In awarding the latest subsidy from cash-strapped Baltimore to a developer, City Council leaders said Monday that the firm must set aside millions for the nearby community — a new standard they plan to impose.
The $17.5 million tax increment financing subsidy — called a TIF — will go to Wexford Science & Technology to expand the University of Maryland's BioPark in West Baltimore. But council members said the deal's $4 million community benefits fund is the true breakthrough.
"This is going to set the standard and the bar for TIFs to come," City Council President Bernard C. "Jack" Young said. "Anybody that's coming for a TIF is going to have to give something to the community. It's going to have to be substantial. They're asking for a lot of TIF money, they're going to have to give us a lot for our communities."
In recent years, tax increment financing deals have become the preferred vehicle for city development subsidies. Eleven such deals have been approved since 2003, requiring the city to float millions in bonds to pay for a development's infrastructure needs. The city then uses the increased taxes from the development to pay off the debt, instead of committing that money to pay for other city services, such as schools or police.
The city approved $107 million in financing for the Harbor Point development in 2013, the second-largest TIF after the $301 million used for the city-owned Baltimore Hilton hotel.
Many expect Under Armour CEO Kevin Plank to ask the city to subsidize his multibillion-dollar redevelopment in South Baltimore. Plank has said he plans to seek federal, state and local financial support for the project but has not provided details.
City Councilman Carl Stokes, the chairman of the council's economic development committee, said the BioPark agreement could serve as a model for future deals — including Plank's. He noted the community benefits agreement is about a quarter of the size of the TIF.
"From now on, every TIF will have to have a community benefits agreement," he said. "We should use at least that scale."
The $17.5 million subsidy for the roughly $110 million project, approved unanimously on Monday, is designed to help Wexford lure a branch of the Cambridge Innovation Center to Baltimore. The Massachusetts-based firm provides shared working space to startups. The TIF bonds will cover the construction costs of a 250,000-square-foot building at 873 W. Baltimore St.
Stokes said he agreed to move the subsidy forward only after the developer and surrounding communities signed a community benefits agreement. The agreement establishes a community fund of more than $1 million that would grow each year with contributions from the university and Wexford. The money is intended to help address parking problems, the development of Hollins Market and job creation, among other community concerns. Stokes said the fund will ultimately grow to about $4 million.
Stokes has made the BioPark deal a centerpiece of his mayoral campaign, saying that if elected, he will use it as a "model for supporting the education and workforce priorities of adjacent neighborhoods."
"The community will get approximately $4 million," Stokes said. "That's hard, cash dollars. They, the community, will decide how that money is spent in their community."
But Joshua Harris, a community activist who is also running for mayor, argues the agreement doesn't go far enough. He's hosting a meeting at the Poe Community Center at 6 p.m. Tuesday to discuss residents' concerns.
Harris wants the developers to build a job training academy in Poppleton and renovate the James McHenry recreation center. Most of all, Harris, said, the developers and the city should include the residents of the nearby Poe Homes in the decision-making process.
"The City of Baltimore is about to gift to Wexford and the BioPark $17.5 million of Baltimore residents' tax dollars in exchange for promises that West Baltimore will be transformed," Harris wrote in a letter to council members. "Take a look at the residents of Poe Homes. The same promises were made to Poe Residents at the beginning of this century by Wexford and the BioPark, what have the residents received?"
Greg LeRoy, director of Good Jobs First, a development watchdog group, said he's generally supportive of community benefits agreements.
"Obviously, the idea of attaching community benefits to a TIF district, we would applaud," he said. "If it involves local hiring, linkages to community schools, generally, we like those."
But LeRoy said some community funds end up simply being "PR stunts" that are "cannibalized" by the developers.
"There's no substitute for good community organizing," LeRoy said. "If a developer thinks a community association is weak, they won't concede very much."
Economist Anirban Basu, who runs the Baltimore-based consulting firm Sage Policy Group, said the TIF was a good deal for the city.
"They can make a difference," Basu said of community benefits agreements. "As always, the question becomes how the money is spent. The fact that money is made available for various social purposes should be viewed as a good thing."
The development is being paid for with $86 million from the developers, the $17.5 million TIF and a $2.5 million grant from state government. The city projects the development will create about 1,400 permanent jobs.
With the TIF, the developer is expected to make about $6.5 million in profit.
James Berens, president of Wexford, said he was "thrilled" the financing deal passed the council.
We "see this as an investment in the Baltimore area and economy," he said. "Since the majority of [existing BioPark] properties are leased and tenants are growing, a new space at BioPark was in demand. This one-of-a-kind innovation community allows tenants to collide and collaborate while serving as a catalyst for businesses to partner with one other. The subsidies for this innovation center also support top-notch entrepreneurs who would not otherwise be able to access the UMB BioPark space."
On Monday, Stokes released a 14-page economic development plan as part of his mayoral campaign. In it, he pledged to drastically cut Baltimore's property taxes and revive the city's old practice of selling vacant homes for $1 in addition to withholding subsidies from developers unless they agree to donate to community benefits funds.
Stokes' plan calls for creating a citywide high-speed Internet service, increasing funding of the city's existing "Main Streets Program," reducing burdensome regulations and promoting apprenticeships. He said the rate reductions will be "earned" as the city's revenue increases from a growing tax base.
He also wrote he wants to expand the Charm City Circulator to become an "essential, free and reliable connector between low-income residents and jobs."
Stokes is among 22 contenders to replace Mayor Stephanie Rawlings-Blake, who is not seeking re-election.
Among 12 Democrats in the field, Stokes is the first candidate in the race to release a plan focusing solely on economic development. Former Mayor Sheila Dixon and lawyer Elizabeth Embry have released plans focusing on fighting crime. Councilman Nick J. Mosby has released a wide-ranging 15-point plan to improve Baltimore.
On Tuesday, Mosby is scheduled to release a plan to lower Baltimore's tax rate that he describes as more "responsible" than Stokes'. Businessman David L. Warnock, another candidate, is scheduled to release his education platform.