Proposal to rein in tax break could derail city renewal plan

Developers have sought to use popular incentive on Baltimore's west side

February 21, 2002|By Scott Calvert | Scott Calvert,SUN STAFF

Attempts to revive downtown Baltimore's struggling west side could be jeopardized if state legislators put strict limits on an unexpectedly popular tax break for restoring old buildings, developers and city officials said yesterday.

Maryland's 5-year-old historic tax credit program is a key piece of the financing puzzle for projects up, down and around North Howard Street. Now, lawmakers grappling with a budget deficit want to rein in the program because of its soaring cost.

While projects across the city would be affected by the new restrictions, the cumulative effect on the fledgling west-side initiative would be detrimental, officials say. Developers can use the credits to cut their tax bills by an amount equal to 25 percent of the renovation costs.

"It's been pretty key," said Sharon R. Grinnell, chief operating officer of Baltimore Development Corp., the city's economic development arm. "Without the historic tax credit, so many of those buildings will just sit underutilized and not be redeveloped for some time."

The impact could be greater on the west side than in other areas because of a deal Mayor Martin O'Malley made two years ago with preservationists. The mayor agreed to protect at least 260 older buildings along the Howard Street corridor that were targeted for condemnation.

That makes rehabilitation the only method of redevelopment. That, officials and developers say, makes historic tax credits critical because otherwise they cannot charge rents high enough to pay the renovation costs.

Lawmakers say west-side projects such as the Hippodrome Theater restoration seem likely to be exempted from the legislation, but others - including two residential projects - cannot count on similar protection.

"I'm very worried," said David H. Hillman, who has mostly finished converting the former Hecht Co. department store into 173 apartments for about $20 million. "I don't want to be standing out there like a pyramid in the desert."

Hillman should be able to cash in his $4 million state tax credit for the Atrium, which opened in September. He is unapologetic, estimating that his renovations have pumped $2 million into the state in sales and payroll taxes.

But he fears for other proposed projects that he is counting on to bloom around his seven-story building at Howard and Lexington streets, making the area a locale where people will want to live and shop.

Sun staff writer Gady A. Epstein contributed to this article.

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