By Luke Broadwater, The Baltimore Sun
10:33 PM EDT, July 17, 2013
Critics of city subsidies for the $1 billion Harbor Point project clashed Wednesday with supporters of the waterfront development that the mayor has called a "once-in-a-generation opportunity."
About 100 demonstrators, some wearing baseball-style "Tax Dodgers" uniforms, picketed City Hall to protest what they said have been decades of development policies that have benefited the rich but done nothing for the poor.
A line of residents waiting to testify against the proposed $107 million in city financing stretched down the street.
"It's a bad deal." said Shantress Wise, 39. "No more failed development."
Inside, the proposal faced scrutiny from members of the City Council's taxation committee, whose approval is required to authorize the deal.
Committee members asked developer Michael S. Beatty and the Baltimore Development Corp. why the city should help to finance a series of small parks, costing about $60 million, and a $21 million promenade, when other builders have paid for such projects themselves.
Councilman Bill Henry, vice chairman of the taxation committee, questioned why Baltimore needs yet another hotel.
"We own a hotel that's not going gangbusters," said Henry, referring to the city-owned Hilton Baltimore at Camden Yards.
The Harbor Point development is the planned home of Exelon Corp.'s new regional headquarters, a Morgan Stanley facility and other office buildings, residential towers, stores and a hotel. The committee will hold a work session on the project in August, Henry said.
Ronald Kreitner, longtime head of the nonprofit Westside Renaissance, handed out documents that he said showed the subsidies, which include public financing and more than $100 million in tax breaks, would cost the city more than $660 million in all, including $200 million in lost state revenue for schools.
Because Harbor Point will not pay property taxes for years, he said, and because the state allocates education dollars based on property values, children will lose out.
Kreitner said the city has given Harbor Point developer Beatty and his former partner John Paterakis more than $1 billion in taxpayer assistance for Harbor Point and its upscale neighbor Harbor East.
"It's one thing to take money from the taxpayers," Kreitner said. "It's one thing to construct the biggest raid on the public treasury in the history of Baltimore, but when you take money from schoolchildren ... that is a travesty."
Kreitner was the state's planning director from 1989 to 2000. Westside Renaissance, the nonprofit he heads, focuses on the central business district. The group's chairman is Peter G. Angelos, majority owner of the Orioles and a downtown property owner with a stake in protecting that district. Angelos and his associates were the largest contributors to the 2011 campaign of taxation committee Chairman Carl Stokes, a fierce opponent of the development.
Minority and construction contractors said the Harbor Point deal would provide badly needed jobs. The Baltimore Development Corp., the city's quasi-public development arm, estimates the project would create 7,000 construction jobs and 3,300 permanent jobs when completed.
"We want to build the whole city, but we've got to start somewhere," said Pless B. Jones, president of P&J Contracting Co. "If you got jobs, you're going to have less drugs on the street."
City Council President Bernard C. "Jack" Young says he will ensure that the deal moves on to the full council, even though Stokes, remains staunchly opposed.
Stokes, who called the 27-acre property between Harbor East and Fells Point an "iconic" site worthy of the Statue of Liberty or Eiffel Tower, has said he wants to see Beatty's books before signing off on the deal. The developers have denied that request.
As council president, Young could use a parliamentary maneuver to take the deal to the full council, even if it stalls in Stokes' committee.
"The bill will pass," Young said Wednesday morning. That evening, he promised the packed crowd at the hearing that the development would deliver "union jobs" to Baltimore residents. He said a "significant amount of minority contractors" would get jobs.
The taxation committee heard hours of testimony on the request for $107 million in city-issued bonds to pay for the project's roads, pipes, public parks, a promenade and other infrastructure. The 30-year bonds would accrue millions of dollars in interest over time.
Under the deal, the developer would be required to pay back both the bonds and interest through projected tax revenue. Over the course of the project, the debt that would be owed to bondholders through interest and other charges is expected to rise to $281 million, according to city documents. If the tax revenue fell short, the project would be assessed a special tax.
"The bonds are not backed by the full faith and credit of the city," said Darrell Doan, the Baltimore Development Corp.'s managing director of real estate development. He said the city would place a tax lien against the property if Beatty failed to pay back the bonds and the special taxes.
Meanwhile, the Downtown Partnership of Baltimore endorsed the deal in a letter to the City Council, despite expressing concerns that the development would take jobs from downtown businesses to the west.
"The partnership feels that this development builds on the success of Harbor East and will provide important benefits to the people of Baltimore, including job creation, new retail and entertainment options, open space on the waterfront, and tax revenues for decades to come," wrote Kirby Fowler, president of the partnership. "We are, in other words, One Downtown."
Fowler said Beatty met recently with his organization's board of directors and assured them that he would participate in marketing downtown as a whole and try to attract businesses from outside Baltimore — and not simply seek to relocate businesses from central Baltimore.
"Downtown Baltimore's overall office vacancy rate is too high, at approximately 17 percent, with the historic core taking a disproportionate hit," Fowler wrote. "While Harbor East has attracted new jobs to the city, it has also drawn some jobs from the historic core, and Harbor Point will continue to pull jobs with its new Exelon headquarters."
The City Hall rally came after the city's Board of Estimates voted 3-1 Wednesday to approve legislation needed for the deal. Comptroller Joan M. Pratt voted against the measure, calling it too risky.
The city estimates that the Harbor Point development would reap a profit of $124 million for its investors without government financing to pay for its infrastructure. With the city financing, the profit would rise to $174 million by 2031, and the rate of return for investors would climb to 14 percent from 10.7 percent, according to the Baltimore Development Corp. The agency has argued that investors would not join the project at the lower rate of return.
Should the developers reap profits greater than 20 percent, the city would receive 15 percent of those additional profits.
Pratt asked why the deal calls for profit-sharing with the city only after the developer reaches that 20 percent rate of return.
"Given today's market, isn't 20 percent unrealistic?" Pratt asked. "The reserves are inadequate. There's no contingent financing for the project. This deal is overdependent on projections, with no guarantee regarding the underlying assumptions."
But Doan said the profit-sharing agreement was determined, in part, by looking at precedent from past Baltimore Development Corp. deals.
"There's a lot of risk in a project like this," he said. "We're collecting far more increment than we need to pay off the bonds."
The site is assessed at $10 million, but the BDC projects it would be valued at $1.8 billion for tax purposes when the project is complete.
Henry said he would introduce an amendment to require the developer to add affordable housing to the site. The city's housing agency has said the site is exempt from affordable housing requirements.
Mayor Stephanie Rawlings-Blake said Wednesday that the project would increase the tax revenue from the site from $250,000 to $20 million annually.
"It's a city-builder," she said. "This is a once-in-a-generation opportunity to build on a long-standing vacant property."
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