4:27 PM EDT, July 9, 2013
Tomorrow City Councilman Carl Stokes plans to hold a hearing on a resolution calling on the developers of the tony Harbor Point project on Baltimore's waterfront to invest at least $15.6 million into the nearby Perkins Homes public housing development. It gets at a vital issue — whether tax incentives for downtown development benefit the city's poor residents — but does so by means of a number of misconceptions.
Mr. Stokes has been a strong critic of the use of tax incentives for the construction of Harbor Point, and although we do not have a philosophical objection to such deals, we appreciate his diligence in the matter. The development proposal is an exciting one that promises to extend the success of Harbor East to one of the last undeveloped parcels on Baltimore's waterfront, but it also presents difficult questions about what level of taxpayer support is appropriate for such a site, particularly given the requirement that the prospective anchor tenant of Harbor Point, Exelon, build a new regional headquarters somewhere near the city's waterfront. Mr. Stokes' skepticism has prompted the Baltimore Development Corp. to release more details about the finances of the deal, including the projected return for investors in Harbor Point, and we look forward to a substantive discussion at a hearing later this month on the proposed tax increment financing for the development.
The resolution up for discussion tomorrow, though, is built on a shaky grasp of the facts and of the workings of the state's enterprise zone program.
Harbor Point (and neighboring Harbor East) had long been part of Baltimore's enterprise zone, which affords property and income tax abatements for a fixed period of time for new development. Half of the cost is reimbursed by the state. In 2012, the city had to renew its zone designation, and the city decided to reduce its size out of concern that the state would cut the program's reimbursement rate. Harbor Point and Harbor East were part of the 8,000 acres of land that the city left out of its renewal application. A few months later, Harbor Point developer Michael Beatty applied for re-inclusion as part of a regular process to consider expansions to the zone. The Baltimore Development Corp. held public hearings and agreed to endorse the expansion. The City Council voted 13-2 in favor of it (Mr. Stokes, for the record, voted no), and the state's Department of Business and Economic Development gave its approval.
In his resolution, Mr. Stokes says that the parcel on which Harbor Point is to be built would not, by itself, qualify as a state enterprise zone. Indeed, the state enterprise zone law sets certain thresholds for unemployment, poverty, population loss, crime or vacant or abandoned property. The city's application to expand its enterprise zone to include Harbor Point confirms that the census tract in which it is located meets none of those criteria by itself.
What Mr. Stokes' resolution does not acknowledge is that the enterprise zone's eligibility is calculated as a whole, not on the basis of one census tract or another. Baltimore has one large enterprise zone that covers the entire downtown business district, Mt. Vernon, parts of East and West Baltimore, the industrial waterfront, Charles Village and areas along many of the city's commercial corridors. According to documentation included with the city's application for the Harbor Point expansion, the zone comprises 147 census tracts, more than a quarter of which would not meet any of the state's criteria by themselves.
Where Mr. Stokes goes seriously awry, though, is in suggesting that the Harbor Point enterprise zone application was modified to exploit the poverty of nearby communities, specifically Perkins Homes, so that it could win approval. In an interview, he says he made that statement based on what he was told by city economic development officials a year ago. But a review of the documentation for the Harbor Point expansion shows that it isn't true. Perkins Homes were not part of the Harbor Point expansion; maps showing the areas added to include Harbor Point easily confirm this fact. Perkins Homes themselves are not part of the city's enterprise zone, but the census tract of which they are a part has been included in the enterprise zone eligibility calculations for more than a decade.
Mark Vulcan, who oversees the enterprise zone program for the state Department of Business and Economic Development, said in an interview yesterday that Harbor Point's eligibility did not depend on Perkins Homes or any other neighboring tract. The state law considers not just the census tracts proposed for inclusion but also nearby areas, and because of the city's overall high unemployment rate, any tract in the city (or, indeed, the entire city) could be included, Mr. Vulcan said.
The shame of Mr. Stokes' problematic resolution is that it obscures a legitimate issue. The real question is not whether the Harbor Point developers "owe" some millions to Perkins Homes but whether the city's long-established habit of including parcels like this one in its enterprise zone furthers the program's goals of lifting up impoverished communities. Backers say it does, at least indirectly, by boosting the city's tax base and creating jobs. But it is fair to ask how many of those jobs will go to people like the residents of Perkins Homes and how the taxes Harbor Point generates will benefit communities away from the glitzy waterfront. Unfortunately, the holes in Mr. Stokes' resolution make those questions too easy to avoid.
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