Tax break law for city developers is passed

Assembly enacts measure that allows city to waive 95% of real estate taxes

April 13, 1999|By Timothy B. Wheeler | Timothy B. Wheeler,SUN STAFF

Legislation giving lucrative tax breaks to developers of hotels and other major projects in downtown Baltimore cleared the General Assembly last night in the waning hours of the 90-day session.

The measure, a priority of downtown development advocates, received overwhelming approval from the Senate and House of Delegates, despite complaints from some Baltimore community groups about the bill's favored treatment of politically connected developers, such as bakery magnate John Paterakis Sr.

The bill passed the Senate by a vote of 46-1, with Baltimore Democrat Perry Sfikas the lone dissenter, and the House by 115-19. The governor is expected to sign it.

The legislation will allow city officials to negotiate payment-in-lieu-of-tax agreements, known as PILOTs, with developers of hotels, offices, stores, housing and parking garages.

City officials had granted such tax breaks to the 750-room Wyndham International Hotel being built on the east side of the Inner Harbor by a group led by Paterakis. But a Circuit Court last fall struck down the old PILOT law, prompting the city to seek new legislative authority.

Qualified developers could forgo up to 95 percent of their real estate taxes for up to 25 years. They must still pay 5 percent of their property taxes, a major increase from the $1-a-year deals under some old PILOT agreements.

But lawmakers grandfathered Paterakis' hotel. At his behest they also softened the bill's prohibition against gambling at any project receiving tax breaks.

Sen. Barbara A. Hoffman, chairman of the Budget and Taxation Committee, defended the changes made for Paterakis, who made a rare visit to Annapolis last week to meet with her and other key lawmakers.

She noted that the city had approved a PILOT agreement with Paterakis before a Circuit Court judge overturned it. Construction recently began on the hotel.

"He already had his plans and financing," said Hoffman, a Democrat representing the 42nd District straddling the city's northwest border with Baltimore County. "We didn't want him to have to do it [negotiate a new deal] over again."

Hoffman also said Paterakis asked for flexibility in the law to offer new lottery games in his hotel. The measure bars any gaming that is not already legal, but says the city may permit unspecified new games authorized by the Maryland State Lottery. She insisted lawmakers did not intend to allow slot machines, which cannot be permitted without a change in state law.

"The day that will happen, pigs will fly," she said.

John Murphy, a lawyer for the Waterfront Coalition, which had successfully sued to overturn the Wyndham PILOT, contended that the hotel did not deserve a tax break because it was too far from the Baltimore Convention Center.

He questioned the bill's treatment of Paterakis, noting that construction had started after the judge had invalidated his tax break.

City officials were relieved at the final passage of the PILOT bill, which had languished as developers and officials haggled over language affecting millions of dollars.

"I think the bill as it's come out is a really strong piece of legislation and will enable the city in a prudent and measured way to do the kind of economic development we couldn't do without it," said M. J. "Jay" Brodie, who heads the Baltimore Development Corp., the city's economic development agency.

Legislators turned aside a bid by lawyer and businessman Peter G. Angelos to alter the bill in a way that could have gotten a PILOT for his redevelopment of One Charles Center. Hoffman said the Orioles owner already had begun work on the project without any tax breaks.

Angelos is planning an 850-room Grand Hyatt Hotel across the street from the Convention Center on city owned land, which may qualify for a tax break.

Pub Date: 4/13/99

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