Baltimore leads state in growth

For years, the Baltimore sites where General Motors assembled vans, Procter and Gamble manufactured soap and McCormick made spices sat underused, or empty — dispiriting reminders of the city's once-powerful industrial past and apparently bleak future.

Today, they are humming back to life — home to the surging companies Amazon and Under Armour and a rising skyscraper meant to house people returning from the suburbs.


Amid the violent crime and vacant houses that still plague the city, the new buildings underscore an oft-overlooked fact: Baltimore's economy is surging. Over the past three years, according to state analysts, Baltimore's property wealth has grown at twice the rate of the rest of Maryland. The rise in incomes in Baltimore has outpaced the state as well.

"There's construction activity happening in diverse areas of the city," said Bill Cole, president of the Baltimore Development Corp. "Urban areas have become attractive again. People are starting to rediscover the charm of dense urban living."


Now city leaders want to see the growth shared more broadly. The priciest development remains concentrated in a few areas of the city. The money pouring into the high-rise buildings has yet to lift up Baltimore's poorest neighborhoods. And black families remain much poorer than white families.

"I'm happy with the direction we're moving," said Bernard C. "Jack" Young, president of the City Council. "But I want to see some of that energy spill over into our impoverished neighborhoods."

Young and others want the rest of the region to take notice of the city's gains — and return to shop, eat and live.

Baltimore's property wealth has grown at an average rate of 5.2 percent since 2014, according to state budget analysts, double the 2.6 percent growth for the state. Incomes in Baltimore have grown by 4.3 percent, a third more than the 3.1 percent across Maryland.

Over those three years, Baltimore's economy has added about 12,000 jobs, the sixth consecutive year of job growth after decades of declines.

In the continuing growth, city boosters see good news — evidence that the unrest that drew national attention to Baltimore in 2015 hasn't stopped progress.

The Washington-based Corporation for Enterprise Development warned last week of a significant wealth gap between the city's white and black residents. The median income for African-American households in Baltimore — $33,801 — is little more than half the $62,751 enjoyed by whites. And the unemployment rate for black households is more than three times the rate for white households.

While the city's unemployment rate has dropped from 8 percent to 6 percent over the past three years, Dedrick Asante-Muhammad says, Baltimore's economic growth remains largely unfelt in the city's poorer communities.


Asante-Muhammad, director of the corporation's Racial Wealth Divide Project, sees an opportunity, if local leaders grasp it. He urges city officials and business leaders to focus on hiring workers from neighborhoods such as West Baltimore's Sandtown, where nearly one in three families lives in poverty.

Economic growth "will only be a good thing for a few if it's just creating nice places for more high-income people to live," Asante-Muhammad said. "The economic moment that's happening in Baltimore can be very positive if city leaders ensure it's an investment for as wide a swath of Baltimore as possible."

Stephen J.K. Walters, an economist at Loyola University Maryland, describes Baltimore's growth as more of a "boomlet" than a boom.

After hemorrhaging nearly 100,000 jobs over two decades, the city was at rock bottom in 2010. Even after six years of job gains, he notes, Baltimore remains poorer than neighboring jurisdictions.

Walters argues that the city's high property tax rate, which is double that of other areas in Maryland, is preventing faster growth. Much of the development in Baltimore is fueled by tax subsidies, ranging from programs intended to spur growth in impoverished areas to a newly expanded credit for builders of apartments.

Seven of the 10 most valuable construction projects added to the tax rolls last fiscal year receive breaks of more than half of their tax bills. Together, those seven properties pay just $1.3 million on tax bills of $5 million.


"Because we have such a high property tax rate, we have to induce some of this investment by giving up-front tax breaks," Walters said.

"It's nice the investments have been induced. The investments would be happening in other jurisdictions if we didn't. But the investments go to those places that have gotten the breaks. The places that haven't, they are as undesirable to invest in as before. The development stops at the borders where you've granted the subsidy, and it doesn't go much further."

Cole says much more needs to be done to help lift up Baltimore's poorer residents. But he notes that the current development has extended beyond the waterfront.

He points to growth around Johns Hopkins in East Baltimore, the west side of downtown and neighborhoods such as Hampden, Remington and Greenmount West.

"We're actively trying to ensure that development creates jobs in all parts of the city, so that all Baltimore residents have a share in this growth spurt," he said.

The growth has helped allay at least one fear of city boosters: that the unrest of 2015 — and the dramatic spike in violent crime that followed — would drag the city backward.


The death of Freddie Gray in April 2015 drew international attention to Baltimore. The 25-year-old Baltimore man died after suffering a severe spinal cord injury in police custody.

On the day he was buried, the city erupted in rioting, arson and looting. Overtime for police and firefighters, reimbursements for help from other jurisdictions and damage to city-owned property cost taxpayers $20 million. Damage to businesses cost another $9 million, and hotel bookings fell by 9 percent.

Lauren Von Bargen, an analyst with Moody's Investors Service, noted that property assessments have risen by about 11 percent over the past three years, and income tax revenue is trending $18 million above budget.

"We have not seen a continued impact of the riots on the city's credit profile," she said.

Victor A. Matheson, an economist at the College of the Holy Cross, has studied the fiscal impact of rioting. He compared the unrest of 2015 to the 1992 riots in Los Angeles after the police beating of Rodney King, and called Baltimore's numbers "very encouraging."

"In the Rodney King case, the economic damage was big and long-lasting," he said. "It's no doubt good that at least Baltimore as a whole does not seem to be negatively affected.


"But you could have said the same thing about Beverly Hills in Los Angeles. The smaller neighborhoods may have some longer-lasting effects."

Young, the council president, sees some lingering effects from Baltimore's unrest: lower attendance at Orioles games, fewer diners at restaurants and less tourist money.

The economist Anirban Basu, who runs the Baltimore-based consulting firm Sage Policy Group, said growth would have been more robust if there had been no riot. He notes that cities such as Atlanta and Seattle are seeing urban centers grow faster.

"There appears to be a significant amount of momentum in Baltimore," he said. "But what would Baltimore look like if the riots had not transpired?"

A downside to the city's growth is the loss in school aid. For the third year in a row, rising property values mean the public school district is losing tens of millions of dollars from Annapolis. The amount is determined in part by a formula that delivers aid based on property values and student enrollment.

Because much of the growth has been fueled by tax subsidies, city revenues have not increased as quickly as private wealth. Some of Baltimore's most valuable buildings pay little or no property taxes.


But the state formula that determines aid for schools doesn't take that into account. It assumes that growth in property values means commensurate increases in tax receipts.

As a result, schools that lack staff, supplies, heat, air conditioning and working water fountains face the loss of $42 million in state aid this year without a corresponding boost in revenue.

Young has called the cuts "devastating." He has called for more money for schools from the city and state, and overhauls of employee pensions and health care.

"We want to make sure the state clearly understands the need of the city," Young said. "Baltimore is the economic engine of the state. If we go down, we drag the state with us."

Last year, Gov. Larry Hogan provided city schools with about $13 million more than the funding formula prescribed. He has yet to do so this year, but Baltimore lawmakers in Annapolis are pushing for more state money.

Local architect Klaus Philipsen sees Baltimore's growth as part of a national "renaissance of cities."


He says he watched with frustration for decades as Baltimore failed to join in the region's growth.

But over the past three years, as the gross domestic product of the metropolitan area grew by $14 billion, Baltimore has helped push the rally. The region's GDP now ranks 19th in the country, ahead of cities such as Portland, St. Louis, Charlotte and Pittsburgh.

"If you have a growing region, you have a chance to make your center city prosper," Philipsen said.

"What we've seen in recent years is that businesses and residents are increasingly looking for urbanized places. They are not as interested in the McMansions anymore.

"Cities like Boston and San Francisco are capturing enormous amounts of wealth because of this renaissance. We need to prepare ourselves for the value creation inside our own city. I think we are on our way."