Della regrets HarborView tax break $2 million waiver bigger than sponsor of law expected

'I suppose I was naive'

Mayor defends move as way to rescue tower from tax sale

February 27, 1997|By JoAnna Daemmrich and Ivan Penn | JoAnna Daemmrich and Ivan Penn,SUN STAFF

As Baltimore authorized as much as a $2.05 million tax break yesterday for the HarborView luxury condominium tower, the man who made the deal possible said he regretted it.

Baltimore Sen. George W. Della Jr., who quietly pushed through the legislation that created the tax plan, said he never envisioned a tax waiver of the magnitude that the city gave the owners of the struggling upscale development on the Inner Harbor.

"I'm sorry I put the thing in. I'm serious," Della said after a day of irate calls from residents in his Federal Hill district. "I suppose I was naive in my thinking, but I thought it was good legislation that gave the city the ability to help developers in financial straits. I had no idea it would be this large."

Della, a Democrat, was the lone sponsor of the bill, which passed last year. The bill did not mention HarborView, but Della said he introduced it for the developers. Henry Bogdan, the mayor's legislative liaison, was the only person to testify at a hearing on the bill.

Some members of the city Board of Estimates also raised questions yesterday, but they approved the HarborView arrangement with one abstention.

Della was one of the leaders of the community fight in the late 1980s against the construction of the 27-story tower overlooking the harbor. In explaining his change of heart, Della gave the same rationale used by city officials to justify the tax break, that he feared the developers would pull out of the prominent project.

Mayor Kurt L. Schmoke defended the unusual government subsidy, saying he wanted to save HarborView from being auctioned at a tax sale. The owners -- HarborView Properties Development Co. and Parkway Holdings Ltd. -- owe more than $2 million in back taxes, interest and penalties for the last fiscal year and $1.67 million for the year that ends June 30.

"It's a tough call," Schmoke acknowledged. "From an economic development view, there's strong arguments for doing this. But if you're a property owner sitting at home about to pay your tax bill, you may be saying, 'Hey, this isn't fair. Why can't I get some relief?' "

Under the agreement, the city will forgive $500,000 in annual property taxes for two years and $350,000 for three years on the elegant condominiums that HarborView has rented because of disappointing sales.

Instead of taxes, the city will collect smaller payments based on the rent income from the mostly unsold units.

HarborView will begin making $500,000 payments on its back taxes this week until the total reaches $1.8 million by May 1. The partnership will pay an additional $850,000 in taxes next year, with the city forgiving $1 million in the taxes owed for 1996 and 1997. Thereafter, the city assumes HarborView will pay its tax bill on time but will waive $350,000 a year through 2000.

The deal outraged community leaders in South Baltimore and caught many politicians by surprise, including some in Annapolis who had approved the legislation for it last year.

"This corporate welfare is out of hand," said Del. Cornell N. Dypski, a Democrat who is vice chairman of the city's House delegation. He voted for the bill but said he didn't remember much about it. "Just because we have enabling legislation doesn't mean the city should do it," Dypski said.

After the bill passed, a committee made up of representatives of the mayor, comptroller and City Council president worked out the financial arrangement. But council members who represent the waterfront neighborhoods said they didn't know about it. And they were inundated by calls from residents complaining that they, too, had been deliberately left in the dark.

Councilwoman Lois A. Garey told the Board of Estimates that her constituents never had a chance to get any details, let alone protest.

Many were particularly upset that the developers wanted the tax waiver in part so that they could proceed with a second luxury apartment tower nearby.

"The community doesn't like the development in the first place. Now we're going to give them a tax break and let them build more?" Garey said. "Give me a break."

"We're subsidizing a high-income dwelling, which I don't think we ought to be doing," said Robert Gisriel, president of the Federal Hill South neighborhood association. "I feel really resentful that I pay full property taxes and a project that I think will be detrimental to the community gets a tax benefit. This happened very quickly, and we had no chance to organize any opposition."

Comptroller Joan M. Pratt questioned whether the HarborView partners had tried to sell any land or other assets to pay the back taxes before seeking a break. The financial backer, Parkway, is a Singapore-based conglomerate with residential projects in London and Malaysia.

Pratt also pointed out that the board had not been given audited, up-to-date financial statements. "It's kind of difficult to make a decision to give them tax relief if we don't have financial statements on whether they have the ability to pay," she said.

Nevertheless, Pratt was among the four board members who voted for the tax break, contingent on getting the financial reports.

Council President Lawrence A. Bell III, who chairs the board, abstained, saying he feared setting a precedent for owners of other financially troubled developments.

The city's arrangement with HarborView is uncommon. Local governments usually use such "payments in lieu of taxes" to collect money from nonprofit housing organizations.

The last time the city used such an arrangement for a private developer was for Waterloo Place, a 172-unit apartment project downtown, Schmoke said.

Della said the Schmoke administration had assured him that his bill was broad enough to benefit other developers. But when asked whether any other struggling condominium project could qualify, Schmoke said it was doubtful.

Pub Date: 2/27/97

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