An unexpected provision inserted into next year's state budget package could cost Baltimore millions of dollars by exempting four giant cranes at the port from city taxes.
The measure — which would benefit a single private corporation — received preliminary Senate approval Wednesday. A spokesman for the administration of Mayor Stephanie Rawlings-Blake said the city had not been informed.
"This caught us by surprise," said spokesman Howard Libit. He said he hoped the General Assembly would not take such action during the current 90-day legislative session, which ends April 13.
While the item wasn't challenged in the Senate Wednesday, Baltimore Sen. Joan Carter Conway questioned the provision.
"I just don't want to see Baltimore city lose any money," said Conway, a Democrat.
The measure is not in the House's version of the bill. If it receives final Senate approval, it would be a subject of negotiations between the two chambers.
The budget amendment would exempt Ports America Chesapeake, the company that operates Seagirt Marine Terminal on behalf of the Maryland Port Administration, from paying personal property tax to the city. While called the personal property tax and created by state law, the levy applies to business assets other than real estate and the revenue is collected by local governments.
Ports America entered into a $1.8 billion, 50-year lease deal with the state in 2009 as part of one of Maryland's first public-private partnership deals. The deal, announced with fanfare by former Gov. Martin O'Malley, was presented as an innovative way for Maryland prepare for the expected widening of the Panama Canal and the need to accommodate larger ships.
Because the state had little money at the time for major capital transportation projects, Maryland enlisted Ports America to foot the bill for construction of a 50-foot-deep berth and four super-sized cranes to load and unload cargo from the large container ships that would traverse a wider canal. In return, Ports America would receive a long-term lease to operate the terminal and collect its profits.
Sen. James E. "Ed" DeGrange, the Anne Arundel County Democrat whose transportation subcommittee added the provision, said the company did not directly ask him to include the measure in the budget package, but said the matter had come up in conversation.
According to DeGrange, the amendment would correct an oversight in the original public-private partnership agreement. Before the agreement, the state-owned cranes at the terminal were not taxed. The taxes collected on the privately owned cranes — which DeGrange estimated at $2 million a year — were a windfall for the city, he said.
DeGrange said the amount the city would collect on the cranes — valued at $10 million apiece — would decline in any event because they are on an accelerated depreciation schedule.
"We felt it should be excluded because it's still state property they're located on," he said.
Company officials did not respond to emailed questions seeking their comments. Former U.S. Rep. Helen Delich Bentley — the longtime "godmother" of the port that now bears her name — defended the tax break for Ports America. She said similar facilities in other ports are not taxed.
"If they pay the personal property tax, they are put in a competitive disadvantage to other ports," she said.
Richard Scher, a spokesman for the port administration, said the amendment was not an agency request.
"Ports America Chesapeake asked for the exemption. We were absolutely unaware of it," he said.
Libit said Ports America has been paying taxes on the cranes since 2011 — a year when they were still being installed. He said the current year's tax bill is $2.5 million. He did not have estimates for future years.
"They never came to the city with any objections or raised any concern to us," he said. "We are hopeful that this is a discussion we'll have outside of [the legislative] session and not within the state budget."
Libit said the city believes the tax has been levied appropriately but welcomes a conversation at the appropriate time.
"We are supportive of the port of Baltimore and Ports America and want to help them be successful," he said. "We know the port is a major economic engine for Baltimore city and we want to help it flourish."