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City says 'forged or altered' document resulted in $2 million tax break for condos

Baltimore's planning department was tricked into awarding $2.1 million in historic tax credits to a Little Italy condominium project based on a "forged or altered" document, a city review panel says in a new report.

As a result, two dozen condo owners face higher property tax bills of roughly $10,000 a year.

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City officials are investigating how a document was allegedly changed to look as though 25 new condominiums at the Canal Street Malt House project were eligible for a credit reserved for the renovation of historic buildings. But Baltimore Solicitor George Nilson said it's clear the city or state didn't do it.

"It was the fault of private parties, not the government," Nilson said. "We think the government was a victim, not a perpetrator."

Newly constructed units in the project "never should have had a tax credit at all," Nilson said.

The revelation comes as the city was preparing to pay up to $3 million to owners of historic properties whose tax bills in coming years will be higher than what government officials told them to expect. The city's Tax Recompense Committee was designed to make right the chronic miscalculations in the historic property tax program by awarding payments to aggrieved residents. Officials now think only about $100,000 in such payments will be warranted.

As the panel — made up of retired judge John M. Glynn, City Auditor Robert McCarty and Nilson — reviewed individual accounts, they noticed something amiss in the paperwork for the Canal Street condominiums, which were wrongly awarded large tax credits for seven years.

In 2006, city officials correctly awarded tax credits to 13 condos that were part of the renovation of the historic malt house at 1220 Bank St. But they improperly awarded the credits to the 25 new condos built as part of the project.

The Tax Recompense Committee says in its report that a "forged or altered version" of a city certification letter "removed/erased" original language that made clear the credit was for the 13 units in the historic building, "thus leaving the reader to assume that the credits applied to all thirty-eight (38) units."

The committee wrote that the city "at this time" will not be asking the condo owners to make payments to cover the past seven years of tax bills that were too low. But it also said it saw no reason for the 25 owners to get money to make up for the mistake in future property tax bills.

Nilson declined to say who he believed was responsible for the allegedly altered document, but he added that the city is investigating. "Our view is somebody asked for that credit in an inappropriate manner, and the credit resulted," he said.

Developer Brent M. Reynolds, formerly of the Union Box Co., corresponded with the city regarding the property's 10-year historic tax credits in 2006, according to city documents. Reached this week, Reynolds said he agreed with Nilson's view that the 25 new condos were not eligible for historic tax credits.

He said he had nothing to do with the document the city calls "forged or altered."

"I was actually not involved in the finishing of the new building construction," Reynolds said. "The application and original intent was for the initial 13 units. The credits are clearly for historic buildings."

The Baltimore Sun provided Reynolds with a copy of the final letter from the city to the developer awarding the tax credits to all 38 units.

Reynolds said the handwritten notes on the document are "not my handwriting." Part of the document looks as if it had been "whited-out," he said, but he noted the letter was sent by the city to the developer, not the from the developer to the city.

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Of the higher bills for property owners, Reynolds said, "It's unfortunate for those owners that they were sold a unit that they believed had that tax credit and that it was taken away."

Union Box Co. officials did not respond to repeated requests for comment this week. No one answered the door Friday at the company's Fells Point office.

Owners of the condominiums were still processing the news. Owner Mary Widomski, 66, said she had not yet read the report from the city but believed residents would be frustrated by the result. "I can't imagine not being upset," she said.

Another owner, Michael Jackson, 66, has said he will face about $30,000 more in payments over the next three years. He declined to comment on the altered document.

Baltimore set out in January to try to fix chronic problems with the historic tax credit program, in which the full value of approved home renovations goes untaxed by the city for 10 years. In 2012, The Sun found the city did not collect more than $1.5 million in taxes because of historic tax credit errors on some apartment buildings and commercial properties.

And in 2013, about 315 city homeowners saw significant increases in their property tax bills after officials discovered that previous tax breaks were larger than they should have been. City and state offices have blamed each other for the errors.

The Tax Recompense Committee sent out about 1,200 letters this year to every city property that has a historic tax credit, with the plan of awarding up to $3 million in payments to owners faced with higher bills than they were told to expect. The committee received 123 applications, but denied about two-thirds of them as not qualifying for the payments for various reasons. In the end, the committee awarded the owners of 44 properties a total of about $95,000.

"We sent a letter to every single taxpayer who could have been eligible," Nilson said. "I feel confident we did good outreach."

Keith Gray, who owns a former corner market near Patterson Park and who contended that he never received the full tax credits he was due for his building, is among six property owners receiving a total of about $33,000. In an interview, Gray described in a long, frustrating process in which he argued with the city and his developer for two years.

"I was at the end of my wits," Gray said. "Now I'm ecstatic. It took two years to happen, but I'm glad it's happening."

The recompense payments are the city's latest step to try to remedy the errors. Among other changes, city officials say they're doubling the staff of their Billing Integrity Unit, which monitors the process for mistakes, and have moved to an automated system to calculate the bills. The city is also hiring its own assessors to determine the size of historic tax credits in response to errors blamed on the state that left some property owners with wildly inaccurate bills.

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