Downtown developer is given a tax break Council majority says it's only tool city has to lure back residents

November 24, 1998|By Gerard Shields | Gerard Shields,SUN STAFF

Despite a projected $25 million budget deficit over the next two years, the Baltimore City Council approved last night an annual tax break of up to $400,000 to a developer of 151 luxury apartments downtown.

The council voted 16-3 to absolve A&R Development Corp. from paying the full taxes on its 11 S. Eutaw St. project in return for a schedule of lower payments.

Three council members from the 1st District, where the council this year granted the proposed Wyndham Hotel a 20-year tax break estimated at $25 million, opposed the measure last night.

Councilman John L. Cain, of the 1st District, called the decision an abuse of state law that allows payments in lieu of taxes, or PILOTS, to be used as economic development tools. The law was established to create low-income housing, Cain contended.

"We desperately need these tax dollars," Cain said. "Now, PILOTS are used for every little thing under the sun."

But the majority of council members supported the measure, saying the tax breaks are a way to lure residents back into the city.

The A&R project will be built above an eight-story city parking garage. The apartments will help fulfill a key city goal -- to create more residential housing downtown.

In return for the tax breaks, the developer will pay the city an annual fee on an escalating scale. The city will receive $50,000 a year for the first five years, with that figure growing to $200,000 in payments after 15 years before full taxes are assessed after 20 years. The projected annual tax bill is $450,000.

Councilman Martin O'Malley of the 3rd District, chairman of the Taxation and Finance Committee, views the tax breaks as the only economic tool the city has to lure new development.

Residents are leaving Baltimore at about 1,000 a month, according to city planners, and businesses continue to vanish, the latest being the Piper & Marbury law firm.

O'Malley said the project will bring the city $50,000 a year it would not have if the apartments weren't built.

Developers Theo Rogers and William L. Adams have told the city the tax breaks are critical to the project and obtaining an additional $8.5 million private loan.

VTC Council President Lawrence A. Bell III supported last night's action.

"Quite frankly, we're in the midst of a booming economy that won't last forever," Bell said. "We have to take advantage of the good times while they last."

The vote was not the last that the council will face on the issue of PILOTS. A $350 million renovation of downtown's west side will also depend on using tax breaks to lure developers. Cain vowed to fight the trend.

Pub Date: 11/24/98

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