Deficit-ridden city has money to burn

Scandal: Some merchants reap a windfall from city's buyout in the westside renewal area of downtown.

March 11, 2001

BALTIMORE may have to shutter libraries and sack hundreds of municipal employees to soften the blow from a projected $21 million budget deficit.

But that hasn't stopped Mayor Martin O'Malley from throwing millions of dollars at merchants being relocated to facilitate westside redevelopment plans.

Consider:

The city is forking over double what politically connected owners paid for a strip club building just four years ago. Not only that, but the city is proposing to sell the club another downtown building for $480,000 below appraised valued.

The city is spending $6.9 million to acquire a 90-room Howard Street discount hotel. That's more than double the $3 million the owners paid just two years ago.

The biggest winners in this mind-boggling windfall, though, are four shops in the old Stewart's building on Howard Street. They are being paid $1.5 million in relocation costs - even though they're month-to-month renters who had no secure future as tenants.

Does it really cost $700,000 to relocate one jewelry shop or $400,000 to move a small record store from rental premises?

Of course not.

But that's what the city's paying. The O'Malley administration has told store owners it's willing to buy them out lock, stock and barrel.

That's scandalous at a time when the city is so cash-strapped.

Laughably, Sharon Grinnell, chief operating officer of the Baltimore Development Corp., is defending the practice.

"Businesses can opt to relocate or go out of business. That's always the option with relocation," she insisted.

A jewelry store with $700,000 worth of merchandise in the largely unoccupied Stewart's building?

"That's for how much the merchandise was appraised, based on purchase and resale prices," Ms. Grinnell said.

In some cases, shops that liquidate have subsequently applied for low-interest loans from the BDC to start businesses elsewhere. And City Hall sees nothing wrong with this scam. Neither the mayor nor the City Council is batting an eye at such outrageous demands.

Instead, they are scrambling to find $30 million to pay acquisition costs and relocation claims. Most of that money is from bonds city taxpayers have approved for various economic development purposes.

Relocation estimates for just 16 merchants in the Lexington Mall area total $3.2 million, city records show.

So far, the BDC has paid for the relocation of 51 westside businesses. Thirty-eight others either have liquidated or are still at their old locations.

"It's madness," says a well-informed private-sector official. He said some business operators inflated their regular inventory to get a better liquidation price.

The Sun's editorial page has been a strong supporter of a succession of efforts over the past three decades to breathe new life into the Howard Street corridor, once Baltimore's Fifth Avenue. We still favor renewal.

But now that the latest revitalization project is finally moving ahead, the $350 million plan has spawned questionable pandering to a wide variety of special-interest groups. And elected officials don't seem to care.

When historic preservationists threatened to stop the project, the city rushed to placate them. The original development strategy was revised to include sweeping agreements to safeguard landmarks and old buildings that some considered not worth saving.

Politicians also came to the aid of the Baltimore Symphony Orchestra. It wants guarantees that the renovated Hippodrome regional performing arts complex will not take business away from its Joseph Meyerhoff Symphony Hall a mile away.

The shrewdest of the renewal area merchants hired aggressive lawyers to protect their interests. Some have struck stupendous deals.

Two buildings the city bought at a premium, for example, belonged to Ioannis "Crazy John" Kafouros, a felon who is an international fugitive.

Kenneth "Kenny Bird" Jackson also stands out in this crowd. He is the sole African-American among those controlling major buildings; the rest are overwhelmingly white or Asian. He also runs a strip club, which is difficult to relocate because of city restrictions against smut.

Mr. Jackson has a criminal past. He also cultivates politicians who are now rushing to his defense. Why, they ask, should this minority businessman be punished for the nature of his enterprise when everyone else seems to make a bundle in the westside extravagance?

Relocation compensations are ripe for flim-flam, unless excessive claims are challenged.

There are remedies: Nine years ago, the city was willing to pay a rundown West Baltimore bottling plant $5.5 million in relocation costs until federal auditors protested. The matter ended up in court. The bottling plant settled for $1.4 million.

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