'Recovery Zones' Eligible For Federal Funds

Council Rushes Designation To Facilitate Stimulus Money

July 14, 2009|By Annie Linskey | Annie Linskey,annie.linskey@baltsun.com

The Baltimore City Council Monday night rushed through sweeping legislation that designates more than half of the city a "recovery zone" making many neighborhoods eligible for federal stimulus funds meant to ignite construction projects.

The designation is needed before the city can dole out roughly $50 million of newly available recovery bonds for development projects that have been stymied by the tight lending markets.

"Aside from things that are currently under construction, we are seeing only a few new projects, and those are in the thinking phase," said M.J. "Jay" Brodie, president of the Baltimore Development Corp., who briefed City Council members on the legislation Monday afternoon. "We are not seeing projects coming with financing."

City Council bills are normally voted on over the course of three separate meetings, but yesterday's legislation passed through the three phases without a hearing or any discussion.

"The economic recovery needs to move quickly," said Ryan O'Doherty, a spokesman for City Council President Stephanie C. Rawlings-Blake, explaining why the process was expedited. "The administration asked that we work to move the resolution through. Given the fact that unemployment has nearly doubled in Baltimore City, we thought that this economic tool should be implemented as quickly as possible."

The designation will allow the city to administer two types of bonds for construction projects: one for infrastructure, in which the federal government pays 45 percent of the interest, and a second for private projects, in which the interest on the bonds becomes exempt from federal taxes.

City officials are considering using the first type to give skittish investors more confidence in bonds they want to issue for Patrick Turner's ambitious Westport project - a planned retail, housing and office complex on a 43-acre strip of the Middle Branch near I-295.

In December, the City Council authorized Baltimore officials to issue $130 million in bonds to build sewers, roads and water mains for Turner's project, but the market for such bonds has dried up during the economic downturn, and the bonds have not been sold, Brodie said. The recovery zone bonds could make the investment more attractive.

But as city officials weigh if and how to use the bonds, they are still waiting for federal regulations governing their distribution, Brodie said. "This is one step in the process, there is still a lot that needs clarity," he said.

Other cities such as New York have already created zones to use the bonds.

Officials initially considered designating the entire city a recovery zone, but instead decided to use existing designations for "distressed" areas that qualify for other federal programs plus a city analysis of local foreclosure trends to determine which parts of the city would be eligible for the new bonds. The result is a broad area of east, west and southwest Baltimore that only excludes the pockets of wealthy neighborhoods in downtown, Federal Hill, Fells Point, Canton, Bolton Hill, Ashburton and northern Baltimore.

"The idea was to have more recovery rather than less," explained Brodie. "We don't want to have to come back for additional legislation."

But Councilman James B. Kraft raised concerns that the city was overly conservative in drawing the lines, saying that portions of Highlandtown should be included. "I'm not happy that part of my district was left out," Kraft said. But he supported the bill, saying "we had to have it."

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