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."