The city approved low-interest loans yesterday worth a total of $1.45 million that will benefit two of the area's most prominent developers and encourage two longtime businesses to move to new locations within Baltimore.
H&S Bakery Inc., operated by developer John Paterakis Sr., was awarded a $600,000 loan by the city's Board of Estimates to build a bakery in Highlandtown and move an existing distribution center to there from Fells Point.
Ernst & Young LLP was awarded an $850,000 loan to move from 1 N. Charles St. to an Inner Harbor office building being developed by the Cordish Co.
All of Ernst & Young's loan and two-thirds of H&S' will convert to grants if the businesses add a specific number of jobs.
Both deals will keep local businesses from moving to the suburbs and will add jobs, said Andrew B. Frank, executive vice president of Baltimore Development Corp., the city's economic development arm.
"It's very numbers-oriented," he said. "There are higher costs associated with being in the city, and we never try and close the gap. But we do help to narrow the gap."
Frank said the city estimates that H&S will pay back its subsidy through taxes before the fourth year of its loan. Ernst &Young's aid would be repaid before the fifth year.
The H&S move would allow for the continued gentrification of Fells Point and Inner Harbor East, where Paterakis has built several buildings, including the Baltimore Marriott Waterfront hotel.
Michael Beatty, a vice president at the affiliated H&S Properties Development Corp., said Paterakis will wait to move the distribution center from Fells Point until he has an office user that wants the space. He has no immediate plans to move the entire six-block bakery operation from its home of 58 years.
However, the city's loan to H&S covers both the distribution center move and construction of a bakery at 3800 E. Baltimore St., a former Esskay Quality Meats Co. processing plant. The new bakery will become home to a bakery operation H&S acquired in Martinsburg, W.Va.
The 13-acre Highlandtown property, owned by the Essex Community College Foundation, is among the largest industrial sites in the city. The nonprofit foundation hopes to fund scholarships for the college with proceeds from leasing the site to H&S.
The site, which has been vandalized and even set ablaze since Esskay closed its doors in 1992, was cleared using grants and loans from the city, state and private entities. But the site needed additional cleanup that cost H&S about $1.3 million, Beatty said. It is situated in a state enterprise zone, which will afford H&S tax breaks.
Paterakis had offers of subsidies from three other cities that wanted him to move the operations from the Martinsburg bakery to them, but he wanted to locate it in Highlandtown to help revitalize his childhood neighborhood, Beatty said.
"John is running a business and he can't overpay for things, so the loan did help," he said.
The 20-year city loan, with 2 percent interest, is for infrastructure improvements only, according to the BDC.
The agency said that H&S would erect two buildings costing $22.1 million. The company plans to add 120 jobs at the new bakery, and create 30 jobs to go with the 100 already at the distribution center.
If H&S maintains 120 jobs at the new bakery until 2012, $400,000 of the $600,000 loan will convert to a grant. H&S has a total of 500 employees in the city.
For Ernst &Young, an accounting and financial services company on downtown Charles Street for more than 40 years, the city approved an $850,000 loan to be used to build out space in a new Inner Harbor office building.
Ernst & Young would anchor the building, proposed on Pier 4 next to the Power Plant entertainment complex by the Cordish Co.
Mark S. Bartlett, managing partner at Ernst & Young, said in February that the company wanted newer offices that allowed workers to be situated on just one or two floors. He said costs, safety and lack of parking were hurdles to the company's staying downtown, however.
The company would occupy about the same amount of space in its new offices as it does now. A parking garage Cordish wants to build nearby for its office tenants has not yet been approved by the city. The loan agreement does not obligate the city to approve the garage.
Bartlett and Cordish officials did not return phone calls.
The BDC said Ernst & Young was considering a move to Baltimore County, and the city wanted to retain the jobs. Under the 10-year loan agreement, Ernst & Young would retain 125 jobs and create about 50 new ones over 10 years.
The loan will convert to a grant if the company employs 150 people in the fifth year of the loan.