City's business incentives do work, says BDC report

But officials wonder if agency should be auditing own results

February 07, 2002|By Meredith Cohn | Meredith Cohn,SUN STAFF

Companies that have received taxpayer money to move to or stay in the city in the past six years beat projections of increased employment and tax revenues, according to a Baltimore Development Corp. report released yesterday.

The report, requested by city leaders, shows that companies that received incentives now employ 8,181 people and pay $14.4 million in taxes annually,

The totals beat BDC's projections of 7,120 jobs and $7.5 million in taxes when the quasi-governmental agency negotiated the incentives with 29 companies and nonprofits.

But the amount the city's economic developers spent in the process is not documented by the report, and may lead to further review by outsiders, according to other city officials.

The Board of Estimates, which approves individual incentive deals, has been hounding the BDC to account for the millions it spends in taxpayer dollars each year to lure and retain businesses in a comprehensive report.

"On its face, it looks good, but my concern is that when you're putting out stats like this about your own work, shouldn't it be verified by an independent person? And what exactly is the return to residents?" said Joan M. Pratt, the city comptroller and Board of Estimates member.

The report, using data available as of Nov. 1, summarizes the jobs and taxes of businesses that received incentives since 1996, when M.J. "Jay" Brodie became the BDC's president.

"We think there are a couple of lessons here," Brodie said. "We're doing business, not just the BDC, but the city. And the incentives help."

Brodie said the value of the incentives is tough to calculate on a comprehensive basis, because so many different kinds of deals were cut.

Some businesses got free parking spaces and others got loans or grants. And some of the deals did not involve cash handouts, but tax abatements or financing to buy city property.

The BDC aims for a 6 percent annual return on its loans over 10 years on all of its deals, he said. While he could not say how often the number has been met, he said the BDC's batting average is "pretty good."

To be counted in the report, the 29 companies needed to receive a loan or grant of at least $250,000 or receive other "substantial city assistance," such as tax breaks or parking assistance.

Another 29 companies have received incentives from BDC since 1996, but are not open or fully operational and were not included in the report.

After a request from The Sun, the BDC's chief financial officer calculated that the 29 companies received about $13.5 million.

Jeffrey P. Pillas said that number represents only one-time cash handouts and not future taxes or other income foregone by the city through deals such as tax breaks over a decade or more.

The report provided reassurance to Deputy Mayor Laurie B. Schwartz. "This is a snapshot," she said. "It shows the analysis and projections that the BDC performs are fairly conservative. We feel good about that."

And while the report also was welcomed by City Council President Sheila Dixon and Pratt, both said monitoring is important.

"We requested the information from them and I'm glad to see it in writing in report form," Dixon said. "We want to see what's happened with past deals, to see if we've benefited. This has been needed."

Pratt - a critic of some big-ticket incentive packages - also said city auditors will look at the numbers. She may call for an independent evaluation of BDC's work.

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