Tax Breaks for Wealthy Developers Reinforce Segregation in Baltimore
Morgan State Professor Lawrence Brown says the distribution of tax subsidies throughout the city only make racial barriers and economic isolation worse
STEPHEN JANIS, TRNN: Hello, my name is Stephen Janis, I’m reporting for The Real News Network in Baltimore.
In a city plagued with entrenched poverty and economic segregation dolling out tax breaks to wealthy developers may seem like a counterintuitive idea. But that is precisely what City Hall has championed over the past few decades to stimulate growth in Baltimore. And the numbers are huge. Recently the City Council approved a $660 million break for Under Armour CEO, Kevin Plank, to build out Port Covington in Southeast Baltimore. But just 2 years ago, another developer, Michael Beatty was awarded $106 million said to build Harbor East the home to energy giant, Exelon.
All of these deals come with a price. Future tax revenues for services like school and healthcare are pocketed by developers and the projects are clustered in already wealthy areas which aren’t burdened with property taxes that are the highest in the state. But our next guest says these subsidies are not only exacerbate poverty, they calcify many of the litany of social ills which have plagued Baltimore along stark racial lines.
Lawrence Brown is an Assistant Professor at Morgan State University School of Community Health and Policy. He has studied the impact of tax breaks have on the community, in depth, and is here to share his insights. Professor Brown, thank you for joining us.
LAWRENCE BROWN: Thank you for having me.
JANIS: One thing I wanna ask you, as a person who has really studied this, this debate always comes up, we have a multitude of tax breaks, TIFs, PILOTs. But in the most recent one, in Port Covington, the $660 million, the developers argue that this isn’t a tax break that this is something to help with infrastructure. What do you say to that argument, that a TIF, which is a Tax Income Financing, which basically puts their real estate taxes back into the property, is that a tax break or is it a subsidy for developers?
BROWN: Well, in many ways, technically, its not. But there is a tax break associated with Port Covington and that’s the $760.4 million in tax breaks that they did receive. 330 million, or so from the Enterprise Tax Zone and about 415 million or so from the rehabilitation tax credits. Significant tax breaks attached to the Port Covington TIF. And the thing is, that’s $760.4 million that would be basically given to them over 10 year periods. So we’re losing $70 million, roughly, every year in this deal. Now, the TIF itself I wouldn’t technically classify as a tax break but what I would say is they’re gonna have to build schools, they’re gonna have to build a fire station, they’re gonna have to build a police station, they’re gonna have to build recreation centers. So, at that point, when they start building public facilities that tax payers are gonna have to pay for in Port Covington, then it becomes a subsidy essentially. That we’re paying for them to have those services in that neighborhood.
JANIS: I was gonna say, they own all of it, basically.
BROWN: Exactly, they’ll own it but their taxes will be diverted. And that’s what I would call it. A tax diversion.
JANIS: Interesting. And one of the major crises of the city is that none of the normal money they’re paying for taxes will be going to city properties. So it will be up to poorer residents to subsidize. What impact does that have on the city in terms of social inequity.
BROWN: We already spend twice as much on policing and prosecution than we do on health, housing, arts and parks combined. So essentially, we’re already spending twice as much on social control than we do on supporting life. I think it exacerbates that phenomenon where we’re gonna be supporting wealthier, whiter communities at the expense of low-income, black communities in our city and I think that will have a tremendous impact over time, negatively. We know that we’re in the midst of a lead-poisoning crisis. We’re in the crisis of homicides and people really trying to get by. We have folks that are having water shut-offs. We’re second in the nation in terms of rental evictions, second to Detroit. Fourth in the nation in 2015 in terms of foreclosures. So, we have a housing instability crisis, crisis of faith in the system. With the DOJ report coming out talking about the way police have mistreated and abused citizens in this city. At a moment of crisis to give the subsidy to a billionaire in Port Covington, it really flies in the face of reason and we’re gonna pay the price.
JANIS: Now, the developer argues, Kevin Plank and Sagamore Development made some pretty slick commercials. And they argue that they’re gonna bring tons of jobs, let’s take a look at one of their videos and we’ll talk about it after we watch it.
NARRATOR: We will create jobs and new homes, connecting more of Baltimore to waterfronts and building a safe place for our kids to play. We will built on our city’s hardworking heritage, and channel our innovative spirit. Baltimore’s resilient and we’ve never been stronger. We will build it together.
JANIS: So that is a pretty compelling, “we’re gonna help everyone, everyone’s inclusive, we’re gonna bring jobs.” What do you say to the argument, “We’re gonna bring jobs and development, this is the only way we can do it.”
BROWN: If you look at the people who planned this deal, if you look at the marketing analysis particularly, that was produced by a company called Battelle, if I’m not mistaken. You look at the key informers, you look at the folks at the city who wrote that report. Eleven white men were either the key informants or the people that informed the city about what was going on in terms of the market. The lack of inclusion is at the outset and I think that’s an important point. To the video, you look at that and you see primarily nothing but black faces. Even though, this was a deal that wasn’t put together with lower-income, black voices involved in that market analysis. I think there’s a disjunction that I see. The “putting forth” of black culture and black faces to make it seem as though this project will be inclusive when in fact it’ll be anything but.
JANIS: One of the things you talked about, you write a lot about this affordable housing problem in the city and how it exacerbates many of the problems you write about, which is lead poisoning. But there’s very little inclusion on housing. Can you talk a little about what effect that has, not just in fairness but some of the health outcomes and some of the policing problems, some of the things you’ve studied.
BROWN: Well, let’s talk about what’s not included in this. Number one, there’s no guarantee that our school will be held harmless. That’s a tremendous impact over the last 2 years because of the TIF that we gave to Michael Beatty, we lost $50 million toward public schools. So let’s put that in the bucket. Now, on the second bucket, we look at our housing issue, the housing crisis that I mentioned earlier, in terms of housing instability, because housing is so unaffordable here in Baltimore. You look at the fact that, first of all, our median annual income in Baltimore City is roughly $42,000 a year. But the white annual media income is $60,000. The black AMI in our city is actually $33,000. So, the median income in Baltimore for black people is so low at $33,000, its very difficult to create the type of affordable housing with 4 people that are low income in the city, without paying special attention to the AMI that you need to go to, to make that happen.
What Sagamore did is—
JANIS: They used the county AMI, right?
BROWN: They used the regional AMI, exactly.
JANIS: AMI means?
BROWN: Annual Median Income. Annual median household income.
JANIS: And they used the one for the county not the city.
BROWN: They didn’t use the city’s but I believe that 80% of AMI, you’re talking $60,000 so when they say, “Its gonna be affordable at 80% AMI” that only people who make $60,000 or more. They say that its affordable at 50% AMI, that’s around 45-50, that’s still cutting off at least half of our city residents. That’s definitely cutting off a large percentage of our black residents. So, this notion of affordable housing, it relies on them receiving low-income housing tax credits, it relies on the city providing housing or housing choice vouchers or project vouchers. There’re all these loop holes and buy-outs and a lot of off-site things that they can do to lower that 20% that they said they were gonna provide for affordable housing.
JANIS: Now, we studied Harbor Point, which is the previous TIF, only 20% of the jobs go to city residents and a lot of them seemed like security and not really high-paying. Do these developers, are they really gonna deliver jobs and transform people’s lives like they’re talking about?
BROWN: When you say 20%, we’re giving them a $100 million, $107 million. That’s what we gave to Michael Beatty, which is gonna cost us a quarter of a billion dollars when you add in interests and fees. But to only give us 20% of the jobs is laughable. With Port Covington, Sagamore, the deal they struck, we’ll only get 30% of those jobs. Its really ridiculous on the face of it, that we received 20-30% of the jobs even though we’re putting up the capital to help finance those multi-millionaires and billionaires. You have that. Now, the question is, what is actually produced at jobs that are promised? You look at EBDI, which received a $78 million TIF from the city back in 2007 or 2008. They said, “We’re gonna produce about 8,000 jobs. “For our biotech part that we’re gonna build here, we’re gonna have 5 biotech park buildings, we’re gonna have 1/3 of our jobs from low-income folks, 1/3 for regular folks and then we’re gonna have, for our highly-professionals another 1/3 of those jobs allocated. Well, 15 years later, after the project started in 2001, how may jobs have they created? Only 759 or so, according to the Daily Record reporter Melody Simmons.
So, you have this situation where they promised 8,000 but we only got 759. There’s no punishment, there’s no call-back provision, there’s nothing to say, that when they promised, in this case, with Sagamore, 25,000-35,000, what if they only end up producing 6,000? What’s gonna be the punishment for that? Are there any provisions that are gonna make sure that the citizens of the city are putting up so much funds are gonna be made hope? No, that’s not gonna happen, that’s the type of thing that our City Council and our Mayor failed. They failed to assure racial and economic equity when they came to the Port Covington TIF.
JANIS: One of the big debates about these TIFs cause there’ve been more, as you pointed out EBDI [inaud.], Harbor Point, has been where they’re located. In terms of not being evenly distributed throughout the city, throughout low-income neighborhoods, mostly concentrated on already wealthy neighborhoods, you did this fascinating graph where you showed, this ‘L’ that showed where most of the [inaud.]. Can you talk a little to explain what it means?
BROWN: Absolutely. Demographically, our city is very hyper-segregated in terms of race. Sociologist Douglas Massey, at Princeton University, came up with this fabulous research that helps illustrate this. He wrote the book, American Apartheid with his co-Author Nancy Denton, a couple of decades ago. But since then, he and another co-Author, Jonathan Tannen, they created a scheme to classify how hyper-segregated cities are in America. Baltimore ends up being in the top 8 hyper-segregated cities in the targeted Unite States. Along with other cities like Chicago, Flint, Detroit, Birmingham, St. Louis – outside of which is Ferguson, Cleveland. In many of these cities you have lots of racial conflict. Lots of uprisings that have taken place. Lead poisoning crisis in Flint, which we should also have here in Baltimore and in a place like Cleveland. These are cities that are on the edge of having real crises and catastrophes, even. Hyper-segregation is at the root of that because you’re creating 2 different types of communities in your city.
In white communities, you’re creating structural advantages which allows resources and access to goods and services to flow easily into those communities. Whereas in red line, disinvested black communities, you’re creating capital deserts where people don’t have resources. They don’t have access. My thesis around the ‘White L,’ which is what I call it, and if you look at the Racial Dot Map by Dustin Cooper at the University of Virginia, you can see that there’s where the white population lives, in the center of our city of Baltimore coming down roughly from York Road, just south of Towson where you have Roland Park, Guilford. Then you have Mt. Vernon, Charles Village, Mt. Belvedere, those communities, then downtown, then you head east along Pratt Street to Canton, you have Harbor Point, Harbor East, Fells Point, Federal Hill, all these communities. So, you have this ‘White L’ where the majority of our white residents are clustered whereas, in the outlying areas, East and West Baltimore, primarily where our black residents live, so I call that the ‘Black Butterfly.’
You can see on that TIF map the allocation of TIFs in Baltimore have either been clustered tightly in the ‘White L’ or they’ve been given to white-owned institutions like Johns Hopkins or in the terms of, if you look at the TIF at West Port, which was owned by Patrick Turner, is now owned by Kevin Plank. So he owns 2 of those, West Port and also of course Port Covington. The only major black TIF in a black neighborhood, there’s been 2, one is Frankfurt Estates which is more of a residential area, and Mondawmin mall, which is about $17.5 million. Really, the best, most equitable TIF that the city’s ever done, we’ve just never duplicated it.
JANIS: Right. And there is Poppleton, maybe, we’ll see what happens with that.
BROWN: That’s with University of Maryland.
JANIS: Right. Which a big chunk of that went to a private company to built out office space.
BROWN: Exactly, that the inequity of having it in the ‘L’ or with these historically segregating universities and institutions.
JANIS: So, last question. We had the uprising, poverty in Baltimore became a national story, a “Tale of Two Cities,” all the clichés, but its real. Yet, it seems like we’re upping the game on creating those inequities and making them worse. What does that say about the psyche of the city? That we’re still giving out huge tax breaks even when we know that these structural poverty runs are causing so much social stress. What does that say about Baltimore?
BROWN: I think the first thing that we have to say is that poverty is really not the static construct that we make it out to be. Poverty is a process. The reason why we have so much poverty in Baltimore is because of the litany of policies and practices and processes that we put in place that extract wealth from black communities – red lining, sub-priming – predatory financial lending institutions like check-cashing and payday lending facilities that we have in black communities. We have landlords that are slumlords that extract rents at higher prices than should be legally allowed. What you have is a situation where we’re creating neighborhoods where wealth is extracted. We create poverty. We create and reinforce poverty with all the housing instability, the water shut-offs for $250 in the past and now they’ve upped it to maybe $350 or $750. But still, a low amount where you could lose your home to a tax lien. That creates poverty.
The rental eviction at 7,000 a year, that creates poverty. The foreclosures, the massive number that we have here in Baltimore every year, especially after the foreclosure crisis, that creates poverty. So, poverty is a process and what we miss here in Baltimore is the fact that red lining is one side of the coin, green lining is the other side of the coin and what we did with Port Covington and Kevin Plank, we created a green line around Port Covington and we gave them all the resources that a billionaire could ever want to create a beautiful community at the red lined communities’ expense. So red lining lives, red lining is persisting and we’re continuing a structural advantage to the green lined communities and give structural disadvantage to the red lined communities. And that’s the story, unfortunately, its been true in Baltimore for decade, after decade, after decade.
JANIS: Well, Professor Brown, we really appreciate it. Thank you. We’ll keep talking to you about your research and what you’re doing, going forward. Thank you for joining us.
BROWN: Absolutely, my pleasure.
JANIS: My name is Stephen Janis, I’m reporting for The Real News Network in Baltimore.
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