Hotel tax breaks argued

Inner Harbor East eligibility for city aid debated before court

July 23, 1999|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The state's highest court heard arguments yesterday over whether a 750-room hotel being built east of the Inner Harbor is eligible to receive $75 million in tax breaks that were struck down by a lower court late last year.

The Court of Appeals will decide whether H&S Properties Development Co., the real estate arm of baking mogul John Paterakis Sr., and its partners are entitled to tax breaks that Baltimore pledged as part of a deal to build the 31-story hotel.

At a hearing yesterday, attorneys for Baltimore and H&S Properties' Inner Harbor East project argued that a Baltimore circuit judge erred when he ruled that the $117 million hotel failed to meet state criteria for "payment in lieu of taxes" (PILOT) tax breaks because it would not be owned by the city.

In the first of two cases the court will decide, lawyers for the city and H&S Properties argued that the city would be the ultimate owner of the project. Opponents said the city would hold "record title" but not legal title to the hotel.

"This is a case of statutory interpretation," said Sandra Gutman, a city attorney. "In this case, the title holder will be upon completion the mayor and City Council of Baltimore. The city has met all the requirements of the law."

John C. Murphy, a lawyer representing a coalition of community groups opposed to the hotel, contended that the city would have no real control -- and thus no true ownership stake -- in the project.

"You can't manipulate the facts contrary to state law," Murphy said. "To say that normal ownership applies in this case is ludicrous."

The attorneys' sometimes arcane arguments over ownership came despite legislation enacted during the most recent session of the General Assembly that allowed the city to provide the planned Wyndham International Hotel with a new PILOT.

Stephen Goldberg, an Inner Harbor East attorney, said reversing the lower court's decision and obtaining the initial PILOT tax breaks is critical.

"The terms of this PILOT are more favorable to us," Goldberg told the court.

Goldberg told the panel that the new PILOT law calls for payment of roughly $40,000 in property taxes for land annually, or $1 million over the course of the 25-year tax break.

Under the initial PILOT, struck down by Circuit Judge Richard T. Rombro in November, the city subsidy called for the development team to pay $1 a year in property taxes for 25 years.

In the second case, the opposing sides argued over whether the urban renewal plan governing Inner Harbor East was changed for the hotel's benefit.

The original plan allowed a maximum of 350 rooms. Building heights were limited to 180 feet. Today, two hotels with a total of 957 rooms are being built. The taller of the two projects will be 330 feet.

Proponents contended that zoning changes enacted by the City Council allowed the urban renewal plan to be amended and noted that the plan has been amended seven times since it was first enacted.

Murphy called the two "apples and oranges," but David Kinkopf, another Inner Harbor East attorney, said the two are more like "apples and apple pie."

After the hearing, Paterakis said he was pleased with the proceedings.

"That's just my opinion, though, and opinions don't mean anything here, the law does," he said.

It could not be determined when the Court of Appeals will decide the cases.

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