State legislative leaders have promised Baltimore officials that they will enact a long-term fix to make sure the massive special tax deal for the waterfront Port Covington development won't cost Baltimore schools millions of dollars in state aid.
House Speaker Michael E. Busch and Senate President Thomas V. Mike Miller Jr. assured city officials that they are committed to fixing the state's education funding formulas by holding city schools harmless while enabling the development.
"The poorest of our jurisdictions ... should not have to choose between job creating projects and State education aid," Busch and Miller, both Democrats, wrote in a letter to City Council President Bernard C. "Jack" Young made public on Wednesday. "We are very proud of the fact that whenever Baltimore City is confronted with a significant challenge — particularly in the area of public education — the General Assembly steps up to partner with the City to find answers."
Over the past two years, Baltimore has faced a predicament. The city's economy has been growing faster than that of any other jurisdiction in Maryland, thanks in part to a wide array of tax subsidies used to spur development. But that growth has contributed to Baltimore schools losing $50 million in state funding over the past two years under a formula that gives out more money for poorer school systems.
But under the terms of the various tax breaks and special deals, some of Baltimore's most valuable properties pay little or no taxes to the city's general fund. So they improve the economy, causing the state formula to deliver less school aid, but they don't contribute enough revenue to the city to replace the lost funding.
The issue is being hotly debated as the City Council considers awarding $660 million in tax-increment-financing bonds for the $5.5 billion Port Covington development proposed by Under Armour CEO Kevin Plank.
City Councilman Carl Stokes, who chairs the committee considering the deal, said addressing school funding is perhaps the most important task before the council.
"Certainly, we need to hold education harmless," he said.
The massive project proposed by Plank's Sagamore Development Corp. would include a new headquarters for Under Armour, restaurants, shops, housing and a manufacturing plant, among other features.
The $660 million financing deal that Sagamore is seeking would be the largest of its kind in city history. The city would issue the bonds; they would be repaid by future taxes paid by the developer.
City officials say the deal could cost city schools $315 million in state aid over 40 years. Supporters say the projected $1.7 billion in tax revenue from the development would more than make up for such losses.
But critics say the city's cost estimate is much too low. They say the project could cost the schools more than $1.5 billion.
Members of the Baltimore Education Coalition — a group that includes the American Civil Liberties Union of Maryland — want the council to require financial consultant MuniCap to "correct their initial analysis" of the impact on state education aid, obtain guarantees from state officials that legislation will be passed to ensure Port Covington does not negatively impact school funding, and require the city to refund schools if they lose any aid.
Charly Carter, director of Maryland Working Families, clashed with City Councilman Eric T. Costello over the issue at a recent public hearing.
Carter asked council members to "slow your roll and don't steamroll Baltimore."
"Over the course of this project, Baltimore City Schools stand to lose $1.5 billion," she said.
Costello rejected that number.
"We can disagree about whether the agreements or the concessions Sagamore has made are adequate or not," he said. "But we can't continue to dispute the facts. ... I take issue with that figure. The methodology is weak."
He then pointed to MuniCap's analysis for the city's finance department. It was MuniCap that said the impact on city schools would be $315 million over 40 years.
Carter dismissed that estimate.
"What you cannot also dispute is every time we have a TIF it results in decrease in funding for our schools," she said. "We already struggle to maintain the investment in our schools. We cannot continue to say that the state is going to bail us out. The state is not going to bail us out."
Busch said Wednesday that the state planned to do just that. He called the Port Covington proposal exciting.
"You have a private developer with a transformative plan," he said. "We just want to assure the City Council that whatever final decision they make, we're going to be there to make sure Baltimore has the funds it needs for its educational system. It's important not only to Baltimore but the surrounding counties as well. If you stabilize Baltimore, you stabilize the whole area."
A spokesman for Young said the council president was encouraged by Busch and Miller's pledge.
"He understands they're strong partners," spokesman Lester Davis said. "They're committed to this issue clearly. This issue is tops on the minds of folks in Annapolis. Having the commitment to solving this issue is a great step."
The General Assembly approved a temporary fix in April by tweaking state education formulas so that Baltimore wouldn't be penalized by new tax-increment-financing deals for the next three years. But the sunset means that the largest project in city history — the Port Covington deal — would not be completed before the law expired.
By then, Busch said Wednesday, lawmakers expect a state panel evaluating how Maryland pays for schooling will have completed its work and recommended a long-term solution.
Currently, state education funding formulas award money to local school systems based on the size of their student populations and their relative wealth, among other factors. Busch said he'd like to see a greater emphasis on the number of students in poverty instead of property values.
"To me, the poverty rate is the biggest thing," Busch said. "Of the 50 poorest schools in the state of Maryland, all but six are in Baltimore City. We have to make sure they money gets into the classroom for the neediest kids."
Some leading Republicans in the General Assembly said they agreed the state needs to fix its funding formulas. But they said they wanted to see equal treatment for jurisdictions outside of Baltimore.
"Port Covington is a revitalization of Baltimore City," said J.B. Jennings, the Senate minority leader. "Unfortunately, with the formulas, it's going to put Baltimore City in a $300 million deficit. Let's go back and let's look at these formulas. I would hate to see this project being held up because of the fear of its impact on local schools. If the president and the speaker are willing to do this, I just hope the legislation would take a similar stance toward the other counties, too, if they have a project of this magnitude."
Del. Susan Krebs said the state has a long history of helping Baltimore. She wants to make sure other counties get similar consideration when funding formulas are rewritten.
"Every county has their unique problems," the Carroll County Republican said. "Baltimore City has a unique problem. We in Carroll County have a unique problem with declining enrollment.
"I'm hoping the speaker of the House and the Senate president will recognize other counties have needs as well."
The 2017 budget proposed by Mayor Stephanie Rawlings-Blake includes $256 million for education. City schools are funded largely by the state, which has dedicated $932 million for them for next year.
An earlier version misstated the title of J.B. Jennings. The Sun regrets the error.