Baltimore’s Harbor-Front Development at the Expense of City Infrastructure and Schools

The Baltimore Sun’s Luke Broadwater says Baltimore’s push to give tax-breaks and incentives to developers has Baltimore City’s schools losing tens of millions of dollars in state funding

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Story Transcript

JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore.

It was a who’s who of the Baltimore development world at the groundbreaking of the controversial billion-dollar development Harbor Point on Baltimore City’s waterfront. It’s been billed by supporters as a job creator and an economic engine that will ensure the city’s financial success for years to come, where critics say the Harbor Point deal was enshrined in secrecy, gives hundreds of millions of dollars to developers, while property tax breaks may result in the loss of hundreds of millions of dollars in state education funding.

This is Mayor Stephanie Rawlings-Blake addressing supporters.

STEPHANIE RAWLINGS-BLAKE, MAYOR OF BALTIMORE: Harbor point for me is an example of the kinds of projects that positively impact residents for today and for tomorrow, while positioning Baltimore to become a premier city that thousands of residents will want to flock to in the future.

Harbor Point means jobs. As was stated, it means new tax revenue, as well as hope and opportunity on once-vacant land.

NOOR: Now joining us to discuss Harbor Point and a host of other issues is a journalist for The Baltimore Sun, Luke Broadwater. Luke got his start in journalism at the age of nine when he scored an interview with Colts great Johnny Unitas. Since then, he’s won more than a dozen journalism awards, including for investigative reporting, government reporting, and feature writing. He currently covers City Hall and local politics for The Baltimore Sun.

Thanks so much for joining us, Luke.

LUKE BROADWATER: Thanks for having me.

NOOR: So, before we get into all the details and the history of Harbor Point, let’s talk about how that relates to the recent story you’ve been working on about how these type of developments like Harbor Point have resulted in a loss of a tremendous amount of money for city schools from the state government.

BROADWATER: Sure. Well, one thing that happened in the last year was that Baltimore’s wealth grew tremendously. Baltimore gained about $1.3 billion in wealth. And a lot of that is attributable to new projects that came online, from the Horseshoe Casino to Canton Crossing to different developments around town.

And what happens is as you get richer, as your city gets richer, the state formula for schools funding assumes you have more tax dollars in your budget to pay for your schools, so you get less state money. Now, the issue is: a lot of properties, especially in the downtown area, have gotten special deals over the years in which they do not pay property taxes.

NOOR: For decades is often the case.

BROADWATER: Correct. So they pay things instead of property taxes. They pay special payment sometimes.

In the story, we use of examples. One was the Marriott Waterfront Hotel, which pays $1 a year in property taxes for 25 years. This was a deal inked three mayors ago. But you can see how things have ramifications over the years. So instead of paying something like $3 million a year in property taxes, they pay $1. And you can see the effect on the city’s budget when we don’t have that money to then go to our schools. So that sparked a debate about how these incentives should be used and what direction we should continue to go in in Baltimore with our development.

NOOR: And you reported in the debate over Harbor Point that this was a concern when this was being discussed and debated, because according to one calculation, as you reported, the city is basically giving $400 million in incentives and tax breaks to developer, and then this will result in a loss of something like $200 million in the future to the city’s schools.

BROADWATER: Right. So the $400 million number is a number we crunched. And that’s all the different incentives and tax breaks Harbor Point gets. Harbor Point gets Brownsfields, tax credits. They get enterprise-own tax credits. And they have the TIF bonds. And the TIF bonds–.

NOOR: That’s tax increment financing, for people that aren’t familiar with it.

BROADWATER: Correct. So what that is is a special deal signed off on by the City Council in which this project’s tax dollars–well, first, the city floats a bunch of bonds. They float over $100 million worth of bonds to pay for this project. And those bonds accumulate interest over time. So the city has to pay back the interest.

Now, the way they do it is, under the deal, the developers’ tax dollars, well, instead of going to the general fund and pay for police and schools and all kinds of things, they will go to paying off these bonds. So that’s another incentive. If you add it all together, it’s about $400 billion worth of incentives.

How does that relate to schools’ funding over time? Well, that remains to be seen, because schools’ funding is based on your assessed value of your property. Right now, the projections are that Harbor Point will be a $1.8 billion development, which, if Baltimore grows at a faster rate than the other jurisdictions in Maryland, could result in lost schools’ aid. Ron Kreitner, the director of the WestSide Renaissance Downtown, estimated in his calculation that it would be $200 million over time. I have no way to say whether that is correct or not, because I can’t predict the future. But it’s safe to say it will have an impact on the schools formula of some amount.

NOOR: So, Luke, you discovered that Baltimore had violated the Open Meetings Act when it came to the Harbor Point deal, specifically around the TIF funds, I believe.

BROADWATER: That’s correct. So, before any TIF funds can go to the City Council for approval, they have to go through a board called the Board of Finance. And what the Board of Finance is is it’s kind of the debt manager for the city. It’s supposed to keep reins on how much debt the city accumulates. And most analysts say it’s very bad for a city to have more than 4 percent debt. Right now the city’s at, like, two and a half percent debt in these bonds.

And so this board was meeting, and they were going to discuss Harbor Point. And the Baltimore Development Corporation, which brokered the deal for Harbor Point, came in, and they were going to present all the details of the deal. They’re going to have a–they had a PowerPoint set up, they had documents to pass out, they were going to lay out all the intricacies of the deal.

And I was there to cover it, some other reporters from FOX were there, and they told us to get out of the room. You know, obviously, we objected. I stood up and stated on the record that I object to this, I think it’s open meeting, I think we have the right to be there, it’s in the public’s interests to see how our tax dollars are spent. They had other ideas. The FOX reporters objected as well. They kicked us out. They closed the door.

We filed a complaint. I put on my lawyer hat for a minute and drafted the complaint. We sent it to the open meetings compliance board, and they ruled in our favor. They said they had no right to kick us out of this meeting. It was the public’s money. We had every right to see how it was spent. And they said the board was in violation of the law.

NOOR: And did anything really result from that?

BROADWATER: Well, I’ll say this. One, that does not invalidate the deal, right? In that process they signed off on the TIF. And then it went to the City Council, right? But what it did do is it forced them to be more open to future. So now that–and this is true. The next TIF deal that came through, the Board of Finance, they called us, they sent us emails letting us know what’s happening, they opened the door, we got to sit in the meeting, watch how everything was discussed and how things were approved. And so it did open up their process going forward, although it had no effect on us being able to see the details that were told that board of Harbor Point.

NOOR: And so more on Harbor Point. The developer behind it, Michael Beatty, who is the? And talk about his financial ties to the major proponents, including the mayor and several city councilpeople.

BROADWATER: Yes. So one story I looked into was sort of the behind-the-scenes players behind Harbor Point. We knew this sort of the main players, right? We knew the mayor was in favor of it. We knew Jack Young, the city Council President, was in favor of it. We knew Michael Beatty, the developer, [was] obviously in favor of it. We knew people like Carl Stokes were against it, a city councilman who chaired the committee it had to go through on the Council. He thought it was too much money. He thought it needed to be scaled back. Several councilpeople felt that way as well.

So what I did was I looked at who is behind the scenes advocating for this project. And one thing you could see was the lobbyists for Harbor Point worked for a firm, worked for the Gallagher law firm. The Gallagher law firm is headed by a gentleman named Rick Berndt. He has been seen for many years as a kingmaker in Baltimore. And if you look at the mayor’s contributions, you saw she got–I believe it was about $35,000 or so from lawyers at the Gallagher law firm. So you could see sort of quietly they were trying to wield their influence.

On the other side, you could see that Carl Stokes, who was the biggest opponent, his biggest benefactor was Peter Angelos, the owner of the Orioles, who is also a developer and a big owner of real estate property of the Westside. He was opposed to the project–at least his people were; I don’t think he ever publicly stated anything on it–because they felt that there’s–in their opinion there’s a finite amount of resources to go around in Baltimore. And if you have subsidized development on the Harbor, tenants from the Westside properties will move over there, ’cause they can charge lower rents because they’re getting the subsidies. So he’s–I believe that their crew was opposed to it in part because they’re were worried about its impact on existing businesses Baltimore.

So you had sort of–you could see the money and the contributions on both sides behind the scenes, which is, I think, always interesting and fun to look at, who’s aligned with whom, who’s supporting whom, and who doesn’t want to put their name out there on record and stating, arguing it’s in the public, but who wants to sort of do it behind the scenes.

NOOR: And you covered a lot of these kind of raucus hearings and protests against it. And so there was the foresight of the City Council, and they decided against it. But there was also grassroots groups, like the United Workers, who were saying that this is an example of what they call a failed development, because they cited other instances of development around the harbor where the fair wage jobs just did not to materialize and United Workers work on the front line, demanding that those kind of jobs, like around the Horseshoe Casino and other developments, paid a living wage and actually benefited the communities in Baltimore.

BROADWATER: Yeah. There were substantial protests at the Harbor Point hearings. I actually was kind of surprised at how big and passionate the protests were, because we’re talking about wonky stuff here, right? Like, I probably used a bunch of things that have bored everyone that we’re talking about. We’re talking about TIFs and pilots and incentives. And so it’s wonky stuff to get down into. But I think people, with this project, it really came to the forefront and people really got passionate about it. And like you said, United Workers, other unions were among those highly involved.

And their argument was this. Look, we’ve been subsidizing development down by the harbor for years, right? People have gotten all sorts of special deals. It’s built up. It looks great. You know, it’s beautiful and all that.

NOOR: It’s transformed dramatically over the last 20, 30 years.

BROADWATER: Dramatically. Yeah. And it’d be hard for people who argue that there’s a lot of positive benefits to those developments.

But that said, they don’t see the benefits in other parts of Baltimore, and they would rather see the money used in other neighborhoods, rather than at the harbor. So if we’re going to float TIF funds, bonds for a project, if we’re going to give a bunch of tax credits to a project, let’s do it someplace else. Why should there be more and more development where there’s already–or more and more incentives where there’s already, I guess, a bonanza of riches?

NOOR: While a lot of the city, you can see the 15,000 vacant homes and the epidemic of drug violence and drug use in huge portions of this city that isn’t seeing the type of investment. So what is really behind this push for–. I mean, some would say that it’s drawing tourists and making Baltimore a city of the future and raising his profile and kind of trying to get away from the image that people often think about of Baltimore, which is, like, The Wire. But on the other side, there is that other part of Baltimore, that is–people feel–a lot of people feel like it’s being ignored.

BROADWATER: Right. Correct. So what’s behind the push? Well, I think the mayor and the City Council and supporters think that it’s not in either/or. They’re of the–I don’t know what economist said it, but the rising tide lifts all boats is their idea, right? So if you–.

NOOR: The trickle down kind of idea.

BROADWATER: Right. Yeah. So if you have a big, rich development somewhere that’s bringing in–arguably, bringing in people from the counties who would stay in the county otherwise, and they’re spending their money here, that means more jobs here in Baltimore, that means more people with money in their pocket to spend elsewhere in Baltimore, and everyone sort of benefits in the long run.

I think the thing that people like the United Workers would argue is: we’ve been doing it for decades, and we’re still seeing one-fourth of the city in poverty, we’re still seeing high joblessness. I think the unemployment rate has been around 10 percent now for a while the city.

NOOR: And in some neighborhoods it’s closer to, like, 40 or 50.

BROADWATER: Right. Correct. We just had a story in the paper the other day that my colleague Justin Fenton wrote about seeing how Sandtown-Winchester has more people incarcerated than any other neighborhood in the state.

NOOR: And it’s costing the city and the state tens of millions of dollars every year to incarcerate people.

BROADWATER: Exactly. So their argument is: are these strategies really working? Or is it really just benefiting a select few and not the city as a whole?

I think–I’ve talked with the mayor about this before, and her opinion is it’s not an either-or, we can do both, we can help Downtown and help the neighborhoods as well. I think a lot of people would like to see more done in neighborhoods.

NOOR: Alright. Well, Luke Broadwater, thank you so much for joining us for this first part of the discussion. And we’re going to–hopefully, you’ll stay with us for the next few parts we’ll talk more about your work and what it’s like to cover City Hall and the city of Baltimore.

BROADWATER: Great. Thank you.

NOOR: Thank you for joining us at The Real News Network.

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