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Protest filed ahead of Baltimore vote to move forward with $148M in bonds for Port Covington

Baltimore’s Board of Estimates is scheduled to vote on issuance of $148 million in bonds, the first phase of public financing for development of Port Covington, the formerly industrial area of South Baltimore owned by billionaire Under Armour founder Kevin Plank. Part of the area is shown in a July 1, 2019, photo.
Baltimore’s Board of Estimates is scheduled to vote on issuance of $148 million in bonds, the first phase of public financing for development of Port Covington, the formerly industrial area of South Baltimore owned by billionaire Under Armour founder Kevin Plank. Part of the area is shown in a July 1, 2019, photo. (Jerry Jackson / Baltimore Sun)

A group of civic organizations is objecting to Baltimore’s plans to move ahead Wednesday on issuing $148 million in taxpayer-backed bonds for the initial phase of development of Port Covington, the formerly industrial area of South Baltimore owned by billionaire Under Armour founder Kevin Plank.

The city’s Board of Estimates is scheduled to vote on the bond issue Wednesday, the first part of a $660 million public financing package for Port Covington that the City Council passed in 2016. The bonds had been expected to be issued in the first quarter of this year, after a city finance panel approved them in December, but work on the project was suspended when the coronavirus struck Maryland.

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The activist groups, including the ACLU of Maryland, Step Up to Lead, the Maryland Consumer Rights Coalition, the Public Justice Center and Jews United for Justice, argue the redevelopment project is too risky for taxpayers to support given pandemic-induced budget shortfalls and a slowdown in Under Armour’s business. They also said public financial support for the project conflicts with a national push for greater investment in black neighborhoods to undo systemic racism.

The coalition is asking city leaders to postpone any decision on the public investment “until after the current pandemic emergency, and until after the public has a chance to be fully and accurately informed about what is being done,” the groups wrote Tuesday.

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The city bond money was approved for spending on public infrastructure — such as streets, water and sewer lines, parkland and bulkhead improvements — surrounding construction of an initial phase of redevelopment, which includes three apartment buildings, two office buildings and 1,000 parking spaces.

The community organizations are also raising concerns that the money raised in the initial bond sale will also go toward repaying more than $400,000 in lobbying costs Plank incurred when pushing for the financing agreement.

The Board of Estimates, whose members include the mayor, president of the City Council, and the city’s comptroller, solicitor and director of public works, is responsible for approving large city contracts and spending. Mayor Bernard C. “Jack” Young controls the board because the city solicitor and public works head report to him.

The Port Covington agreement is on the board’s agenda for its weekly meeting, which will be held virtually at 9 a.m. Wednesday because of measures to control the spread of COVID-19. But the agenda item took many around City Hall by surprise after not appearing on an early version of the weekly agenda.

At the meeting, the community groups will have a chance to speak and urge the board to postpone or cancel its vote on the bond issuance.

According to a letter filed with the board, the groups plan to argue that the conditions surrounding the project were significantly different when the council approved the public financing four years ago through a mechanism known as tax increment financing. Under such arrangements, increased tax revenue from projects repay the bondholders, but city taxpayers would be on the hook for any shortfall.

Since the council passed the financing agreement, Plank stepped down as CEO of Under Armour, and the sportswear company has laid off employees amid slowing sales, suspending plans to move its headquarters from Locust Point to Port Covington. Weller Development took over the Port Covington project from Sagamore Development, a real estate firm owned by Plank that launched the project in partnership with New York investment bank Goldman Sachs.

The activist groups suggest that the city must at least conduct a fresh economic review of the project and its potential impact on taxpayers before advancing to the bond sale, to be conducted by the Maryland Economic Development Corp., or Medco.

“We did not believe the Port Covington project was realistically viable or a good deal for the City from a financial perspective in 2016,” they wrote to the board members. “But if it ever was viable and an acceptable risk for the City, it is not now.”

Under Armour did not respond to questions about its commitment to the project or what involvement Plank, who remains the company’s executive chairman, still has in the development. Weller officials also did not respond Tuesday to a request for comment.

The Port Covington area in South Baltimore is home to Under Armour offices, a Sagamore-owned restaurant and whiskey distillery, and The Baltimore Sun’s offices and printing presses. The Sun has a long-term lease on its facility.

Three cybersecurity firms in 2018 committed to moving to Port Covington as part of the first phase of redevelopment. Before the coronavirus struck, Weller said last fall that construction of the first five buildings would begin in January and they would be ready for occupancy in 2021. That schedule now appears delayed after the coronavirus-related suspension of work on the project.

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According to an economic analysis of the bonds that was produced in December, obtained Tuesday by The Sun, Weller was in negotiations with an apartment operator to manage rental of 101 short-term units, out of 529 total apartment units planned for the project’s first phase.

The report, produced by Columbia-based public finance consulting firm MuniCap, estimated the initial phase of the project would support 3,000 temporary construction jobs and about 2,800 permanent jobs, providing a net $1.6 million increase to annual city tax revenue.

It is not clear who is now involved in overseeing the development project. The MuniCap analysis says Weller is working for a joint venture known as Baltimore Urban Revitalization LLC. J. Thomas Bashore II, an attorney at Ballard Spahr LLP whose name appears on state documents registering the Delaware-based entity, could not be reached for comment.

Karyl Leggio, a professor of finance at Loyola University Maryland’s Sellinger School of Business and Management, said she thinks the uncertainty surrounding the development and its economics justifies calls to pause and revisit the Port Covington financing.

Leggio said she supports tax increment financing and has found that it usually benefits communities in the long run. But she echoed the groups’ protest, saying there are many valid reasons to revisit the Port Covington bonds: the coronavirus and recession, slowing growth for Under Armour, potential costs of needed police reforms, and urgency to invest in black communities.

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The public financing “was all based on the fact that Under Armour was experiencing double-digit growth every year,” Leggio said. “The conditions under which this was approved are not the conditions we have today.”

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