House approves PILOT tax bill

Delegates vote 95-28 for break on property taxes worth millions

Senate opposition expected

Commercial development

April 10, 1999|By Timothy B. Wheeler | Timothy B. Wheeler,SUN STAFF

Legislation that would give millions in tax breaks to developers of downtown Baltimore hotels and other major city projects received approval from the House of Delegates yesterday by a vote of 95 to 28.

The bill now returns to the Senate, where its prospects are uncertain. A key Senate committee chairwoman refuses to accept changes the House made that would benefit two development projects backed by bakery magnate John Paterakis Sr. and Baltimore Orioles owner Peter G. Angelos.

"I'm not going to do it," said Democratic Sen. Barbara A. Hoffman, chairwoman of the Budget and Taxation Committee. Hoffman, who represents the 42nd District in Baltimore and Baltimore County, vowed not to make it any easier for developers to get such large tax breaks.

The bill, a top priority for downtown development advocates, would let developers in designated urban-renewal areas in Baltimore forgo paying property taxes for up to 25 years. It is bitterly opposed by some community groups, who complain that homeowners are being forced to shoulder an unfair tax burden while developers favored by City Hall get huge breaks.

City officials have negotiated payment-in-lieu-of-tax agreements, or PILOTs, with developers of the 750-room Wyndham International Hotel at Inner Harbor East and an 850-room Grand Hyatt Hotel near the Baltimore Convention Center. Paterakis is a partner in the Wyndham, and Angelos in the Hyatt project. Angelos also has undertaken renovation of a Charles Center office tower.

Last year, a city Circuit Court judge struck down the law under which Baltimore granted those projects PILOTs, so city officials had new legislation authorizing such agreements introduced this year.

The Senate approved the PILOT bill last month. But it imposed several conditions at Hoffman's urging, including a requirement that developers pay at least 5 percent of the property taxes they otherwise would owe on their projects. Developers had been able to pay as little as $1 a year.

Lobbyists for developers have since been pressing for removal or relaxation of the Senate's conditions. Paterakis, co-owner of H&S Bakeries, even made a rare appearance at the State House on Thursday, where he met with Senate President Thomas V. Mike Miller and several Baltimore-area senators. He also met with Del. Sheila E. Hixson, a Montgomery County Democrat, who is chairwoman of the House Ways and Means Committee. Hixson's panel voted the PILOT bill out to the House floor that day.

Hoffman said Paterakis was hoping to amend the bill to allow the current PILOT he negotiated with the city to remain operative. "He doesn't want to start over again, with the lawyers and everything," the senator said. "Time is money. He doesn't want to have to renegotiate."

Paterakis said he did not believe he should now be required to pay 5 percent of the property taxes on the $134 million Wyndham hotel.

"We've already made an agreement with the city," Paterakis said.

The Wyndham project would have to pay $150,000 a year to the city if it paid 5 percent of its property taxes. The PILOT would provide a tax break worth $3 million a year for 25 years.

Paterakis insisted that he doesn't really object to paying taxes, and his hotel project isn't threatened by the additional expense, since construction already has begun.

"If I didn't want to pay taxes," he said, "I could go up to Delaware, and not have to pay taxes at all."

The House removed the requirement that developers pay 5 percent of their property taxes, and it made another change that legislators said Angelos requested for his Charles Center project. That change reduced the amount of investment needed to qualify for tax breaks from $20 million to $12.5 million.

In all, Angelos intends to spend $12 million to add parking, retail and restaurant space, and a new stairwell and entrance to the 320,000-square-foot building, which was completed in 1963. Angelos bought One Charles Center in October 1996 for $6 million.

Hoffman acknowledged that tax breaks are needed to help make downtown development projects viable, but said she must balance that against the resentment of her home-owning constituents who pay the highest real estate taxes in the state.

The senator said she would not agree to the House's changes, and she said city officials must informally work out the differences between the two chambers if they want to see the measure become law.

"I'm afraid some people are misreading this as an entitlement to a tax abatement," she said. "Not every project is entitled to a PILOT. Otherwise, there's no one left to pay taxes, other than the middle class."

Staff writers Kevin McQuaid and Thomas W. Waldron contributed to this article.

Pub Date: 4/10/99

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