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BDC proposes PILOT tax break for Liberty Street residential tower

Demand for housing is "virtually infinite" on the Westside, says a city official. But to build it – that takes tax credits and other subsidies.

liberty park 1

The facades of these two historic buildings on Park Ave. would be retained as part of the proposed Liberty Park tower.

Photo by: Mark Reutter

The Baltimore Development Corp. recommended this morning a tax break for a proposed 14-story residential tower on a derelict stretch of the city’s struggling Westside adjacent to the “Superblock” project.

The non-profit corporation’s board, which provides the city with economic development help, closed its meeting to the public and media to discuss the mechanics of a payment in lieu of taxes, or PILOT, to developers Anthony Waddell and Christopher Harrison, trading under Liberty Park Redevelopment LP.

The amount of the tax break – said to be privileged information by BDC president M.J. “Jay” Brodie – will be forwarded with other information to Mayor Stephanie Rawlings-Blake for review. The mayor’s chief development advisor, Kaliope Parthemos, attended today’s meeting.

Superblock Tax Break

The PILOT proposal comes on the heels of another PILOT submitted by Rawlings-Blake to the City Council on Monday. This would give the developers of Superblock an estimated $35 million in property tax relief over 20 years.

Today’s proposal involves both a smaller piece of land and smaller development cost, roughly $20 million for a 92-unit apartment tower, according to Brodie.

Typically under a PILOT, a developer pays as little as 5% of the assessed value of the improved property for a period of 10 to 20 years. Brodie said the recommended Liberty Park PILOT would last 20 years.

“Virtually Infinite” Demand

Brodie said the PILOT was needed to make the economics of the proposal work and is part of the BDC’s and Rawlings-Blake’s goal of turning the Westside into an urban neighborhood – “and getting more population in Baltimore.”

He quoted Paul Graziano, city housing commissioner and member of the BDC board, as saying the residential demand for the Westside “is virtually infinite.”

He said that 95% of the lofts and residential units in the neighborhood are currently occupied.

However, to get the supply of housing equal to this demand requires various tax subsidies, according to Brodie and the mayor’s office.

Looking north at Fayette, the four properties on Liberty Street would be demolished, while the yellow building would be retained. (Photo by Mark Reutter)

Looking north at Fayette, the four properties on Liberty Street would be demolished. The yellow building would be retained. (Photo by Mark Reutter)

In addition to the proposed PILOT tax break, the developers are eligible for “EZ” (Enterprise Zone) tax credits. These credits would reduce property taxes by 50% for five years, then add 10% increases until terminating after 10 years.

Brodie said the developers are also seeking public assistance to purchase the five city-owned properties on the site (102, 104 and 106 North Liberty St. and 142 and 144 W. Fayette St.).

The appraised value of the properties are $830,000, Brodie said, and the developers propose a purchase money mortgage from the city to complete the sale.

Needs Historic Approval

The developers want to demolish four of these properties “because they have really impossibly small footprints,” said BDC economic development coordinator John Thompson.

The facade of 144 W. Fayette St. (at the corner of Park Ave.) would be retained, as well as an adjoining building on Park Ave. owned by Health Care for the Homeless.

The residential tower would include 20% affordable housing, and the developers are applying for federal and state tax credits available for low-income housing. The group is also seeking historic tax credits, Brodie said.

The project needs a stamp of approval by the Maryland Historical Trust, which has jurisdiction over the preservation of buildings on the Westside. The city-owned buildings are currently classified as “contributing” to the historic integrity of the area.

Two prior plans to redevelop this triangular-shaped block bounded by Liberty St., Fayette St., Park Ave., and Marion St. have failed.

The proposal by Liberty Park Redevelopment was the only response the city received to its 2011 RFP (Request for Proposals) to redevelop the site.

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  • Unellu

    True to color and consistent.  The BDC is at cross purposes with the ordinary folks of Baltimore–visions don’t coincide and there is so much dissonance and cross talk because people see the BDC as arrogant, exclusive, imperious and impervious to suggestions that will keep the city from the greed and schemes of big developers.  The BDC , on the other hand, probably sees the people as ill informed and impractical. 

    Many in the city want development that is quaint, historic, quixotic, small and slow–the BDC , on the other hand, is pursuing development that is enormous, fast, furious, radical and commercial.  In the process the BDC and the city have marginalized or eliminated small businesses, ethnic stores and many other unique Baltimore landmarks that gave the city its character in the past.

     The Brew presents an ongoing motif about urban development, as it is happening in Baltimore.  No different from anything in many other places.  In Myanmar the horrible military leaders developed a whole megalopolis for themselves called Naypiydaw–the road to Naypiydaw is empty.  China has been building cities at a frenetic pace just to prove the power of growth.  It expands its communist chest and says, “Bravo!” to capitalism– all in the same contradictory breath. 

    China’s new cities rise like ghosts from the landscape, their highrises empty, their malls lifeless and their public buildings testaments to inactivity.  China has been building 10 new cities a year and the bubble is cracking as are the new cities–some of them already in a state of decay. 

    UAE is the same way.  It hired slave labor, impounding the passports of new arrivals from India and Pakistan, and it built luxury hotels and apartments galore for Westerners, who fled during the deep recession, that has besieged the developed world.  The luxury hotels are now decrepit and their roofs are leaking–their fixtures are falling apart.

    How is all this relevant to Baltimore?  The hubris of money, and the puffery of large constructions or big powerful architectural statements don’t cut it when it comes to urban development.  It is the people who make a city tick.  People won’t come just because the big brass have built offices, box retails and apartment complexes.  The people will come for their neighbors and friends who run shops, restaurants and bars.  The people will come for the intimacy, the fun and the frolic, the personal touch, the conversations and the ongoing relationships inherent in the tiny nooks and corners that lend a city its charm. Politicians and developers inhabit an alternate dystopic vision for the urban areas they control together.  That dystopia is sowing dead or dying cities across the world.       
        

    • http://twitter.com/MairZdoatz Mair

      Most visitors to NOLA go to see The French Quarter….not the over-sized downtown buildings. But there are always two sides. Maybe the BDC would go to look at the newer downtown. Whatever,…as long as their trip is on their dime.

  • http://twitter.com/Siamese1971 Siamese1971

    Would it be cheaper for the city to raze the lots themselves and then sell it to the developers with no additional tax breaks?

  • Anonymous

    From B Brew: a great question that will require an expert to answer, given the morass of rules and regs. My understanding is that affordable rent is based on a % of the family’s income. The city simply requires that large developments include such housing. Liberty Park proposes 18 (of 92) units as a low-income set-aside, and they’ll get tax and other $ breaks for their beneficence. -MR

    • http://twitter.com/MairZdoatz Mair

      I may have this wrong but to me it’s sounding like I pay what it is deemed I can afford and the taxpayers kick in the difference. Similar to section 8?

  • Unellu

    The affordable rents are not usually more than 900 dollars per month.  Not easy to get into these units.  Usually an average rent of 500 to 600 dollars.    

  • http://profiles.google.com/jamiehunt344 James Hunt

    Unella wrote: “How is all this relevant to Baltimore?  The hubris of money, and the
    puffery of large constructions or big powerful architectural statements
    don’t cut it when it comes to urban development. …”

    +++++++++++++++++++++

    Geez, c’mon … where’s the “hubris” and “puffery” in a  pretty modest 14-story building  — shorter than the 40-year-old twin hotel towers across the street — the base of which would be the facades of the mid-19th and early 20th century buildings on the site? At any rate, the demand for downtown apartments is still pretty strong. A lot of people have figured out that it’s easier to get to work anywhere in the metro region (or DC) from downtown than from anywhere else and appreciate the convenience. This ain’t no Chinese “ghost city,” hon.

  • Unellu

    James Hunt,
    There are ghost parts of Baltimore–several and the reclamation process by the developers, aided by plenty of tax breaks is yet to bear fruit.  I was talking about the BDC and its schemes in general.  Come back and write, when the building is fully occupied, also when you’ve rented one of the units.  Let us know–we’ll be here you “hon”or.

  • TFunkLives

    “The non-profit corporation’s board, which provides the city with
    economic development help, closed its meeting to the public and media to
    discuss the mechanics of a payment in lieu of taxes, or PILOT, to
    developers….”

    Obviously the BDC needs to let residents and media into their meetings; that’s the first step.  If we’re supplying the tax revenue we should have more of a say. 

    But the larger problem that Unellu alludes to is what geographers and anthropologists consider the “production of space versus the construction of place” phenomenon.  In a nut shell: a city, developer, or average joe can produce a space (the physical act of creating it) for an intended purpose.  They could build a park, a highway, a building, etc. but that space can only be turned into/constructed as a place (the cultural act of giving that space meaning, value and specific uses) by the local population.  If the local population isn’t included in the development plans, then there is no way to ever predict if the ‘space’ will ever be turned into a ‘place’.

    So maybe these proposed development products will be constructed as a place in the way that the developers and city officials had planned, but at the same time there’s no way to know for sure.  Unless you ask the residents what they want to see there the most, what places are missing in the space that’s available.  Maybe some will say a high rise, but some might say a community rec center, some might say shopping centers but others might say local businesses. 

    So should the city be sponsoring these big ticket ideas that don’t have the residents’ approval or should they just fix the over all tax system so that local peoples can (re)construct the blighted areas in a more natural/local (less forced/external) manner?  I think the answer is obvious, thus the BDC HAS to keep the media and taxpayers out of their meetings.

    • Demonseed

      Let the public in on BDC meetings? Seriously? Based on some of the comments here that seems like a bad idea. Some folks seem to like the sound of their own voice just a little too much.

  • Tom Kiefaber

    Another groundhogday account of M. J. Brodie, the lame duck president of the BDC, & his desperation to salvage a dismal 15 year BDC reign of failure. Brodie’s determined to ram though his discredited, top down, Westside gentrification efforts, the biggest fiasco of his career, by crook or by crook. 
    During Brodie’s entire tenure at the BDC there’s never been a preservation community professional permitted on the BDC board to represent an enlightened redevelopment philosophy that enhances and preserves our city’s irreplaceable historic structures. They’re our unique  assets that we still possess in one of America’s most historic cities. Brodie’s BDC back-room  *club* simply do not “get” what the rest of the nation realized years ago, that enlightened and progressive adaptive reuse, historic preservation is real economic development of the best kind.It’s an established, national, best practices reality that would preserve what makes Baltimore unique, and benefit the citizens and our local economy more, in the short and long run, rather than the discredited, top down, big-box-bulldozer approach the deep pocket, crony developers prefer.  

  • http://profiles.google.com/jamiehunt344 James Hunt

    TFunkLives wrote: ” … So should the city be sponsoring these big ticket ideas that don’t have the residents’ approval or should they just fix the over all tax system so that local peoples can (re)construct the blighted areas in a more natural/local (less forced/external) manner? I think the answer is obvious, thus the BDC HAS to keep the media and taxpayers out of their meetings. …”

    +++++++++++++++++++++++++

    (1) The BDC holds closed meetings so they can review and comment on developers’ proprietary information _on behalf of_ the city and its taxpayers. (2) Fixing the tax system would be wonderful, but it can’t be done without addressing the expense side of the budget, which is primarily driven by the number of employees and their health and pension costs. Cut away. The West Side projects do provide the city with revenue through taxes other than property taxes. If they’re not built, they provide nothing. (3) Local people such as Betty Hyatt (Washington Hill) and Ed Rutkowski (Patterson Park) have led the revitalization of neighborhoods that were teetering on the edge of blight, but no locals have taken on a seriously blighted neighborhood without a lot of help from the city (Otterbein is one example of a partnership between locals and government … but that once-forlorn neighborhood sits between outstanding transportation links and a world-renowned redevelopment project.)

  • Ktrueheart

    Baltimore City’s “Inclusionary Housing Law” states that developers receiving incentives from City taxpayers will make 20% of the new units “Affordable”.  Affordable is based on the area mean income.  Often this requirement is waived by the Housing Commissioner, who has sole discretion in making the final decision, when/if a developer asks for a waiver.  So let’s see if this really happens????

  • Guest

    This is more evidence that the BDC operates under the principle that real estate supply creates demand. The entire city of Baltimore proves them wrong. 

    There is a 97+% occupancy rate for apartments downtown.  Rents should be going up, making it profitable for investors to add capacity without subsidies.  They might not add capacity exactly where and how the BDC wants them to, but it’s a free country (unless you’re a developer in Baltimore).  It would be foolish to subsidize the construction of new apartments if it’s going to happen anyway.

    On the other hand, if there is not enough demand to fill existing capacity, then this new building will just poach residents from other buildings.  That’s a real risk when you continuously subsidize construction in an overbuilt city with declining population.  So we’ll have a shiny new building receiving tax breaks, and fully taxpaying properties taking a step closer to vacancy.

    Either way, the subsidies are a bad idea (again).  They will almost certainly result in a net tax loss to the city.  Stop the construction subsidies.  Let the free market work already.

  • Guest

    Reading this article again, it appears that they are saying that they can’t raise rents by enough to justify the cost of new construction.  In other words, they use subsidies to keep rents low.  If that’s the case, then the “tax breaks” are effectively government transfer payments to renters.

    Why on earth should the people who own property in this city be taxed to provide handouts to renters?  It doesn’t make any sense, unless your goal is to create more business for local apartment builders.  To get the city government to sign off on something like this, local builders would have to have access to some sort of development corporation that…  oh, now I get it.

  • Peter Fillat

    60% of AMI (adjusted median income) is approximately $54k/yr for a family and $35k/yr for a single person.  Thats what will qualify for the M on Madison. (currently under construction at the corner of Madison and Howard).

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