Seven months after the Baltimore City Council gave the green light to borrowing $160 million for the planned Westport development, investors have shown no interest in the bonds, leading some city officials to fear that the ambitious project will be delayed.
But a new federal stimulus program could provide a lifeline for the project, which, if it goes forward, would drastically change the face of one of the city's poorest areas, bringing a high-rise office building, thousands of homes and retail stores to a 43-acre strip of land along the Middle Branch.
Late last year, the developer, Patrick Turner, successfully lobbied the city to issue bonds for Westport's infrastructure in a method commonly used around the country and known as tax increment financing, or TIF.
Under that plan, the city issues TIF bonds that are paid back with property taxes as the development begins generating revenue. Even though the city issues the bonds, the developer must repay them if the project fails.
But since last year's financial meltdown, the market for such noninvestment-grade bonds has virtually disappeared.
"The only TIF bonds that have been done since [the] Lehman [Brothers] default have been TIF bonds for already developed projects," said Nathan S. Betnun, the managing director for public finance at Stone and Youngberg, an Annapolis-based firm that specialized in TIF bonds. "To my knowledge, there have been no TIF bonds done for projects that are undeveloped."
Without those bonds, Turner would have no obvious way of financing sewers, streets and water lines for his $1.4 billion development, according to city officials.
"Infrastructure has to precede building buildings," said M.J. "Jay" Brodie, the president of the Baltimore Development Corp. "So it would mean a delay in the project until the market for TIF bonds improves sufficiently or some other source or sources of funds were found."
First Deputy Mayor Andrew Frank was more blunt: "I think the entire project is at stake if we cannot sell the TIF bonds."
For the time being, Turner only needs to borrow $25 million for the first phase of the project, and city officials are optimistic one portion of the federal stimulus package could provide a solution.
Under a recently announced federal program, the city could issue Recovery Zone Economic Development bonds for the infrastructure, a generous new arrangement where the federal government pays 45 percent of the interest on the bonds, making them more secure.
