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News Opinion Editorial

Superblock: Making the math work

Baltimore MayorStephanie Rawlings-Blakeis asking the City Council to grant generous property tax breaks for the developers of the long-stalled Superblock project on the west side of downtown, calling it a linchpin of her long-term strategy to grow the city's revenue base and increase its population by 10,000 families over the next decade. That may be overstating the impact of any one project, and it is bound to revive a long-simmering debate about the value and wisdom of the city's practice of providing tax incentives to big developers.

Indeed, the mayor and her supporters need to use the opportunity to explain in detail why the deal makes sense for the city even though Baltimore won't reap the full benefits of the redevelopment until decades after its completion. But given the time, effort and investment the city has put toward revitalizing this parcel near Lexington and Howard streets, Baltimore needs to do what it can to finally get the Superblock project off the ground, and without these subsidies, it won't happen.

The Superblock is in an area that was once a bustling commercial and shopping hub but that in recent decades has fallen into decline and disrepair. Many of the buildings are historically or architecturally important, which means a developer can't just knock them down and start over but instead must incorporate parts of them into whatever new structures are built.

That requirement substantially increases the cost of construction, which the quasi-public Baltimore Development Corporation estimates will require about $150 million to complete, and BDC presidentM.J. "Jay" Brodie has advised the mayor that it's unlikely any developer will take on the project without the promise of significant long-term tax relief from the city. But he also suggests that in exchange for its help, Baltimore can still expect to garner millions of dollars in additional benefits over the interim in the form of higher income and other tax revenues from new residents and businesses in the area.

The mayor is asking the council to grant Lexington Square Partners LLC, the developers of the parcel, a 20-year, deep discount on property taxes for a planned 296-unit apartment tower and a 650-space parking garage on the site. Under the proposed deal, the city would tax the parcel — appraised at $12.2 million — at its current value plus 5 percent of improvements for the first 15 years. After that, the payments would gradually rise to the city's full rate over the next five years. The BDC also looked at the developers' request for a similar "payment in lieu of taxes," or PILOT, on approximately 217,000 square feet of planned retail space, but it declined to endorse that subsidy as necessary to the project's completion.

In the context of the faltering efforts to revitalize downtown's west side, the BDC's analysis of what the developer needs to get this project off the ground argues persuasively for the council approving the requested subsidies and incentives. But critics of the proposal, including Councilman Carl Stokes, who heads the council's taxation and finance committee, question whether the city is giving away too much to lure developers and whether the money the city forgoes under its PILOT agreements might not be better spent on new schools and recreation centers, or be applied to lowering the city's high property tax rate on businesses and homeowners in other parts of town.

Those are all valid concerns that deserve serious answers. The question of whether the city is giving huge tax breaks to downtown developers who may not really need them at the same time it is cutting public services and scaling back programs for youths rightly troubles many residents who wonder whether such arrangements are either justified or fair.

This is why the mayor needs to forcefully make the case why such subsidies are needed for Baltimore's long-term prospects. She should remind residents that the parcel, which is currently owned by the city, isn't generating any revenue at all at the moment, and that absent some sort of revitalization, it may never be a valuable asset.

Moreover, unlike some downtown waterfront projects on the city's east side, none of the west side projects that now exist could have been completed without similar tax incentives for their developers because the math of their design and construction simply wouldn't add up. If the goal is to grow the revenue base over the long term, projects like the Superblock probably will have to rely on some form public subsidy for the foreseeable future, even though that means the city may have to wait years before it sees the return on its investment.

Copyright © 2015, The Baltimore Sun
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