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City Council approves tax-break plans for two harborfront developments

Net tax gain: more than $140 million for Harbor Point and Tide Point over 10 years.

harbor point tax dodgers

Todd Dolbin and Marianne Navarro of the Baltimore Development Corp. watch as protesters give mock endorsement of tax breaks last month.

Photo by: Mark Reutter

The City Council voted overwhelmingly last night to approve plans that would make Baltimore’s two biggest waterfront projects eligible for generous tax breaks and tax-financed infrastructure improvements.

The Council voted to restore Harbor Point to the city’s list of Enterprise Zones and to approve a special taxing district for Tide Point, which already has an “EZ” designation reducing its future property taxes.

The twin actions will pave the way for more than $140 million in tax benefits for the developers and the two major corporate tenants at the sites, Exelon and Under Armour. (While technically a preliminary vote, the Council action’s last night is guaranteed to be finalized at its next voting session.)

In both cases, the city has argued that the economic activity stemming from the developments will pay for the loss in property taxes many times over.

Chicago-based Exelon, which purchased Constellation Energy earlier this year, has agreed to be the anchor tenant at the high-rise complex at Harbor Point under development by Michael Beatty and bakery mogul John Paterakis.

Harbor Point is located at the southwest tip of Fells Point. Across the harbor in South Baltimore is Tide Point, headquarters of sports-apparel-maker Under Armour, which will be the main beneficiary of a special taxing district ratified by the Council last night.

The approvals came as no surprise. The Stephanie Rawlings-Blake administration has vigorously pushed for new development to add 10,000 families to Baltimore’s population by 2020 .

The administration engineered the $35 million in tax increment financing, known as TIF, for the expansion of Under Armour at Tide Point.

The project was approved by the Council’s taxation committee even though the share of public funding is more than 20% above the city’s own guideline for financing such project, according to a Department of Finance memo disclosed by The Brew.

Most of the TIF financing will go for a waterfront park and “state-of-the-art” athletic fields adjoining Under Armour’s Tide Point campus rather than for street improvements, a more typical use of TIF financing.

The memo justified the higher ratio of public underwriting by saying the location of a “major corporate headquarters [makes] this project worthy of an exception.”

Last night, the full Council approved the Tide Point arrangement by a unanimous voice vote without discussion.

Restoring Harbor Point’s EZ Credit

The restoration of Harbor Point’s “EZ” tax credit has been more controversial.

Artist's sketch of how the new Exelon building might look at Harbor Point. (Harbor East Development Corp.)

Artist’s sketch of how the new Exelon building might look at Harbor Point. (Harbor East Development Corp.)

Just four months ago, on May 7, the Council removed Harbor Point from “EZ” eligibility because the 27-acre vacant site did not qualify as an economically distressed area, which requires a renew of its status every 10 years.

The removal came because of demographic and income shifts since 2002 that saw the rise of adjacent Harbor East and Fells Point as highly desirable locations, with new housing, restaurants, office towers and luxury hotels.

What’s more, Councilman James B. Kraft, whose district includes Harbor Point, argued that Exelon did not need tax breaks from the city to pay for its new $120 million office tower.

The removal of the EZ designation was met by a vigorous pushback by the Beatty-Paterakis group.

The group appealed to the Baltimore Development Corp. (BDC) to restore the tax break, saying it could not attract tenants to the $1.5 billion complex without the credits, which would translate into lower rents. Like Tide Point, the project also qualifies for TIF financing, but the exact amount of such financing has not yet been determined.

Last month, Kraft came out in favor of expanding the EZ to include Harbor Point, saying the high cost of constructing on the property, the former site of an Allied Chemical factory, necessitated the tax break.

That still left the sticky problem of how to qualify the parcel as an economically disadvantaged community, which requires high poverty and unemployment levels, population loss and “chronic abandonment or demolition of property.”

Finding a Public Housing Project

Todd Dolbin, the BDC’s Enterprise Zone expert, came up with the solution of adding Perkins Homes, a nearby public housing project, to the census tract used to justify the Harbor Point application.

This pushed the unemployment and poverty figures to the level that the BDC believes will make Harbor Point qualify for Enterprise Zone eiligibility under the criteria of the Maryland Department of Business and Economic Development, which administers the EZ program.

The resolution passed the Council last night with the only “no” votes cast by Councilmen Carl Stokes and Nick Mosby, and abstentions from Robert Curran and Mary Pat Clarke.

After the meeting, Stokes called the EZ designation “a sham.”

“The BDC pulled it themselves before they buckled under the pressure. Nothing will accrue to the benefit of the residents of Perkins Homes. They won’t qualify [for tax credits] because Enterprise Zones are only available to commercial businesses and development. It makes a mockery of a program supposed to help impoverished communities,” Stokes said.

The Council approved a special taxing district for expansion of Under Armour's Tide Point headquarters in South Baltimore. (counterkicks.com)

Under Armour’s Tide Point expansion will receive an unusually high ratio of public underwriting. (counterkicks.com)

“Tax Dodger” Protest

During a public hearing on the proposal last month, a group of Occupy protesters wore baseball uniforms emblazoned with the name “Tax Dodgers” in a mock endorsement of the tax break.

Other speakers were critical of the proposed EZ restoration, with activist John Duda saying that of all development projects before the city, Harbor Point needed the least public subsidy given its enviable location on prime harbor property.

According to the BDC, the EZ zone designation will reduce Harbor Point’s property tax bill by $106 million over the 10-year life of the tax credit. The city would directly lose $53 million in tax revenues, with the state reimbursing the city for the other 50% of the revenues.

The BDC estimates that Harbor Point would generate $143 million in revenues over the same period from personal income taxes, real estate taxes, and parking, energy and hotel taxes. The developer also envisions a gain of 5,000 permanent jobs from its proposed mix of new office buildings, high-end residences and at least one upscale hotel.

The Under Armour expansion in South Baltimore would create 615 new jobs when completed in 2021, according to the BDC.

Last night’s vote was on second reader. A third and final vote ratifying the two plans is assured passage at the Council’s next meeting.

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  • krempel

    “Todd Dolbin, the BDC’s Enterprise Zone expert, came up with the solution of adding Perkins Homes, a nearby public housing project, to the Harbor Point application.
    This pushed the unemployment and poverty figures to the level that the BDC believes will qualify for approval by the Maryland Department of Business and Economic Development, which administers the EZ program.”
    whoa whoa whoa whoa.  So…is this bit of political gymnastics only a gimmick, or does this mean the Perkins area is going to see some money because of this development?
    I mean, obviously it’s a gimmick, but is it one that will have any effect on Perkins, or now that it’s on paper that’s where it will stay?

    • Tom R

       Are you kidding me?!  This is the most inaccurate article I’ve ever read.  Perkins Homes were not added into the Enterprise Zone to adjust the unemployment.  Look at the map, it’s not even being included.  Flat out untrue.  Mark Reutter, is not reporting on any type of facts here. 

      • baltimorebrew

        From the Brew: Perkins Homes is not part of the Harbor Point EZ Zone. But you are wrong in implying that it did not play a critical role in the application.

        The BDC included Perkins Homes in census tract data it included as part of Harbor Point’s application for a EZ designation. This in turn increased the unemployment and poverty levels used to justify Harbor Point’s eligibility as supporting a “disadvantaged community.”

        Perkins Homes is essentially a pawn in a statistical game, according to Councilman Carl Stokes, with all the tax benefits accruing to Harbor Point. What’s more, EZ credits are available ONLY to commercial developers, not to Baltimore residents or homeowners. -MR

        • Tom R

          It played no role. Perkins Homes is in the 301, whose demographics are already in the EZ. Patarakis is applying to add the 203 data to the existing zone. It’s very simple… Not a statistical game.

          • Gerald Neily

            Tom and Erintressler, you must now apologize and admit that your accusation against The Brew regarding whether or not Perkins Homes was “included” was wrong. Then Tom, you can start a new argument if you wish as to whether or not this is a “game”.

          • Tom R

            again…Perkins Homes is in the 301, whose demographics are already in the EZ. Patarakis is applying to add the 203 data to the existing zone.  The 301 demographics can’t be added twice if it’s already been in there since the beginning. 

          • Gerald Neily

            That is not what you said the first time. You said: ”
            Are you kidding me?!  This is the most inaccurate article I’ve ever read.  Perkins Homes were not added into the Enterprise Zone to adjust the unemployment.  Look at the map, it’s not even being included.  Flat out untrue.  Mark Reutter, is not reporting on any type of facts here.”

  • Baltimoreplaces

    This is disgusting at so many levels.  Essentially the taxpayers are having to pay for current urban planning because of previous urban planning mistakes.  The tax paying residents of the area are being penalized over and over.  It is bad enough that the city has chosen to densely pack this area with public housing, missions, shelters, rehabs, jails,  but then to cite these as a reason why the tax paying citizens of the area who have been able to fight to keep their neighborhoods some-what stable should now forego sorely needed tax dollars because of wealthy political influence is dirty.

    Stokes in 100% correct!  This is a sham, it is exploitive, and corrupt.  

    Baltimore power protects its own, pacifies the electorate and bleeds the tax payer.

  • Erintressler

    Nobody included Perkins Homes.  This article is not correct at all.

    • baltimorebrew

      See our response to Tom R.

  • Steve

    Is there no legal remedy or barrier to these creditts being given?

    • Kim Trueheart

      Yes! Write the Maryland Department of Business and Economic Development | 401 East Pratt Street | Baltimore | MD | 21202 and tell them to reject the application when BDC submits it in October.

  • Bmorepanic

    Harborpoint is 1.5 billion dollar complex building about 1.8 million sq ft of new space.  It’s receiving  a little over a 1 million per year in tax credits.  

    Buying into the BCD’s “but for” baloney,  the city gave up tax revenue of $106 million and we, as state residents, are directly reimbursing the city for $53 million of that revenue – in other words, we’re paying for it .

    So, this is supposed to help it compete against downtown and/or county rates because it might lower rents by a nickel per square ft per month on rents of $20-$30/sq ft?  Srsly?

  • Kim Trueheart

    The Tax and Finance Committee meeting last week, where most of the members approved this SHAM, was recorded on audio. I’ll be requesting a copy and sharing it for ALL who DO NOT believe the content of this article.  EVERY word written here is true and both the acting BDC President and Mr. Todd Dolbin, the BDC’s Enterprise Zone expert, testified in the open public session how they manipulated the census data to qualify the Paterakis deal … TRUTH!!!
     
    I was there and this deal STINKS beyond belief … Another BDC is Possible Deputy Kaliope Parthemos!

  • Cwals99

    The point here is that none of this Enterprise Zone development meets the classification of Enterprise Zone.  We are not seeing under-served communities being given grants to develop a business district for their community members to become small business owners and hire local, community members in an effort to lift the existing community economically.  That is an Enterprise Zone.  What is happening in Baltimore is fraud. 

    • Matt

      The negative effect Perkins Homes has on the area is immense, the negativity radiates into Harbor East, Fells Point and Little Italy.  Perkins homes is like an abyss, it sucks everything that is good from the surrounding area into it and everyone who lives in the area knows that. It is no wonder why the closer to Perkins you get the more rundown the area becomes. Since Perkins has such a large influence on the area it only makes sense that developers would add those demographics to its proposals.
       
      Every Baltimore city resident knows that that the vibe changes street to street and the Harbor Point area is no different. Walking east from the inner Harbor the first street to get bad is Central Avenue, this is the main street right before running into Perkins Homes. Paterakis would have to be naïve to spend millions developing the streets of Perkins Homes, the developments would be doomed to failure from the get go. Detroit keeps developing areas that are too far from each other, as a result, none of the developments are a success. New development needs to happen close to existing development,  and expand outwards making the surrounding areas better.
       
      The access to harbor point will be via Central Avenue, which is rundown and would likely continue to be run down without the expansion of Harbor Point.  I anticipate that Central Ave. will see expanded development as a byproduct of Harbor Point. In Baltimore you have to improve street by street and the Harbor Point development is helping do that. No matter how you look at it, Harbor Point is drowning out the negative vibes radiating from Perkins Homes which every resident will tell you is a good thing.

      • Gerald Neily

        Perkins Homes is subsidized low income housing. Abyss or not, that means that our society has decided that it is worth spending taxpayers’ dollars for it to be maintained. If one wanted to argue it is not a wise use of those funds, please go ahead, but make the point directly. Harbor Point is also being subsidized because the public sector has decided that it desirable to be subsidized as well. “Developers add those demographics” of Perkins Homes to their proposals simply because they can. If Central Avenue is to see “expanded development as a byproduct”, it will happen due to Harbor East to a greater extent than Harbor Point (and already has to some extent), because Harbor East is actually contiguous with Central Avenue, whereas Harbor Point is not. Harbor Point is a peninsula out in the water where it has the minimum possible contiguity with other areas, and thus the minimum benefit to those areas.

  • Alex

    Thanks for the solid reporting on this issue.

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