$2 million tax cut to aid HarborView City would drop taxes on unsold condo units

February 26, 1997|By JoAnna Daemmrich | JoAnna Daemmrich,SUN STAFF

In an unusual government subsidy, Baltimore is poised to give as much as a $2 million tax break to the owners of HarborView for luxury condominiums they have been unable to sell in the tower overlooking the Inner Harbor.

Top city officials are expected to approve a deal today to forgive from $350,000 to $500,000 in annual property taxes for five years on the elegant condominiums that HarborView has been forced to rent because of disappointing sales.

Instead of the taxes owed by the HarborView partnership, the city will collect far smaller payments based on the rent flow under a program typically used by nonprofit housing groups.

Local governments routinely offer subsidies in the form of tax breaks, grants and loans to private developers in the name of economic development. But they rarely waive property taxes on projects once they're built.

City Finance Director William R. Brown Jr. defended forgiving some taxes as a way to guide the prominent development through a rough financial time and boost downtown residency.

Equally important, he said, is that the plan will make HarborView pay the more than $2 million it owes in back taxes, interest and penalties. The city will continue to collect taxes on the marina, parking garage and sold units.

"With such a large investment, it would be best to do something to help for this period of time," he said. "The objective obviously is to get these units sold."

Only 39 of the 252 condominiums have been sold since the 27-story tower opened in 1993. Purchase prices have ranged from $190,000 for two-bedroom units at the marina level to $550,000 on the skyline level and $750,000 to $1.5 million in the penthouse.

Ambitious plans

Despite losing money, the owners -- HarborView Properties Development Corp. and Parkway Holdings Ltd., a $1.5 billion conglomerate based in Singapore -- still have ambitious plans to create a resort-style waterfront village and want to proceed with a second upscale apartment building.

Richard A. Swirnow, president of HarborView Properties, was out of town last night and could not be reached. He is expected to join Brown in providing details on the tax arrangement today when it will be voted on by the Board of Estimates, the city's financial panel.

News of the tax break surprised community leaders in Federal Hill, who had vigorously protested the design and construction of the high-rise condominium tower. Federal Hill residents objected to the brightly illuminated top that resembles a lighthouse and argued the building would block views of the harbor and damage the fabric of the neighborhood.

'They should pay their taxes'

"My feeling is they should pay their taxes just like the rest of us," said Howard Feldman, past president and board member of the Federal Hill South neighborhood group. "Most people in the neighborhood felt that project would not take off because the harbor has not yet proven to be a condo place. The developers should have known, and they took that risk."

Councilman Nicholas C. D'Adamo Jr., who represents southern Baltimore, said: "It's definitely the wrong message to be sending to the citizens of Baltimore to give one special interest group a tax break."

A bill that created the HarborView tax plan was quietly approved by the General Assembly last year. The sponsor was state Sen. (( George W. Della Jr., a South Baltimore Democrat who had challenged the mayor when he tried to introduce legislation in 1994 to offer tax breaks for HarborView condominium buyers. Mayor Kurt L. Schmoke withdrew the measure that year after getting a frosty reception from the city delegation. Della could not be reached last night.

Under the plan, the city would forgo up to $500,000 in property taxes owed for the fiscal year that ended June 30, 1996, and $500,000 for the current fiscal year. Another $350,000 would be waived in each of the next three years as long as HarborView had more than 100 unsold condominiums. The arrangement expires if there are fewer than 100 rental units.

In return, the HarborView partners will pay by May 1 a total of $1.8 million in back property taxes, interest and penalties for the last fiscal year and fees based on the rent flow. By March 1, 1998, the partners will pay another $1.6 million in taxes and rent-based payments in lieu of taxes. After that, the city is assuming the HarborView owners will pay their taxes on time, and more of the condominiums will have individual owners, Brown said.

The rent-based payments comprise 10 percent of the rent flow during the five-year agreement. For example, for fiscal 1996, the city will collect $542,000 from the rents and waive $500,000 in taxes.

Like Oriole Park

The arrangement, called payment in lieu of taxes, is commonly used by local governments to collect fees from tax-exempt groups that own properties. In Baltimore, Oriole Park at Camden Yards makes such payments instead of taxes, as do numerous nonprofit housing organizations.

Robert Young, associate director of the Maryland Department of Assessments and Taxation, said the arrangements were most common with nonprofit groups, but a few others have been approved by local governments to boost economic development.

HarborView Development Co. and Parkway, which owns residential projects in London, Malaysia and Melbourne, Australia, lowered their property tax bill in 1994 by successfully appealing the assessment of the condominium tower and surrounding land.

Pub Date: 2/26/97

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