Baltimore’s Tax Break System is Like a ‘Vending Machine’ for Wealthy Developers
A city councilman is calling for a hearing to scrutinize hundreds millions in tax breaks to developers as calls mount for more money to fund affordable housing by Taya Graham and Stephen Janis
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, but now one council person is saying, who’s paying attention. We asked him to find out.
Big tax breaks for developers have been a way of life in Baltimore for decades. Just last year the city awards six million dollars to Under Armour CEO and billionaire Kevin Planck to build Port Covington, a mini-city on the water. Yet despite giving out hundreds of millions of dollars in subsidies, there is little formal scrutiny of how these deals are faring. The Real News has learned that that may be about to change. City councilman Bill Henry wants to convene a special hearing to begin a formal process reviewing the deals, particularly as the city has yet to move on a proposed offer nearly a month ago by an array of activists that the city set aside twenty million dollars annually to fund affordable housing, which is why we had an extensive and detailed conversation with Henry about what needs to be done to rein in subsidies to wealthy developers and to work towards more equity in city housing and to address the underlying conditions of poverty and economic isolation in one of the poorest cities in the country.
You have … Obviously the city’s awarded a lot of TIFs, a lot of money. Has been very little oversight, so you’re sort of reconstituting or reconvening a commission on TIFs or a council, committee. Could you talk about that a little bit?
Bill Henry: Sure. What may come out of it is a more formal, longer-term group like … We’ve had a task force in the past, a commission that looked at TIFs and pilots very comprehensively. What we’re starting with is one hearing. We’ve made a request to the BDC to finance, to come in and sort of say where we are right now. I mean, I have some personal awareness of the TIFs and the relatively few pilots that we’ve issued in the nine or so years that I’ve been on the council, but it’d be good to not just review these one at a time but to see them in the perspective of what we have out there and where we are in it.
Stephen Janis: Councilman, forgive me, but giving away all this money and not really having ongoing oversight or some formal mechanism, isn’t that kind of strange? I mean, you’re talking about hundreds of millions of dollars in taxpayer money. Why don’t we have a mechanism already?
Bill Henry: One of the things that hopefully that the administration can discuss is, to what extent does the administration monitor this, and just the council has been lax in not asking for a regular report. Hopefully, and I’ll say that, hopefully, that one of the things that maybe the Board of Finance or maybe the BDC’s board is already doing is tracking the TIFs and pilots that have already been issued.
I’m sure finance is tracking it. The question is to what end? When they make the decision on whether or not to give a new TIF or a new pilot, do they make that decision looking at the big picture of what we’ve already done, and if so, are they looking just financially, in terms of what the city’s tax base can support, or are they looking in a geographic fashion, and that’s one of the things that I’m concerned about. It’s not that any given TIF or pilot might be bad on merit in some fashion. What I’m worried about is that there is not overarching vision for what we want to be doing with TIFs and pilots, with any of our development incentives other than encouraging more development. If that’s our vision, then I think we should be upfront and say Baltimore city government’s goal is to just encourage growing the tax base wherever the private market wants to do so.
I think we have an opportunity to direct where we grow the tax base. We can say that if you want a TIF or a pilot, you should be trying to do development in these areas, or we can do it the other way around. We can say these areas over here, we think that they’re well enough developed that there’s enough private market investment happening here without big incentives from city government. We’re not going to do any more here. Go look elsewhere, because there’s other parts of the city that would love to see reinvestment.
Stephen Janis: The mayor … There’ve been a lot of developers taking advantage of the pilot for apartment units, what, over twenty or something [inaudible 00:04:40]tax rate. Has the BDC or anyone given you any inkling as to how many projects are out there that have benefited from this and what the general cost?
Bill Henry: No, and you know what, that’s one of the things that we would get out of this kind of report, because the difference between pilots and tax credits … With pilots, they’re a deal by deal type of thing, and so they do come before the council. With a tax credit, once the council signs off on creating the tax credit program, then it just becomes essentially a vending machine, where you put in a development deal that meets whatever criteria you’ve set, and you get the tax credit out of it, and there is no decision-making on a deal by deal basis.
Stephen Janis: Do you have any … You said you had some … Do you have any idea of how any of the other TIFs are performing? There was a report that the Port Covington TIF, or the Port Covington project is delayed. There’s been some cost overruns at Harbor Point. Anything that you can share with us right now about some of the TIFs in terms of what they’re doing?
Bill Henry: I’m no longer on the Taxation and Finance Committee, so I don’t know whether or not that committee has received any additional briefings. In the past, the person who really pushed this issue, at least for the past five years, was former councilman Stokes, who chaired the Taxation and Finance, so I know that there was a lot of effort to keep him as much in the know as possible. You might want to talk to councilwoman Middleton to see if they’re giving her any separate information, although I suspect, given that she was one of the people who I worked with to put this resolution in, and she’s going to be co-chairing the hearing on it, I think that this is going to be when she learns about some of it also.
Stephen Janis: I know you supported the fifteen-dollar-an-hour minimum wage. Is it hard to explain to people in the city that we can give a tax break to six hundred million but we can’t give fifteen-dollar minimum wage to working people? How do you explain that to the people in the city?
Bill Henry: The first way I explain it is that with a TIF, it’s not as much of a tax break as much as it’s a city willing to help out with the financing of a project, because the project continues to pay the same amount of taxes that they would pay anyway. It’s just that we use a portion of that tax money to pay the debt service on the infrastructure that we paid to build …
Stephen Janis: Let me stop you there. The country … In the county the developers pay impact fees. They pay for their own infrastructure. There are several projects [inaudible 00:07:17] where they pay for the … Why is this so specific to the city that we have to pay for the infrastructure, when out seven miles from where we’re standing, they actually pay for infrastructure plus a fee. Why does that exist and …
Bill Henry: I will tell you that the general reason why developers ask for incentives of any kind, whether they’re TIFs, pilots, tax credits, to do projects in the city is because when they’re looking at a project that could be, because not all projects could be in the city or the county. Some have to be in one for some reason, but if it’s a project that could be somewhere else, the reality is our tax rate is twice what it is in the county, and I have had several developers tell me over the years, if we could figure out a way to cut our property tax rate down to the same level as in the county, they wouldn’t be asking for the same level of incentives that they’re asking for now.
Stephen Janis: A broad coalition of housing activists are calling for twenty million dollars for vacant …
Bill Henry: [inaudible 00:08:25]
Stephen Janis: What do you feel about that, given the fact that the city doesn’t seem to have a problem giving out tax breaks to developers? Do you support this proposal?
Bill Henry: I support the proposal. I’m a little concerned about where the money would come from. If it’s money coming from non-community development, I think that’s great. If it comes at the expense of reducing what I think of as already pots of money going to other community development initiatives, we’ll have to weigh whether or not this is the best spending of that kind of money. If we were talking about taking forty million dollars from the police department and reinvesting it in housing and community development, I would say, yes, that makes all the sense in the world. I know that’s an unpopular thing to say, with the crime rate skyrocketing. I’ve got people calling me and emailing me about carjacking in Homeland just the other day.
Stephen Janis: Right, Homeland, a robbery in Homeland.
Bill Henry: Here’s the thing, we’re not going to police our way out of the crime that we’re facing. At some point we have to just dig down and fix the lives of the people who right now are growing up to be criminals, and we have to get ourselves on a different path, because if we continue to have people growing up in blighted neighborhoods, with no real hope of a job or a mainstream future, then we’re just going to continue to see the same problems with crime, and it is less cost-efficient to keep trying to expanding resources in the police department, when all they do is try to catch or deter people who are already inclined to commit crimes. The same way to manage this problem is to grow fewer criminals, and we’re not putting nearly enough resources into that.
Stephen Janis: Wow, that’s pretty profound. I mean, you’re dealing with a district, in your district, where people might not agree with you. Why are you taking this … Well, you already kind of explained that. Are you not running for reelection?
Bill Henry: Well, actually, yes and no. I did announce during the campaign last year that I would not be running for my seat again. I introduced a charter amendment last term saying I didn’t think we should have people serving in council seats for more than three terms. I think public service as a career might be laudable, but no individual office should be a career.
Stephen Janis: A family legacy …
Bill Henry: Last year when I was running for reelection, five years before when I was running for reelection, and four years before that when I was running for this in the first place, I’ve said the same thing all along, which is that when I started working full time in city hall in the fall of 1991, as a staffer for then council president Mary Pat Clark, we spent about a hundred sixty-five million on police, and we spent maybe thirty-seven million on rec and parks, and over the next twenty-five years the whole city budget doubled. The police budget has tripled, and we spend about the same on rec and parks as we used to.
Now, sometimes people will say, well, the city’s lost population, so that’s why we spend less on rec and parks. That’s why we’ve cut the number of active recreation centers in half in the last twenty years, but you know what? We’ve tripled the police department during the same population decrease. What we’ve done for a generation is we’ve decided that the way we’re going to deal with our young people is we’re going to wait till they commit a crime and catch them, instead of giving them meaningful things to do so they don’t become criminals in the first place.