Boondoggle on Baltimore Street

March 16, 1992

The Department of Housing and Urban Development is absolutely correct in its criticism of Baltimore's use and monitoring of federal grants, which city Housing Commissioner Robert W. Hearn is trying to dismiss as a "rehash" of earlier audits.

The latest HUD audit reveals a situation that boggles the mind. The $237,000 relocation of a West Baltimore bottling company has escalated into a $5.5 million boondoggle that may not even benefit the city because the company wants to move its plant HTC and 40 jobs to Harford County!

The relocation involves a number of bottling-related companies apparently operating under a single ownership at 930 West Baltimore Street. They are the last tenants on a block the city has been clearing for as-yet unspecified housing or commercial redevelopment use.

Here is the history. A building used by Custom Laboratories Inc., New Gold Bottling and Sun Spot Soda was appraised in 1986 at $215,000, with city officials concluding the companies' "equipment has little or no sale value except possibly as scrap." Telling HUD the relocation would benefit low- and moderate-income residents, the city began acquiring the property (and others in the 800 and 900 blocks) with federal funds in the mid-1980s.

No feasibility studies were done, no redevelopment costs estimated. According to the HUD audit, city officials did not even visit the site. Yet the city has negotiated a relocation deal that would give the owners of the aging bottling plant 20 times the originally appraised value for property with diminishing value and obsolete equipment.

"We believe there is a windfall profit to the business because new equipment will replace the old; new equipment, purchased with CDBG funds, can be depreciated; the relocated and refurbished business can be sold without restriction, and relocation benefits are not taxable," the audit report says. Unless the city can justify its actions, HUD may demand its grants back.

Residents and community organizations in the Hollins Market area, Poppleton and Union Square have been incredulously watching this relocation case unfold. At a recent Hollins Market Neighborhood Association meeting, Mayor Kurt L. Schmoke said he was not aware of the situation but thought the $5.5 million figure "sounds a bit high."

The figure is correct, Mr. Mayor, and the final cost is not even in yet.

The West Baltimore Street case is the latest one cited in HUD audits that suggest systemic flaws in the city's planning and oversight procedures of federal grants. We urge Mayor Schmoke not to accept excuses from his underlings. This is one boondoggle that deserves thorough investigation.

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