Advocates of Baltimore's downtown development and neighborhood leaders squared off in Annapolis yesterday over legislation that would let city officials give millions in tax breaks to developers of new hotels and other large projects.
Mayor Kurt L. Schmoke, making what he said was his final appearance before the General Assembly, joined business leaders and developers in telling legislators that the city's economic future depends on being able to offer financial incentives for major new construction.
"This will be a great stimulus to economic development for our community," Schmoke told the Senate Budget and Taxation Committee.
That panel is reviewing a city-sought bill that would let developers negotiate how much they would pay in property taxes. A similar bill also got a hearing before the House Ways and Means Committee yesterday.
But community leaders and citizens urged lawmakers to defeat the bills, saying the breaks for developers amount to "welfare for the rich" that will weaken the city's already declining property tax base.
"We are not against incentives, but we do not trust the process," said Carolyn Boitnott of the Waterfront Coalition, a collection of neighborhood and small business groups.
Such development deals, known as "payments in lieu of taxes," or PILOTs, were granted by city officials for the 750-room Wyndham International hotel project in Inner Harbor East, and for an 850-room Grand Hyatt hotel that attorney and Baltimore Orioles owner Peter G. Angelos plans to build across from the Baltimore Convention Center.
But a city Circuit Court judge struck down the existing PILOT law in November after community groups challenged the $75 million in tax breaks promised to the Wyndham developers, which include bakery owner John Paterakis. The new legislation is designed to reinstate those deals and make it easier for the city to award tax breaks to other projects.
Carroll R. Armstrong, chief of the Baltimore Area Convention and Visitors Bureau, said the city is losing millions in revenue because the recently expanded Convention Center does not have enough hotel rooms nearby to attract large meetings.
The state provided $150 million toward the Convention Center's upgrade, Armstrong reminded legislators, and without the ability to get new hotels built, "we're going to continue to lose business to Philadelphia and to every other East Coast city, and it's money down the drain."
The hearings featured jockeying among developers seeking to ensure that their projects could go forward without helping any potential competitors.
John Pica, a former city senator now lobbying on behalf of Angelos, urged the legislators to amend the PILOT bill so owners of existing office buildings could get tax breaks for renovating -- an amendment that some legislators saw as a bid to help Angelos' plans to redevelop Charles Center.
In all, Angelos intends to spend $12 million to add parking, retail and restaurant space, and a new stairwell and entrance to the 320,000-square-foot building, which was completed in 1963. Angelos bought One Charles Center in October 1996 for $6 million.
Pica also urged legislators to limit the number of PILOT deals offered for hotels so the two already approved by the city -- including Angelos' Hyatt -- can be built and open before any others get similar tax breaks.
"There's not enough business for all those hotels," he said. He said studies indicate the city needs perhaps another 1,500 hotel rooms. There are seven hotels now proposed downtown that would provide 3,500 new rooms if all get built.
Developers hoping to build three other downtown hotels urged lawmakers to give them a fair chance at qualifying for PILOTs, too. Without tax breaks, they said, they cannot afford to set room rates low enough to compete with convention hotels in other cities.
"We would have loved to build this hotel without any subsidy at all but I can't," said Harvey Schulweis, president of a New York firm that wants to build a $124 million Westin Hotel at the former News American site at 300 E. Pratt St. Schulweis had proclaimed early on that he would build his hotel without any tax breaks, but recently reversed position.
Community leaders, small business owners and homeowners urged the legislature not to grant city officials broad authority to negotiate deals with developers. They repeatedly brought up the controversy over the city's support of the Wyndham, which critics charged was a political plum for Paterakis.
John Murphy, a lawyer for the Waterfront Coalition, called the PILOTs "pure fiscal insanity." He noted that the $700 million worth of projects lined up to get PILOTs now would mean an annual tax loss for the city of $16 million.
"If these tools are misused, our property taxes will go even higher," said Carolyn T. Burridge, lobbyist for the Baltimore Homeowners Coalition.
Frederick Savage, another coalition member, noted that the city can allow developers to pay as little as $1 in property taxes for up to 25 years. The legislation grants the city "unfettered discretion to grant favors to some and not to others," he said, adding, "Nobody should have that much discretion."
"It's welfare for the rich," said Kay Dellinger of Lauraville. "If this bill passes, Baltimore will be coming to the General Assembly asking for more money to pay for its services."
Developers insisted that they already had invested heavily in the city, and that their projects will boost the economy through the jobs created and through other taxes.
Joseph Clarke, president of J. J. Clarke Enterprises, said his company already has invested $20 million in buying property and planning for a 267-room Embassy Suites hotel, in connection with a $120 million 35-story skyscraper at One Light Street. "Our equity is down there in the ground," he said.
The bill, which city legislators said has been amended in response to citizens' complaints, would require developers to borrow or put up at least $20 million of their own money to qualify for the tax breaks.
Pub Date: 3/18/99