The Baltimore Board of Finance approved $58.3 million in public financing Monday for a long-stalled development in Poppleton, pushing forward a plan to use a tool associated with high-profile Inner Harbor projects to spur largely residential development in an impoverished area.
It was the second time the board considered the tax increment financing proposal, which would help pay for a plan to build roughly 1,600 apartments and other residences, 52,000 square feet of commercial space, a park and a school in a West Baltimore neighborhood close to the University of Maryland BioPark.
The TIF legislation failed to progress last month after board members raised questions about the project's long-term prospects, questioning the financial projections and the affordability of the new apartments for the area's residents.
Those concerns resurfaced Monday, but the plan won enough support from the five-member board to pass. The legislation now goes before the City Council.
New York-based La Cite Development, selected as the project's lead developer in 2005, did not respond to requests for comment.
City Councilman William "Pete" Welch, who represents the area and spoke in support of the proposal at Monday's meeting, said he was pleased to see the deal for an underserved area pass.
"It's a different kind of TIF," he said. "It's one that deals with residential properties, not a huge multi-complex for business, and it's the type of TIF that I think is needed in Baltimore City."
Tax increment financing allows the city to issue bonds to help finance private projects, reserving new tax revenue generated by the investment to pay for the debt service and other expenses.
Since 2000, city TIF projects have included improvements at Mondawmin Mall and Belvedere Square, and conversions of former industrial sites such as Clipper Mill and the Procter & Gamble factory used as Under Armour's headquarters.
A $107 million TIF for the Harbor Point waterfront development approved in 2013 became the focus of debate, with critics saying it diverts funds from other areas and is not true to the spirit of tax increment financing, a tool pioneered in California in 1952 as a way to raise funds for blighted areas.
The deals also can fail to meet expectations.
For example, in the East Baltimore Development Inc. biopark zone north of Johns Hopkins Hospital, EBDI had to pay special taxes of $800,000 in the 2013-2014 tax year alone to cover the $3 million in debt service and other expenses on just the first $39.7 million set of bonds issued, according to public bond documents.
While calling EBDI "a mess," City Councilman Carl Stokes said that shouldn't make the city reluctant to use TIFs to spur community development.
"We've misused TIFs in Baltimore City," said Stokes, who has begun to review the Poppleton proposal. "The original TIF idea … what it's supposed to be for is for communities that are distressed. The harbor is not distressed."
La Cite and co-developer Diversified Realty Partners LLC estimate that redeveloping the 13.8 acres will cost $460 million over more than 15 years.
The firms want to start this summer with two apartment buildings on Schroeder Street totaling 257 units, 163 parking spaces and a dog park — at a cost of about $74 million. The city approved designs last year.
The developer would put $15 million toward the project. Monday's legislation authorizes the city to issue $12.25 million in city bonds for the apartments. La Cite also is seeking seeking $45.8 million in state bonds and roughly $4.2 million in low-income housing tax credits.
About $8.5 million of the city bonds would pay for public improvements, such as sidewalks, curbs and street paving, and a small park.
Developer Larry I. Silverstein of the Union Box Co., who sits on the board, abstained from voting Monday and voted against the TIF last month. He said he was hesitant because the lead developer lacks a record with similar projects and he believes the financial projections for rent and income of residents are overly optimistic.
The document is also fuzzy about what public improvements the bonds would help finance and their costs, he said.
"It's hard to vote no. I think people's perception is, 'You voted for Harbor Point. Give the west side one.' And it's really not in our scope to analyze where it's going, as much as how it's being employed," Silverstein said. "It's a very, very complicated project that few people have been able to pull off successfully. ... It's certainly a worthy project … [but] it's half-baked at this point."
The $58.3 million in bonds are expected to incur an average of $2.9 million in debt service annually over 44 years, according to Steve Kraus, the city's chief of the bureau of treasury management. Under the terms of the agreement, La Cite would cover the debt service if the taxes fail to generate enough revenue.
The city is projected to gain about $426 million in revenue over the 44-year life of the project, after debt service and other expenses, he said. The first phase would add about $7 million.
Peter Engel, a deputy commissioner at Baltimore Housing, said his agency, which is sponsoring the deal, shares the concerns raised at the meeting but wants to see investment in the area.
"We really want to see something happen," he said. "This is a chance to transform a very low-income area."