Baltimore Officials Tout Massive Giveback to Seal Tax Break Deal, But is it Fair?
Developers promise millions in community investments in exchange for subsidy to build Port Covington, but questions remain about how a massive $600 million tax break for Under Armor CEO Kevin Plank will address entrenched poverty and ongoing economic inequity in the city.
TAYA GRAHAM, TRNN: This is Taya Graham and Stephen Janis reporting for the Real News Network in Baltimore City, Maryland.
We’re standing inside the city garage where a 100-million-dollar deal was just announced between city officials and Sagamore Development. Sagamore which is run by Under Armour CEO Kevin Plank, has asked for a controversial 500-million-dollar tax break to build Port Covington. But some city officials like councilmen Carl Stokes argue that Kevin Plank needs to give more. And now both sides say that indeed has occurred. The deal includes guarantees to employ city residents, invest in new projects, and increase the percentage of affordable housing to be built for the project itself. It’s an array of give backs city officials say makes the deal much more palatable for the public but equitable.
MAYOR STEPHANIE RAWLINGS-BLAKE: So my office began working with Sagamore Development months ago to make sure that all of the people of Baltimore benefited from Port Covington. From this transformative development project for the city of Baltimore. The initial MOU’s were only the baseline and I’ve been steadfast in following through on the promise I made in April to fully address the concerns that were raised through this new agreement. By working collaboratively with Sagamore, residents, and our elected officials, I have fulfilled that promise to you.
JACK YOUNG: Sagamore knows from the start, I said this deal will not go anywhere unless you get the people in the room and come out with a deal that’s good for Baltimore and they’ve done that.
REV. GLENNA HUBER: While I’m not a singer, I feel like I want to break out in song. So I’m going to. Don’t you feel a brand new day? Don’t you feel a brand new day? Hey, 1978.
GRAHAM: So Stephen give us some of the details on this deal.
STEPHEN JANIS, TRNN: It’s one of the deals constructed around the give backs of the community. Investment in community based projects, a guarantee to build at least 20% more affordable housing. Interestingly, 40% of that affordable housing can be put up anywhere in the city. A guarantee of a certain wage, 23 dollars an hour for people who are employed here, who live in the city. A guarantee that 50% of the new jobs that are created here will go to people who work or live in the city. And other various amounts of money dedicated to projects around the city community initiatives. Now the details were not–it wasn’t each dollar amount was assigned to something specific but it was generalized targets which will ultimately, they claim, add up to 100 million dollars for the project going for that’s sort of a give back. That’s the total of the deal right now. Sort of the outline that they’ve sketched out for us.
GRAHAM: So Stephen you covered the last big tax break, a 107-million-dollar deal for Michael Beatty Harbor Point. How is this different?
JANIS: Well, Michael Beatty really didn’t give back too much. He gave 2.5 million to Living Classroom, the same organization you see today build and ask for money for affordable housing and he rejected that claim. So technically Sagamore came back to the table with a little bit more than Harbor Point did. And it’s interesting because right now Harbor Point, they’ve actually increased the amount of money they’re spending on the TIF and there’s questions about that project. But nevertheless this is definitely more substantive and they’re making a much bigger deal out of it. So it’s something that we’ll have to see what happens. But it certainly is an improvement. You can’t say it’s not an improvement from the Harbor Point deal that was made just 3 years ago for 107 million as you pointed out. So it was still a big deal. So this is an improvement depending on what happens.
SPEAKER: Under Armour is un-afraid. Under Armour is un-afraid. Under Armour is un-afraid.
GRAHAM: The last time we were here at [City Garage] there was actually a disruption. It was a [one thousand friends] meeting where they were discussing Port Covington, having dinner, having wine, having drinks, showing up to City Garage. There was a protest that interrupted the entire proceeding. Now how much do you think that the protestors coming down to City Garage as well as going to the TIF hearings, how much impact do you think they had? Do you think this is the reason why they renegotiated this deal?
JANIS: I think there are two reasons. I think the protestors did have an impact because I think in the Harbor Point there was some protest but it wasn’t as concentrated and I think the actions that took place sort of embarrassed the people of Sagamore had a big impact. The other thing was that we just experienced Freddie Gray, the death of Freddie Gray, and the sort of national spotlight on the abject poverty and the division, class divisions in Baltimore, and the division between the poor part of the city and the rich part of the city. And that has been front and center. And it seems to me, glaring to have a situation where you’re going to give a 500-million-dollar tax break to an alleged billionaire when you have entrenched poverty and many issues that people have been talking about have not been addressed.
So I think that was a big, big part of it was just simply it was embarrassing to the city. And number three I think Carl Stokes, councilmen Carl Stokes, this bill was in his committee. It had to go through his committee Taxes and Finance to get out and to be approved and I think that Carl Stokes, which interestingly he was not here today, I think Carl Stokes had a lot to do with it because I think his basic stated philosophy was it wasn’t going to happen again on his watch. He said you know I’ll just wait. We can wait till next council session. I’ll be out of here. I think that too, the urges he was trying to get this done with this council had a lot to do with it too.
GRAHAM: So a TIF or a tax increment financing deal means the city would have to forgo collecting future property taxes. Do you think this deal is still worth it? Isn’t the city actually losing millions of dollars?
JANIS: Well that’s what’s interesting about this whole thing. There’s this celebration of 100 million dollars but let’s remember that the city is almost going to have to forgo all the property taxes generated by these new properties for decades. And the 535 million dollars is not really the figure. It’s about a 625 million dollars in bonds that are authorized. Then if you include interest on those bonds which basically people don’t understand, the amount of money, the developer gets right up front so the city has to sell bonds to give them all of this. Because all the future tax revenues are calculated and they have to give the tax money up front.
So the bonds are actually 1.2 billion dollars once they’re paid off. 1.2 billion dollars is a year and a half of the entire property tax collection of the entire city. So it’s a major sacrifice. I mean 100 million depending on how it shakes out is certainly nothing to sneeze at. But when you put it against the amount of money the city is foregoing in property taxes everyone has to pay, you’re talking about a huge cost benefit analysis I don’t think really emerges in the calculus and the politics that we’ve seen today. I think people sort of like the city hotel which has lost money consistently in other deals that I’ve seen happen, there’s this euphoria about we struck this deal, we get a little bit back.
Well they’re giving much less than they’re getting. They’re getting 1.2 billion dollars. They’re giving 100 million. Who wouldn’t make that kind of deal? That’s a good deal for the developers.
GRAHAM: So my final question is what type of precedent does this set for these kind of deals?
JANIS: Well I think what you saw with the Harbor Point in 2013 was 100 million dollars. It was the biggest TIF in city history and there was a lot of controversy about it. But when it went through and sailed through, I think it set a precedent where people of Port Covington said well if they can get 100 million we should be able to get 500 million. And I think that every developer now who comes into this city with any project that is over a certain size is going to look at this and say well my god they gave them half a billion, I should at least get 50 million or 100 million.
And we have other TIFs. We have the Poppleton TIF which is the University of Maryland Bio Tech Park where they’re giving 18 million to a firm that is building office space. Not even building infrastructure. I think at this point it is literally at a point where everyone who comes in here regardless of what type of development they’re doing they’re going to seek money because they’re going to say look what they did for Kevin Plank.
GRAHAM: Now everyone who has been negotiating this Port Covington deal whether it is city officials or Sagamore Development, the assumption has been that Port Covington will be a success when Sagamore Development builds it. But isn’t this the first time that Sagamore has actually taken on a project like this?
JANIS: This is a massive scale development and that’s an excellent development. This is something that this is in the upper echelon of development. You’re talking about a 30 year supposedly 4-billion-dollar project. I think it’s 4 million square feet of office space. Just incredibly complex building. And you’ve got a city where vacancy rates for commercial development are 18-20%.
I’ve talked to people, there is literally no demand for commercial office space. You’ve got apartment buildings that have been built that are like 20-30% occupied on Calvert Street, on St. Paul Street. So you’re kind of basing this whole project on people that don’t really exist. What usually happens and what’s happening in Harbor East is it shuffles the table and people come from Midtown and they move over to Harbor East because it’s interesting and I don’t know–the main thing that Baltimore needs to do is bring people in.
But why would this be any different from any other situation? Why does this suddenly make–we haven’t lowered the tax rate. You know you still have some of the structural problems like crime and bad schools. If it doesn’t improve that I don’t know how building something new brings more people in.
GRAHAM: This is Taya Graham and Stephen Janis, reporting for the Real News Network in Baltimore City, Maryland.
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