Downtown developers in line for the new city tax break
Here are some of the downtown office buildings that will benefit from the tax abatement program passed by the City Council last night.
Above: With plants left behind by former tenants, the neglected Art Deco building at 301 North Charles Street is due for a facelift and conversion into apartments.
With the City Council voting overwhelmingly yesterday to award generous tax credits to down-at-the-heels office buildings rehabbed into upscale apartments – what developers and developments are likely to benefit from the program?
The city won’t begin the new tax regime for another 30 days, at which time projects designated as LEED Silver (a pretty low bar for “green” construction) will qualify for 100% tax abatements for two years, followed by reductions of 80% to 20% during years 3 through 15, when the program ends.
Only one Council member voted against the plan at last night’s meeting. Mary Pat Clarke called the 15-year period for the tax break “ridiculous” when the city is struggling to pay for basic services.
“How can we afford to give up all these tax revenues when we are in such a crisis,” she asked in an interview. She also faulted the program for not providing for affordable housing in return for the tax breaks.
The rest of the Council ratified the plan, which has been vigorously pushed by Downtown Partnership and other business interests as the best way to reduce the glut of Class B and C office space in the central city, much of it now vacant or underutilized.
The city already has in place many other tax breaks for downtown property reconstruction. These include PILOTs (payment in lieu of taxes), Historic Preservation and Renovation Tax Credits, Affordable Housing Redevelopment Credits, Enterprise Zone (“EZ”) Credits, Federal Historic Tax Credits, New Markets Tax Credits and Low-Income Housing Tax Credits.
Kirby Fowler, president of Downtown Partnership, said the new tax credit “creates a clear and non-negotiable incentive for developers and property owners” to modernize, and minimizes the amount of individual negotiations and legislation that was needed to get assistance in the past.
The new program allows developers to use “EZ” credits in conjunction with the new tax program, which the city rather obscurely calls the “High Performance Market-Rate Rental Housing Tax Credit.”
New Apartment Construction Included
In addition to old office buildings, new apartment construction downtown and in select neighborhoods is eligible for the “high performance” tax credits.
10 Light Street, a downtown fixture, is slated for apartment conversion. (Photo by Mark Reutter)
This means that whether the Mechanic Theatre is recycled or demolished (with the latter being the most likely scenario), developer Howard S. Brown will qualify for the new tax break.
Brown is proposing between 476 and 600 apartment units in two towers on the site of the now-vacant theater at Baltimore and Charles streets.
The city estimates that developers will pay 57% less in property taxes over 15 years, which will result in many millions of dollars in savings for Brown – especially when coupled with “EZ” credits, that cut in half the property taxes on improvements for five years, with a sliding scale of reductions for the following five years.
Along with Brown’s Mechanic Theatre proposal, here are some other projects currently in the pipeline that are eligible for the new tax abatement program:
10 Light Street. Metropolitan Partnership Ltd. purchased the strappling Art Deco skyscraper from the Bank of America last fall for $6 million. The Virginia-based group wants to start converting the building to 445 apartments as soon as Miles & Stockbridge, the last major tenant, leaves later this month. The new owners were active supporters of the City Council legislation.
301 North Charles Street. Another Art Deco masterpiece, built in 1930 and vacant for many years, was purchased last November by PMC Property Group for $3.4 million. The Philadelphia group wants to convert the building into 90 apartment units.
The former USF&G headquarters building on South Calvert Street, now owned by the city, is ripe for redevelopment. (Photo by Mark Reutter)
26-36 South Calvert Street and 117 Water Street. This group of buildings, featuring the original headquarters of USF&G, also has been vacant for years. The city spent $2.76 million acquiring the properties, according to state land records. The buildings were to be torn down to make way for Mark Sapperstein’s “Hyatt at City Center” project. Last fall, the city entered negotiations with PMC Property Group to convert the buildings into 140 apartments and 30,000 square feet of ground retail. PMC originally planned to use historic tax credits to help underwrite the project.
300 Cathedral Street. This historic brick building, formerly known as the Odd Fellows Hall, was purchased for $1.1 million last September by Washington, D.C.’s Broadwater Capital, which is currently constructing 59 upscale apartments.
520 Park Avenue. The Time Group wants to convert the former furniture showroom and warehouse of Hochschild, Kohn & Co. into 171 market-rate apartments. The Owings Mills group has an interest in various apartment buildings in the downtown, including the Severn and 611 Park Avenue. Its development director, Dominic Wiker, strongly supported the new tax credit in a letter to the City Council last month.