The Baltimore Development Corp.'s board unanimously approved a record $535 million in public financing to build infrastructure for billionaire Under Armour founder Kevin Plank's mixed-use real estate project in Port Covington, sending the proposal to the city's Board of Finance for review.
The money would build streets, utilities, sewers, bike and pedestrian paths, and other infrastructure on the South Baltimore peninsula, where Plank plans to develop thousands of residences and millions of square feet of office and retail space alongside a new headquarters campus for his sports apparel company.
The request from Plank's private real estate firm, Sagamore Development, still needs approval from the Board of Finance and the City Council. Sagamore also is seeking about $574 million in state and federal funds for transportation infrastructure in the area, which is located in an Enterprise Zone and eligible for significant tax breaks.
"We're excited to be one step closer to our city transforming Port Covington into a thriving, active and inclusive waterfront neighborhood and economic center for everyone," Sagamore Development President Marc Weller said in a statement.
The $5.5 billion proposal for Port Covington also includes manufacturing space, hotels and about 40 acres of parks.
The $535 million would come from tax increment financing, in which bonds issued by the city would be repaid using new property tax revenue generated by the construction. The city has declined to share the full estimate of the costs associated with the proposal, including interest payments and issuance costs, which are likely to add millions.
The redevelopment is expected to generate an average of about $34 million in annual tax revenues for the city over the life of the bonds, after taking costs into account, with much of the revenue appearing in later years, said Keenan Rice of Columbia-based MuniCap, which the city hires to review such deals.
That estimate assumes a 6 percent interest rate and assumes that state lawmakers approve changes to the school funding formula so that the city's contribution reflects tax receipts, not just assessed property values, he said.
If revenues are not sufficient to meet the debt payments, Sagamore would be responsible for making up the difference. Sagamore also is likely to be the initial purchaser of the bonds, which would be sold in rounds, starting with about $49 million, Rice said.
The BDC board's approval included conditions that there be no significant adverse impact on schools funding or the city's bonding capacity, said BDC board Chairman Arnold Williams. The BDC also recommended profit sharing be included in the deal.
The terms of the profit sharing — which BDC said is a standard requirement of tax increment financing deals — will be determined at a later phase, said President William H. Cole IV. Sagamore would be responsible for covering any losses to school aid or "we would have to go back to the drawing board," he said.
The city also is negotiating agreements with Sagamore over requirements for affordable housing, local hiring and minority participation, said Deputy Mayor Colin Tarbert.
In a statement, Mayor Stephanie Rawlings-Blake said those agreements are important as she weighs moving forward with a project she said has the potential to be "game-changing."
Pointing to infrastructure needs throughout South Baltimore, Keisha Allen, president of the Westport Neighborhood Association, said she understands why Sagamore has asked for city financing, but she wants to see further scrutiny of the request.
"It just seems like it was already a done deal," she said. "I don't want them to just push it through. I want them to do a little homework and make sure that we're OK with it."
The BDC board, which is composed of city officials and professionals from firms such as T. Rowe Price Group and M&T Bank, gave a green light to the TIF request after three committee meetings, much of which was closed to the public, and less than an hour of discussion on Thursday.
It's difficult to evaluate the TIF request at this point because so few details are publicly available, said Ron Kreitner, a former state planning director who attended Thursday's meeting.
Kreitner said the city should commission its own market analysis and study other ways to finance the development before approving the TIF request.
"The magnitude of this so far exceeds anything even considered, it just begs for going the extra mile in terms of protecting the taxpayers," he said. "This is so far removed from transparent government operations that it's very disturbing."
City Councilman Carl Stokes, who leads the council committee that would review Sagamore's proposal, said he intends to seek outside opinion on the request but isn't sure about the timing of hearings, because the spring is typically absorbed by review of the city budget.
"It's very important in this environment that we do a proper analysis and transparent hearing," he said.
Development in Port Covington, located south of Interstate 95 about a mile and a half from the Inner Harbor, is already underway.
More than 400 Under Armour employees have relocated to a renovated former Sam's Club and a city garage converted into office and manufacturing space is fully leased. Crews are building a whiskey distillery — a pet Plank project — at 301 E. Cromwell St., for which the city's Board of Estimates this week agreed to contribute about $219,000 for water, sanitary and streetscape improvements.
Sagamore's initial focus is on a commercial and retail area located close to the distillery, said Steve Siegel of Sagamore Development. Infrastructure in the first phase also would be in that area and include highway work, he said.
The firm is seeking approval of its master plan from the city. Plans presented to the city's design committee show tree-lined boulevards with wide medians and waterfront parks.
City Councilman Bill Henry, a member of the council committee that will review the TIF request, said he doesn't have enough information yet to evaluate the proposal.
"I don't have any philosophical objection to building additional infrastructure. My concern gets into the details of how much of it is what? Because it's one thing to be building roads and sewer pipes and water mains, [but] … how much of it is landscaping?" he said.
Cole said he was not sure what specific infrastructure the first round of bonds would fund, but none of the $535 million would go to improvements inside the Under Armour campus. The city is focused on "core" needs, and the project will be subject to additional review, including evidence that developer has the finances to move forward with the proposed buildings, he said.
"We, the city, are not going to be issuing bonds for a project that can't demonstrate its capacity to be built and be successful. It's just not going to happen," he said. "There will be a careful analysis of each and every phase before bonds are issued."
The Rev. Andrew Foster Connors, co-chair of BUILD, the advocacy group that opposed the 2013 TIF deal for Harbor Point, said the city needs assurances that this won't be another agreement that benefits the developer but few others.
"We really are not ideologically opposed to the idea of subsidy," he said. "We just don't think it should be rushed through."