs to carry on its low brow activities and give it the sheen of aristocracy.  The aristocrat class rides all over our heads Curtis, because people like you insist, with an air of “pragmatic ” superiority, that people like me just don’t get it.  My grandpa indeed didn’t need a bathroom– he had an outhouse.  And if things keep going the way they are going 99 % of the world will be living in outhouses (as it already is, I believe–squalor is the ruler of the day)  while the ilk of Emperor Exelon will be living in palaces built by the political class and ceded to them by the practical class.  I’ll keep my idealism and you keep your pragmatism, thank you.          

    • Curtis

      Unellu, we made our points and I respect your concerns on the 99%.  We both agree on need for energy regulation and oversight.  California was a disaster 10 years because people swallowed the pill of no regulation and it took years to figure-out what went wrong.     

      On this PILOT case, I only want to add: 1) the tentative future Exelon site is currently a surface parking lot.  Even with a PILOT and without knowing details, I bet the city will still collect much more money over 5+ years than it currently is.  2) This proposal is better than the Marriot and Legg Mason deals because it brings new high paying jobs (regardless of what you think of them) and doesn’t push jobs out of the downtown. 3) Finance jobs will always be relevant and it’s not fair to lump them all together.  I’m irked by the speculators and the bailouts, but finance is necessary to buy a house, run a business, and plan for retirement.      

  • Richard

    The problem here is that the city needs tax revenue badly. Why should City Hall make it easier for anyone to get away with paying LESS in taxes. You have a business that is committed to expanding in the city. Did Exelon say that their decision to build a new HQ is contingent upon a tax break for a developer? No. They will expand here regardless. Our city needs that tax revenue desperately. One of the reasons those of us who live in the city pay such ridiculous property taxes is because big developers don’t contribute their fair share. Working class and middle class homeowners have to make up the difference. So, in my opinion, all of this stinks. And the Kaliope Parthemos rings a bell. Isn’t she the one who lives in Baltimore County and drives around in a new Mercedes? Disgusting!

    • Curtis

      So wrong, Richard.  Taxes are high because we don’t have enough tax payers.  Taxes are high because we don’t have enough high paying tax payers.  Taxes are high because there aren’t enough jobs.  Taxes are high because the middle class moved out and not enough have moved back to fill the void.  Taxes are high because we don’t have enough private sector investment. 

      A dispraportionate number of articles on developer PILOT’s may have made a mountain out of a mole hill.  This article is about a PILOT for a improvement (aka. MUCH higher assessment) on a surface parking lot for the short term.  The city isn’t writing a fat check and no kids are going to go hungry.    

      • Richard

        So wrong, Curtis. What are you? Staff at BDC? An “Economic Development Professional”, maybe? So, a $41 million dollar tax break really isn’t a $41 million dollar tax break? The situation here is pretty simple – a tax burden is being shifted from the entity that would normally pay it (the developer) to the City (the taxpayer). $41 million that could be used by the City (the taxpayer) is being -essentially – gifted to the developer. This is wrong for a million reasons. If the city wants to reduce tax rates to attract more developers and businesses, fine. But why pick and choose? Why have closed door meetings to decide which politically connected developer gets a gift? You sound like someone with a horse in the race. Any Baltimore City taxpayer knows the real score here.

        • Curtis

          I pay too much in taxes just like you, Richard.  I put my hat in this argument when I realized a company based in Chicago could just as easily have their trading floor there, as opposed to here.  I’m well within the 99%, but I don’t have a chip on my shoulder and I recognize that my house value is depressed not because of the BDC, but because of a fundamental supply and demand problem.  Yes, commercial taxes can offset residential taxes (I totally agree with you, NoVa counties case in point), but it can’t be offset if nothing ever gets built in the first place and the workerbees in society (love them or be jealous of them) live and work elsewhere.  

          I thank Mark and Gerald for giving more info on the planned development and a little history to the McCormick site — I view it as a shame that a site next to the inner harbor is a parking lot and taxed as such.  No doubt, it’s a very busy site and certainly wouldn’t be my first choice if I were czar.  Better streetscape and setbacks will add a level of safety.  With so little public transit options, we’re stuck with the parking ratios we’re dealt.  

                  

        • Curtis

          I pay too much in taxes just like you, Richard.  I put my hat in this argument when I realized a company based in Chicago could just as easily have their trading floor there, as opposed to here.  I’m well within the 99%, but I don’t have a chip on my shoulder and I recognize that my house value is depressed not because of the BDC, but because of a fundamental supply and demand problem.  Yes, commercial taxes can offset residential taxes (I totally agree with you, NoVa counties case in point), but it can’t be offset if nothing ever gets built in the first place and the workerbees in society (love them or be jealous of them) live and work elsewhere.  

          I thank Mark and Gerald for giving more info on the planned development and a little history to the McCormick site — I view it as a shame that a site next to the inner harbor is a parking lot and taxed as such.  No doubt, it’s a very busy site and certainly wouldn’t be my first choice if I were czar.  Better streetscape and setbacks will add a level of safety.  With so little public transit options, we’re stuck with the parking ratios we’re dealt.  

                  

  • Gerald Neily

    The McCormick site is clearly the worst of those cited so far with respect to benefit to downtown. It’s barely downtown anyway. It’s at the intersection of Conway and Light,  downtown’s two most pedestrian hostile streets. It faces the dead wall of the Hyatt garage, the Harbor Court loading area and the back-facing edge of Otterbein.

    It’s about as far from rail transit as possible, and in any event, the proposed six level parking garage indicates they’re not much interested in transit anyway. That’s consistent with most major city developments lately (such as UnderArmour at Tide Point, 25th Street Station, McHenry Row, Canton Crossing, and of course, Harbor East). If transit was really a major factor, Howard and Lexington would not be in the sorry shape it’s in.The bottom line is that the McComick site would not be worth sacrificing all that tax revenue which the city would derive from letting Exelon choose from all potential sites, in or out of downtown, without tax “incentives”.

  • http://www.carfreebaltimore.com/ Mark

    The McCormick spice plant that was demolished on this site, while not as majestic as the Power Plant building on the other side of the harbor, could have been a great adapative reuse project. A dignified, historic mixed use building would have balanced out all the crap that’s been constructed on this part of Light Street since, and would have made a great bookend to the Power Plant building across the water. 

  • Gerald Neily

    My conclusion: Exelon’s best move is out of downtown to WESTPORT. Or somewhere else. To Downtown Partnership, the move is mere damage control. But to the city as a whole, it’s a golden opportunity. Downtown’s vested interest clashes with the city’s interest. The decision on this will reveal who really matters.

    Read more on my blog:  http://baltimoreinnerspace.blogspot.com

  • Bettygrobinson

    I was under the impression that the powers that be wanted Exelon to come to Baltimore for the money they would bring, not for the money we taxpayers would have to dole out.

The Daily Drip

More of the Daily Drip »

Below the Fold

  • February 16, 2012

    • Checking through and approving the comments on The Brew every hour or two is an odd daily routine, sort of like seining in Chesapeake Bay – you never know what you’re going to come up with. Lately, I thought, our net has been bringing up some particularly cool specimens – intentional and “found” poems and [...]

Twitter

Facebook