City seeks tax cut for 1 Light St. 25-year break wanted for tower to replace closed Southern Hotel

'Assistance here critical'

Downtown skyscraper to have office, retail space, hotel, garage

Commercial real estate

October 24, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

Baltimore's economic development agency is proposing a multimillion-dollar property tax cut for the developers of a new, 35-story skyscraper downtown.

Enabling legislation for the tax cut is expected to be introduced in the City Council Monday.

The ordinance would allow the 1 Light St. tower planned for the southeast corner of Light and Baltimore streets -- site of the long-dormant Southern Hotel -- to pay lower taxes for a quarter of a century on at least a portion of the $120.2 million project.

The tax reduction, under a "payment in lieu of taxes" -- or PILOT -- program, would slash property taxes for two components of the 980,000-square-foot building, a 267-room Embassy Suites Hotel and a 660-space parking garage.

"Authorizing the use of a PILOT is in the best interest of the city and will achieve significant public benefits," the proposed ordinance reads.

Under the PILOT program for 1 Light St., the city would provide subsidies to the hotel and parking garage valued at $7.96 million. The developers, J. J. Clarke Enterprises Inc. of Baltimore, Capital Guidance Corp. of Geneva, and FelCor Lodging Trust Inc. of Dallas would save $6.1 million in taxes, according to city projections.

The PILOT program would not apply to 385,000 square feet of Class A office space that the Clarke and Capital Guidance team plans to develop, or 18,000 square feet of street-level retail and restaurant space.

"What we're proposing is to put a taxable asset on the city's tax rolls, but they just wouldn't collect some taxes for a period of time," said J. Joseph Clarke, president of J. J. Clarke Enterprises. "The city assistance here is critical."

The Baltimore Development Corp. contends that the benefits of 1 Light St.'s development would include redevelopment of downtown's financial district, more jobs, the promotion of tourism and increased public parking.

The corporation, which did not return telephone calls yesterday for comment on the PILOT plan for 1 Light St., recently blessed a similar program to spur development of the $134 million Wyndham hotel, which is nearing construction in Inner Harbor East.

The BDC projects that the 1 Light St. hotel would create 275 permanent jobs and generate $1.1 million in taxes in its first five years. In addition, the hotel would pay the usual 8 percent hotel room tax and share profit with the city for 20 years from its completion.

And the garage -- desperately needed as the downtown area grapples with a shortage of more than 3,600 spaces daily -- is expected to generate $177,000 in parking taxes in its first year of operation, even with a PILOT requiring the developers to pay only $1 a year in property taxes.

The garage PILOT arrangement would run 25 years. The hotel tax program would last for a decade.

But even if the developers obtain the PILOT, several hurdles remain, including obtaining demolition permits for six buildings -- including the Southern Hotel -- along Light, Baltimore and Redwood streets.

The Clarke/Capital Guidance team also would have to obtain construction financing and lure office tenants before building could begin.

The developers have received demolition approval from the city's Commission on Historic and Architectural Preservation, and they obtained design approval from the city's Architectural Review Board in March.

Clarke estimates that the project could be completed in March 2001, if city approvals are forthcoming and the six-month demolition project proceeds.

Pub Date: 10/24/98

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