Another Massive Tax Break for Developers? One Key Official Says No

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Baltimore’s latest proposal to overhaul a low income housing project and an abandoned outdoor mall may include a huge tax incentive for developers, but city council president Jack Young says he has “no appetite” for another tax break.

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Story Transcript

STEPHEN JANIS: This is Stephen Janis reporting for the Real News Network in Baltimore City, Maryland. Tax breaks for developers have been a big issue in Baltimore, and some thought that story was over. But it turns out it’s just beginning.

To get a sense of just how expensive Baltimore’s latest tax break finance development deal is, you have to drive. The project will encompass huge swaths of the city’s low-income neighborhoods, including a former outdoor mall called Old Town, and a low-income housing project, Perkins Homes. The city says the deal will span over 200 acres, and includes rebuilding a school, and a recreation center. But like many of the most recent deals to redevelop the city, who benefits and who doesn’t paints a picture of just how Baltimore works for some and not for others. That’s because Perkins and Old Town has suffered from decades of neglect and little direct investment, and its residents are mired in poverty.

ROXANNE: You know, this is round about the third time they said they was going to tear the property down, and then leave us hanging. And you know, these places are so, so bad. You know, the rodents, the bed bugs, the smells, the pipes, everything is wrong with these places.

STEPHEN JANIS: But even with this fraught history of neglect, the city has floated a plan to give a generous tax incentive to developers who have proposed this massive redevelopment. The city is considering offering a possible $250 million TIF, or tax increment finance incentive, to a group of wealthy out of town developers, says Baltimore Business Journal reporter Melody Simmons.

MELODY SIMMONS: My sources are telling me the TIF is somewhere around $250 million, even though the price tag has not been identified yet.

STEPHEN JANIS: A TIF allows the developer to plow all future property taxes back into the project through city-backed bonds. It’s a boon for developers that city officials often justify by arguing the TIF pays for infrastructure or amenities.

MELODY SIMMONS: And they’re also going to be adding a lot of infrastructure and cables for high tech, which that area doesn’t have right now.

STEPHEN JANIS: And for this particular TIF, it is linked to a developer who has a fraught history of taking advantage of city largesse: BD Development. In 2013, BD used Perkins Homes to sweeten his deal for this project, Harbor Point. He included the household incomes of Perkins to qualify for an additional $80 million i n enterprise zone tax credits, even though Perkins residents receive nothing.

PERKINS RESIDENT: That they’re going to move all of us back in here, and it’s going to be a better place and all that, because half the people are not going to be able to come back at all.

STEPHEN JANIS: Which is why City Council President Jack Young says he is opposed to the TIF for the Perkins Oldtown project.

JACK YOUNG: At first it was just supposed to be Old Town. Then they’re adding Perkins because they’re going after a choice neighborhood grant.

STEPHEN JANIS: He says he wants assurances residents of Perkins can come back once it’s completed.

JACK YOUNG: If they’re not going to bring these people back then I’m not, I don’t have an appetite for a TIF. I have to have a guarantee that these folk who live there can come back, because what I don’t want to see is that neighborhood gentrified.

STEPHEN JANIS: And it could be quite a big, I mean, people are saying $250 million TIF for a developer.

JACK YOUNG: I have no appetite for no $250 million TIF. At all.

STEPHEN JANIS: Why not?

JACK YOUNG: Because it’s just too large of a TIF.

STEPHEN JANIS: A concern echoed by Councilman Robert Stokes, whose district includes a vast majority of the project.

ROBERT STOKES: TIFs should be based on we can get as many people back there, because they stayed there when it was riddled with crime, no recreation, no afterschool programs. They should have the same opportunity to come back and enjoy w hat’s going to change in that neighborhood.

STEPHEN JANIS: We asked BD for comment, but he did not reply. But perhaps an indication of just how lucrative Baltimore’s tax break haven has become is a looming presence of investment bank Goldman Sachs. Goldman is one of the largest investment banks in the world, and has been accused of predatory practices. And yet Goldman has invested $233 million in the city’s largest tax break to date, Port Covington, a veritable city on the water owned by Under Armour CEO and billionaire Kevin Plank.

But the Real News has learned that Goldman is an investor in this: a 200 apartment complex on the city’s West Side. A project that also benefits from a tax rate called a PILOT, which allows a developer to forgo paying property taxes for years. We asked the mayor about the latest series of deals.

STEPHEN JANIS: There’s this article about the TIF for Perkins Homes redevelopment, and the Old Town Mall. Have you taken a position on that? Do you support the tax break for developers to redevelop that-.

CATHERINE PUGH: Well, I am actually meeting with the team that’s working on the Perkins Homes project, and I can give you more information after that. But let me just say, as we give tax incentive financing to areas in our downtown part of our city, I think it’s important as we’re developing neighborhoods and communities that we look at the kind of opportunities and tax breaks that we’ll get for that kind of development, as well.

STEPHEN JANIS: Do you feel like the residents of Perkins Homes are going to benefit? I mean, you’re basically going through the developers, not to the residents.

CATHERINE PUGH: Well, again, I haven’t had a conversation with them yet. We haven’t determined how the TIF would be used, if in fact it will be used at all.

STEPHEN JANIS: You’re not sure if you support a TIF yet, you haven’t made up your mind, or are you still considering? Just so I understand.

CATHERINE PUGH: Well, I don’t, again, I’m meeting with the group. I think it’s this week, it’s on my schedule. And I’ll be able to give you better information. I don’t like to give misinformation.

STEPHEN JANIS: And the involvement of Goldman Sachs.

CATHERINE PUGH: No, they were in just last week. Didn’t say anything about the bonds. Did talk about, they came in with Goldman Sachs. Goldman Sachs is investing, as you all know, is one of the investors in Port Covington. They are also one of the investors in [la sete]. I’ve also asked them, Goldman Sachs, to take a look at what we’re doing at Mondawmin. I asked them to look at the possibility of a movie theater in Mondawmin, so that they are taking a look at that.

STEPHEN JANIS: Former Councilman Carl Stokes says businesses like Goldman are lured to Baltimore because the deals are too enticing to pass up. Money, he said, should go to helping residents, not wealthy out of town developers.

CARL STOKES: The developers are asking, as they should. It’s self-interest. It’s the city who reneges on the taxpayers. It’s the city who says, take all the money you want. Here. Here’s some more money. It’s the city who does that. I know in more than one deal that has come across my desk that the developer, as best I can tell, put up a number that he assumed there would be a negotiation around. He put up a high number and assumed the city would start fighting with them to get down to a lower number. I say that’s because more than once a developer has called me a year in advance, two years in advance, and said, I need X number of dollars. You think they may work with me? And I said, of course, call them. Let’s see what happens. And when it gets to me the number is, you know, two and a half times larger than it was. And I said, what the hell’s going on?

At least one time a developer was frank enough to share with me, and said, the city said, you can ask for more. You can ask for more. Right. And they just accepted that number.

STEPHEN JANIS: But with the latest proposal to rebuild the Old Town and Perkins Homes communities, it seems the deals just keep getting better. This is Stephen Janis and Taya Graham reporting for the Real News Network in Baltimore, Maryland.