City aid sought for two projects

Developers request tax-linked financing to pay for costs of infrastructure

October 18, 2007|By Jamie Smith Hopkins and John Fritze | Jamie Smith Hopkins and John Fritze,SUN REPORTERS

Developers of two major projects in Baltimore are asking the city for about $250 million in aid to cover infrastructure costs, the city said yesterday.

Turner Development Group is requesting $90 million in tax increment financing for Westport, a mixed-use development set to bring homes, offices, shops and a hotel to an old industrial area on the Middle Branch of the Patapsco River.

The partnership developing Harbor Point, another mixed-use waterfront project on formerly industrial land near Fells Point, is asking for $163 million, most of it in tax increment financing and the rest from parking revenue bonds.

The requests are the largest yet for tax increment financing in the city and much larger than the highest amount approved previously, $15 million for an expansion of Mondawmin Mall.

The proposals are part of an emerging trend as big redevelopment efforts get under way. An $85 million request for the huge East Baltimore redevelopment near the Johns Hopkins medical campus appears to have nearly universal support from the City Council.

Tax increment financing, referred to as TIF, is a way to use future taxes to build roads, sewer and water lines and other infrastructure that must precede development. The city government issues bonds to pay for the work, then repays the borrowed money with property taxes generated by the development. The developer, not the city, is on the hook if revenues fall short, Baltimore Development Corp. said.

Deputy Mayor Andrew B. Frank said the Dixon administration will wait for BDC - the city's economic development arm - to make its recommendation before deciding whether to support the two requests.

"In general, I think the administration is enthusiastic about the investment that the developers want to make," Frank said. "They're asking for a significant amount of assistance and we expect them to go through the process that any developer would go through."

The proposals, if Dixon gives her initial endorsement, would also have to be approved by the 15-member City Council and the Board of Estimates. Several council members said yesterday that they had not been briefed on the deal - not unusual, given its early stage - but said they would keep an open mind.

"I need to judge it based on what is going to be gained and what we're giving up," said City Council Vice President Robert W. Curran, filling in for President Stephanie C. Rawlings-Blake, who is overseas for a conference. "What you gain may be equal or more than what you're going to give up over a period of time."

BDC's project review and oversight committee heard details yesterday but decided to defer a recommendation. The requested amounts don't include costs associated with issuing the bonds, generally an additional 30 percent, which would be tens of millions of dollars in this case.

The BDC staff said Westport's developer wants less than the project is eligible for. The developers of Harbor Point - Struever Bros. Eccles & Rouse and H&S Properties Development Corp. - are asking for more than the tax revenues would cover, the BDC staff said.

Keenan Rice, president of MuniCap Inc., which advises the city on tax-increment issues, said after the meeting that $100 million would be better than $163 million.

Struever Bros. Chief Executive Officer C. William Struever said its tax projections are conservative. BDC didn't discuss the lower figure with him, he said in an interview, adding that "there will be lots of conversations as we flesh out our plans."

Harbor Point, a mix of hotel, office, retail and residential space, is to rise on a cleaned-up and partly capped Inner Harbor site that was contaminated by a chromium plant. U.S. Lacrosse is in talks to put its headquarters and a sports complex there. Struever said he expects to break ground soon on the first building of the long-delayed project.

The Harbor Point tax-increment request includes $10 million to help pay for a combination school and library, said Struever, a former city school board member.

"It's an incredibly powerful tool," Struever said of tax-increment financing. "It's probably the fastest-growing mechanism for local governments to fund the basics."

Critics think some projects would proceed without such aid. And Dixon and the council are coming off the September primary election in which voters complained that the city has been too eager to engage developers with deals along the waterfront, neglecting inner-city neighborhoods.

Frank said most of the city's past tax-increment deals have not been for downtown projects.

Patrick Turner, president of Turner Development, said the financing is critical because no bank will lend a developer the money for the huge infrastructure needs of a big redevelopment.

Turner said in an interview that although public infrastructure costs for Westport will be $107 million, he asked for $90 million to make the number "palatable."

"Westport's the ideal use of a TIF," said Turner, who added that he expects annual property taxes of $45 million when the project is finished in eight to 10 years.

J. Kirby Fowler Jr., president of the Downtown Partnership of Baltimore, said he can't comment on the amounts requested without knowing more about the rationale. But he said he supports the TIF concept and believes both projects will be good for the city.

"I certainly think the public sector has a role in resurrecting some formerly moribund sites," he said. "From our perspective, Baltimore should take advantage of its incredible links to the water, and these two projects will be transformative."

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