After the Baltimore Development Corporation today approved a $535 million tax subsidy for the redevelopment of Port Covington, the agency’s consultant was asked how he determined that the financial commitment to the project was a sound one for Baltimore.
Keenan Rice, president of MuniCap Inc., said among other things a market study was performed by Battelle International of Ohio.
Pressed about the funding source for the Battelle study, Rice acknowledged it was commissioned by the project’s developer, Sagamore Development, the private real estate arm of Under Armour CEO Kevin Plank.
“The study was by Battelle, but we review it to see if they have data supporting it,” Rice said.
Asked whether the city should be relying on data from the developer whose proposal they are scrutinizing, Rice said they also looked at cost estimates prepared by Sagamore’s general contractors. Eventually, he said, the city will obtain independent data.
“The city will do its own study before they issue the bonds,” said Rice, who doubles as a consultant to city Finance Department as well as the BDC. “But at this stage, they provided the study.”
Many Costs Still Confidential
What the city may find in its own study is just one of many unanswered questions as Baltimore moves ahead with the largest Tax Increment Financing (TIF) package ever proposed in Baltimore – and one of the biggest ever sought by a private developer in the U.S.
Sagamore is proposing a 266-acre, 15 million-square foot development that would remake the city’s waterfront along the shores of the Middle Branch of the Patapsco River. The developer envisions nearly 1.5 million square feet of office space,1.5 million square feet of rental space, 7,500 rental units and a 200-room hotel.
A 50-acre portion of the development, not part of the TIF district, would be set aside for Under Armour’s new global headquarters.
City officials have said that the commitment from Under Armour to keep their corporate headquarters in Baltimore was one feature that helped set the TIF package apart from others.
The BDC board approved the financing package today after three previous meetings to discuss the project’s impact on the city’s debt load and municipal solvency. Almost all of the discussions were conducted behind closed doors, prompting formal protests by Baltimore Brew and other media organizations.
Only a few questions were asked by members of the BDC board before the vote was taken.
Afterwards, reporters posed additional questions, including this one that BDC President and CEO William H. “Bill” Cole IV said he was unable to answer:
What are the bond issuance costs, legal costs and other additional costs, which could increase the cost of the TIF by millions?
Rice said he had an estimate of those additional costs, but declined to provide it for reporters, saying he might not be able to disclose those numbers because they are part of the negotiation. “I need to find out if that’s confidential,” he said.
Likewise, he said he could not disclose the precise property tax revenues projected as part of his analysis. “I think it will be public when it goes to the Board of Finance,” he said.
“A Lot of Discipline”
On average, Rice said, the total $5.5 billion project is expected to generate about $34 million in annual tax revenues that would be used to pay off the bonds instead of going into city coffers.
[CORRECTION: The $34 million cited by Rice refers to the estimated annual average surplus revenues after the debt service on the bonds is paid and other expenses of the city to provide public services to the property in the TIF district are paid.]
City officials said they plan to sell the bonds in several rounds, the first one to issue an estimated $49 million, Rice said.
Several conditions were included in the motion approved by the BDC today, among them that there be no significant adverse impact on school funding and the city’s bond capacity. (Officials noted that legislation is pending in Annapolis that would change the school funding formula so that the city’s contribution is based on actual tax receipts, not just property values.)
Rice said there was “a lot of discipline built into the whole process,” and noted that the city will carefully review bonds before before issuing them.
“The Board of Finance will ensure that there’s appropriate value on the tax rolls, and that the debt ratio, the assessed value to debt, is being maintained to protect the city’s bond rating.”
Deputy Mayor Colin Tarbert, representing Mayor Stephanie Rawlings-Blake, said that the city is negotiating agreements with Sagamore that would require affordable housing, local hiring and minority participation.
Board member Armentha “Mike” Cruise raised the issue of minority inclusion in the project, saying specific requirements should be detailed “not just [for] construction, but front-end and professional services.”
“It’s a concern that must be spelled out as we move forward to make sure that the minority part of this is very clear,” Cruise said.
BDC Chairman Arnold Williams and Deputy Mayor Tarbert told her that the issue she raised, while important, was being handled by the mayor’s office.
“After that decision is made, does it come back to us?” Cruise asked. “Or is it over and done with?”
Tarbert responded that the Board of Estimates, controlled by Mayor Rawlings-Blake would make the final decision on any hiring or inclusion agreements.