Give Anirban Basu credit for being up front about the financial relationship between his firm (Sage Policy Group) and Sagamore Development, known to the rest of us as Kevin Plank/Under Armour in his recent commentary on the $535 million in public support Sagamore is asking of Baltimore City taxpayers ("Why Baltimore should support Sagamore," March 15).
Mr. Basu demonstrated value to his client by writing the piece and having it published in the city's major daily.
For the rest of us, until a few days ago we had nothing but enthusiasm for the plans Sagamore has presented for rejuvenating this long dormant section of the city. It is likely that few, if any of us, expected to be presented with a $535 million bill for it, however, especially from such a hugely profitable enterprise as is Under Armour.
Yes, I realize the complexity of the TIF (Tax Increment Financing) issue, and that the interest on these bonds is being paid by Under Armour, not the city. But the amount we're being asked to front here is so mammoth that bond rating agencies are sure to take a second look at Baltimore's credit worthiness if we do this. And subsequent use of this all-important tool of urban development is hard to imagine if we pour this much of our remaining credibility into one project.
So before we roll over on a TIF package five times the size of Exelon's Harbor Point, we should be asking some very powerful questions and seeking some very persuasive answers.
Let's start with Mr. Basu's historical analogy, the public-private partnership leading to the creation of the Western Maryland Railroad in 1898.
Baltimore in 1898 was one of America's fastest growing cities and the sixth largest in the U.S.. It was powered by huge growth in the industrial and manufacturing sector after the Civil War and its nearly century-long wave of prosperity would not begin to wane until after World War II.
America's sixth largest city could afford to subsidize a railroad if it was seen as in the city's best interest. That was what it had done with the Western Maryland Railroad as far back as 1873. By 1902, the Western Maryland Railroad owed the city nearly $9 million — an astronomical sum for that era and in today's dollars nearly half the amount we are being asked invest in Sagamore's project.
We could also afford to write off the Western Maryland RR when it became hopelessly over-extended and declared bankruptcy in 1908. The company re-emerged from receivership as the Western Maryland Railway, relieved of its many debt burdens including that to the city of Baltimore.
We have to ask ourselves: Is Baltimore today, now the 26th largest city in America, and having lost 40 percent of its population and most of its manufacturing base in the past three generations, in a comparable economic position as we were in 1898? Can we really take, as Mr. Basu suggests, this particular page from our history and apply it with a clear conscience to today, thinking that all will be well in the end?
Under Armor is the best thing to happen to Baltimore's corporate community in living memory, and the most promising development to our local economy since the redevelopment of the Inner Harbor in the 1970s. Last year, UA's nearly $4 billion in revenue yielded a gross operating profit of $2.1 billion, a 48.5 percent profit margin. Future earnings forecasts are for double digit growth into the foreseeable future.
Under Armour is, in short, not a struggling enterprise in need of subsidies from Baltimore City or anyone else. It is not the Western Maryland Railroad. We should be happy about that, and we should not be using one company's history to justify public policy concerning another.
Still, we live in a competitive marketplace for corporate headquarters — no one would deny that — and some degree of support from this impoverished city, however absurd, is probably going to be part of the recipe that keeps Under Armour's train permanently stationed here in Baltimore.
However, the deal we strike cannot cost the city more in terms of lost educational funds from the state, as the TIFs underwriting so many gleaming projects in Baltimore have managed to do in recent years.
That issue, left unresolved, has got to be a deal-breaker. So long as Maryland continues to determine educational subsidies by the estimated value of real estate (rather than property tax income), then the only thing Sagamore's Port Covington would mean to Baltimore's public school students is less money per student.
Is that a future we want for Baltimore? If Mr. Basu wants to make an argument for a half billion dollars from a struggling city that can least afford it, he should be making it to the General Assembly as a way of changing the formula under which the city receives state funds.
Otherwise, we not only jeopardize the credit rating of the city by floating half a billion dollars of bonds on Wall St., potentially increasing the interest rate we pay on existing debt, and not only do we mortgage our meager, unstable taxable future to the fortunes of one private company. We also face the near certain loss of more of our educational dollars from the state in the process.
It cannot be Mr. Plank's intention to further disadvantage Baltimore's most vulnerable citizens — the children in our beleaguered public schools — in the interests of satisfying shareholder demands. He has shown dedication to the city and a commitment to addressing the very issues that sparked the riots of 11 short months ago.
However, that commitment is difficult to reconcile with this demand. It cannot be reconciled unless, at the very least, the state formula is changed, and that is an argument he must wage with the legislature, not the city.
Beyond that, I think it is fair to ask that if Mr. Plank wants to build a temple on the hill to his hugely and admirably profitable enterprise, as we all earnestly wish him to do, that he also be willing to pay for it himself, just as we are expected to pay for the house we'd like to live in.
Baltimore is Mr. Plank's home, as it has been and likely will continue to be Under Armour's home, given Baltimore's waterfront real estate values. To build his headquarters here is an appropriate way to celebrate that history and that success.
But to ask us to put $535 million dollars worth of credit toward it, jeopardizing both our credit worthiness today and our ability to support other projects tomorrow, could do us real and permanent harm. To borrow a phrase from your own marketing, Mr. Plank, Protect This House.
Mark Thistel, Baltimore