A key state senator is calling for legislation to probe Baltimore’s sprawling and often opaque system of doling out lucrative tax breaks to developers.
Maryland state Sen. Jill P. Carter, a Democrat, who heads the Senate’s Baltimore City delegation, says Baltimore’s strategy of using tax incentives to reverse population loss and promote economic growth has instead heightened inequality in the city while advantaging wealthy neighborhoods over impoverished communities.
“The tax breaks for the wealthy and for developers at the expense of the poor and middle class are driving disparity in Baltimore and need to be fixed,” Carter told TRNN. “If we don’t, we’re going to keep asking the same questions about the city.”
Carter said she plans to introduce a bill to impanel a body to probe the city’s process for awarding tax breaks and the apparent lack of transparency, but it may take some maneuvering because she is limited to the number of bills she can introduce during this legislative session.
However, as a workaround, Carter is currently seeking co-sponsors for the bill, which would permit legislation to go forward.
“We need to understand what is actually going on, as it’s obvious transparency is a big problem,” Carter said.
“This bill would be a step in the right direction,” she added.
Carter’s comments come after The Real News Network shared its investigative documentary Tax Broke with her, a five-year investigation into the city’s use of tax incentives to bolster development.
Among the film’s findings is the fact that the city forgoes at least $100 million annually through TIFs (Tax Increment Financing), PILOTs (Payments in Lieu of Taxes), and other subsidies directly aimed at developers. The film also found that, despite laws that require transparency, reports related to some of the city’s biggest deals had not been filed for several years.
TIFs allow developers to use future property taxes to fund construction and infrastructure costs by selling bonds to investors based on the future value of the property. PILOTs gradually phase in property taxes over a period of time, allowing many projects to forgo taxes for years. The subsidies, city officials argue, are the only way to spur development in a city with the highest tax rate in the region.
Tax Broke examines the history of how Baltimore’s growth strategy evolved to a point where almost all development in the city receives some sort of tax incentive. It explores how the state’s intervention to make Baltimore and surrounding Baltimore County into two distinct entities led to disparity in tax rates that are now twice as high in the city compared to the county. It’s a combination of policies which urban planner David Rusk says turned Baltimore into an “inelastic city,” overburdened with caring for the region’s poor while permanently barred from using the resources of surrounding counties to address population loss.
Carter noted that it was imperative for the state to intervene after the city council was shown in the film voting down a modest study on the impact of TIFs. The bill would have authorized $30,000 to assess the impact and effectiveness of TIFs. It was defeated in committee by a 4-3 vote.
“We need to take a closer look at how much money we are letting go in the city instead of putting into brown or poor neighborhoods,” said Carter.
“I think this type of unequal use of resources demands attention from the state legislature, especially when it comes to transparency,” she said.
Transparency is a problem that continues to plague the use of tax subsidies in the city.
Recently, TRNN asked Baltimore City for reports from recipients of a special PILOT program known as High Performance Tax Credits. Legislation passed in 2014 requires developers to file annual reports about the economic impact of their properties to justify the tax breaks.
However, city officials have not yet answered a request to view the filings or confirmed publicly if they exist at all. The program reduces taxes until they are phased in over the period of a decade.
Tax Broke is a Real News Network documentary film directed by TRNN reporter Stephen Janis and produced by TRNN reporter Taya Graham. Investigative reporter Jayne Miller contributed investigative reporting to the project and appears throughout the film. The film has been screened locally at TRNN Studios and the Charles Theater.
A new series of screenings will be announced soon.