City proposes citywide credit for apartments

Mayor Stephanie Rawlings-Blake said Monday she wants to make a tax credit that has been used to spur apartment development downtown available citywide.

The new proposal would offer a tax credit for 10 years for projects anywhere in the city, five years less than the existing incentive, the mayor said in her State of the City Address.


Rawlings-Blake said the existing credit is helping developers meet demand for rental units and is expected to generate $40 million in new revenue for the city over the next 20 years.

"I'm extremely encouraged by the number of apartments that have come online since I introduced a version of the apartment tax credit," Rawlings-Blake said. "When communities saw the development that happened as a result of the tax credit, that's when there's a call to expand it. We're going to expand it in a responsible way."


The current 15-year credit, which went into effect last year, can be used for projects of 50 or more "market-rate" residential units in downtown and seven other areas, including Station North and the Belair Road corridor. Projects must also meet environmental standards.

The credit starts in years 1 and 2 as a 100 percent break on taxes due for any value added to the property by the project, with that percentage gradually decreasing to 20 percent in years 13, 14 and 15, before being phased out completely.

Details of the new credit, including how many units a project must have to qualify, will be released in a proposal later this spring, a spokeswoman for the mayor said.

"I think it's a good idea," City Councilman James Kraft said. "Anything we can do to develop is a good idea. We can't go to the point where we create so many credits that we don't generate any tax revenue. But this tax credit seems to be working and is having its desired effect."

The city expects more than five projects downtown to apply for the existing credit. At least three apartment proposals are in the pre-development stage in areas outside of downtown, according to the city.

City Councilman Nick Mosby said he is not sure whether the credit will be enough to spark economic development in the city's most troubled areas, but it is worth a try.

"When we come up with these innovative tax credit programs, a lot of times they're downtown," Mosby said. "It's good to see they're looking at the entire city. If we get a couple new developments from this, I think it's great."

Developer Mark Sapperstein, who built the McHenry Row mixed-use project with apartments and the Target-anchored Canton Crossing shops, praised the plan, saying that creating incentives to bring more residents to the city will spill over into other economic benefits.


"She's listening to the development community," he said. "The more residents we have in the city — everything else follows."

The credit is one way of lowering the city's 2.248 percent property tax rate, which gets passed onto residents of rental properties, Sapperstein said. Baltimore County has a 1.1 percent property tax rate.

"You really need that credit to make it happen," he said. "Taxes are just so high."

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Dominic Wiker, development director for the Time Group, said the credit was critical to making the economics work for his firm's conversion of the former Hochschild Kohn department store into 171 apartments at 520 Park.

Making it more widely available could prompt interest in areas that would otherwise have been overlooked, Wiker said.

"People are going to make investments where the market is so in some cases it may not make financial sense to build no matter what the credits are, but this could certainly widen the pool," he said.


Steven Bloom, partner in the Baltimore office of PMC Property Group, which has about 600 apartments in the city, is using the credit for projects at 301 N. Charles Street and 521 St. Paul Street.

Even if some might debate the need for incentives in some areas, "if a deal will happen quicker with it, why wait?" he said.