In return for the promise to bring another 650 jobs to Baltimore, city leaders are poised on Wednesday to give financial services giant Morgan Stanley more time to meet the terms of a $3.25 million loan forgiveness program.
The Board of Estimates vote comes amid public outcry over the city's plan to grant millions of dollars in aid to the $1.8 billion Harbor Point development, but some critics of that plan say the Morgan Stanley deal provides a proven return on investment.
"We made an agreement to them in good faith. We should allow the extension," said City Councilman Carl Stokes, a leading opponent of the unrelated Harbor Point plan that calls for further waterfront development.
The city and Morgan Stanley first agreed in 2003 that Baltimore would provide a series of low-interest loans in exchange for a commitment from the investment bank to create jobs. If the company created the number of jobs promised on the agreed-upon timeline, the city would forgive half of the loan debt. Baltimore was competing with other cities to attract the Morgan Stanley operations center.
The company began receiving $1.75 million in city loans at that time. A second agreement was signed in 2008 for another $1.5 million in loans, expanding the initial commitment of 600 jobs by late 2014 to 1,500 by late 2018.
From the Thames Street Wharf, Morgan Stanley now employs more than 850 people, most of whom were Maryland residents when they were hired, said Matt Burkhard, a company vice president. The Baltimore employees work in institutional securities processing, banking operations and other company functions.
Under the agreement, the company was to have had 900 employees on the payroll by last December. The requested extension would give Morgan Stanley until this December to hire the additional 50 workers.
The company is also seeking relief from its next-phase goal by reducing the number of promised positions from 1,200 by late 2015 to 1,000, said Jeffrey Pillas, chief financial officer of the Baltimore Development Corp., the city's quasi-public development agency. Pillas said that in granting the leeway, the city will reduce the next $500,000 loan installment to $167,000.
He said the company had reached — and exceeded — its job-creation commitments before now, and needs the extension to accommodate a hiring slowdown caused by the economy.
The company's commitment to create 1,500 jobs by the end of 2018 hasn't changed, Pillas said. To meet the final phase of the agreement, the last $500,000 loan installment would be increased to $833,000.
"They were reasonably on target, and we want the jobs," Pillas said. "It's a lot of jobs. It's 1,500 jobs, and 1,500 jobs doesn't come very frequently."
The Rev. Andrew Foster Connors, though, sees Morgan Stanley as a smaller-scale example than Harbor Point of the city's flawed economic development strategy. He is an activist with Baltimoreans United in Leadership Development, known as BUILD.
"BUILD has been saying this for a number of years: The city's whole economic development strategy is empty; it's bankrupt," he said. "These corporations take taxpayers' money under promises that they don't keep, and instead of holding them accountable, our leaders offer excuses on their behalf."
Mayor Stephanie Rawlings-Blake, Council President Bernard C. "Jack" Young and Comptroller Joan M. Pratt all support giving Morgan Stanley flexibility, each said Tuesday.
The mayor called the deal prudent, said her spokesman, Travis Tazelaar. The city's loan modification reflects similar changes approved by the state, which provided a $4 million grant to Morgan Stanley through the Department of Business and Economic Development's Sunny Day Fund and a $1.5 million workforce grant.
Expansion costs for Morgan Stanley have been estimated at $42 million.
Stokes said Morgan Stanley has demonstrated good faith in fulfilling its promises to the city. He pointed out that if the company doesn't live up to its commitment, portions of the loan must be repaid in full.
The $107 million tax increment financing plan to pay for infrastructure, parks and other amenities at Harbor Point doesn't require job creation. The developer, however, agreed to voluntarily follow the city's new local hiring ordinance — pledging to hire 51 percent of new workers for the project from Baltimore. The City Council is scheduled to take a final vote on that plan next month.
"I actually see Morgan Stanley as a much better deal," Stokes said. "Both parties have kept up their end."
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