A Baltimore city councilman is raising concerns over a plan to grant $155 million in aid to a Southeast Baltimore development project led by bakery magnate and developer John Paterakis Sr.
City development officials say the benefits of developing the waterfront parcel far outweigh the city's investment. They have asked the council to quickly approve a development district encompassing a planned $800 million project at Harbor Point, which is sandwiched between Fells Point and Harbor East.
The designation would clear the way for the city to issue bonds to pay for roads, sewers and other infrastructure for the project. The city has used tax increment financing — which enables it to borrow based on projected increases in property tax payments that come with development — as an incentive for more than a decade.
But Councilman Carl Stokes, who was recently appointed head of the council's taxation and finance committee, wants to revisit the city's policies for awarding tax breaks, particularly for already desirable properties such as Harbor Point.
"This is as good a piece of property as any in the state," said Stokes. "It shouldn't take a city subsidy to make it a viable project."
M.J. "Jay" Brodie, president of the Baltimore Development Corp., the city's quasi-public development arm, said the project — on a 27-acre parcel of land owned by Paterakis' Harbor Point Development LLC — could not go forward without tax increment financing.
"It's a world-class site, but it does not have world-class infrastructure," Brodie said at a taxation committee hearing on the plan this week. "It has no infrastructure."
Paterakis' company did not immediately return a request for comment.
The taxation committee is set to vote on the project next week, at the urging of Brodie and other officials, who say the district must be approved by the end of the year if it is to include the $100 million Thames Street Wharf building, which opened in the spring. Several council members say they're skeptical about extending tax breaks to the building, which houses Morgan Stanley's offices, because it would divert $1 million from the city's general fund.
Stokes took the helm of the finance committee after Councilwoman Helen Holton pleaded no contest last month to charges that she violated campaign finance laws by requesting Paterakis and developer Ron Lipscomb to pay for a $12,500 poll during the 2007 campaign.
Paterakis pleaded guilty last year to two misdemeanor campaign finance violations related to the same poll, and is barred from donating to Baltimore politicians until his probation ends in January 2012.
Stokes, who ran for mayor in 1999 and is contemplating entering the ring next year, says that he wants to create a committee to analyze how the city awards tax increment financing, payments in lieu of taxes and other incentives.
"If we're going to use them, for what kind of projects will we use them for? What should the taxpayers get back for their largesse?" Stokes said.
He noted that several waterfront development projects pay little or no property taxes and questioned why the benefits were not extended to other areas of the city.
The measure under consideration would outline the area that would be eligible for the financing. Separate measures, which have not yet been introduced, would grant the benefit.
Mayor Stephanie Rawlings-Blake said she supports the bill before the council. "It's important for job creation that we keep the city moving forward," she said.
The majority of the members of Stokes' committee appear to back the measure. Committee vice chair Bill Henry said that he would support the creation of the district, but would not necessarily vote for the subsequent tax increment financing bills.
The $800 million Harbor Point project, which would include apartments, condominiums, a hotel, parking garage and shops, is slated to be built on the former Allied Signal chromium plant property. A $100 million concrete cap prevents chromium, a carcinogen, from leaching into the water.
Laying water pipes and building roads at Harbor Point poses additional challenges for developers because of the environmental concerns, Brodie said. And many of the improvements — including a park and waterfront promenade — could benefit all city residents, not just those who live and work at the site.
In the past, the city would construct infrastructure to prepare for a development project, Brodie said, but economic conditions make that impossible. He lobbied for changes to state law more than a decade ago that enable the city to offer tax increment financing.
Since then, the city has used the financing technique to spur nine development projects, including makeovers of Belvedere Square and Mondawmin Mall. The financing amounts ranged from $2 million to $15 million until 2008, when the city approved a $160 million bond for developer Patrick Turner's Westport project.
Councilman James B. Kraft, whose district includes Harbor Point, said that he supports the measure because the neighborhood associations in his district back the plan.
But Kraft said he had reservations about including Thames Street Wharf. If the building is included in the plan, about $1 million in property tax revenue for the cash-strapped city would be diverted to paying the bonds.
But Brodie said it would be harder to finance the project if the existing structure were not included.
Attracting new residents and businesses would reinvigorate the city and bring revenue from other taxes — income, energy, parking — into the city's coffers, Brodie said.
"These are wise investments," said Brodie. "We need jobs and we need taxes."