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City defends tax break

THE BALTIMORE SUN

A proposal to lift a cap on the amount of historic tax credits that can be awarded to redevelopment projects in Baltimore encountered some resistance yesterday in a legislative committee hearing the bill, which is backed by Gov. Robert L. Ehrlich Jr.

The bill would reverse a change approved by lawmakers in 2004 that stipulated that no jurisdiction could get more than half the $20 million allotment in a state program widely credited with helping to revitalize Baltimore. It would also increase the program's funding to $30 million per year until 2012.

The bill's supporters say the cap unfairly singles out the city, keeping otherwise worthy projects from getting the tax credits that can often make the difference for developers.

Last year, eight of 51 city projects that applied to the Heritage Structure Rehabilitation Tax Credit Program won $10 million in credits, including conversions of historic buildings to hotels and apartments.

The other half of the credits went to 28 projects elsewhere in the state. But those projects did not use up the entire $10 million available to them, leaving about $500,000 unused.

"There were valuable opportunities that were lost because of the geographic prohibition," Audrey E. Scott, secretary of the state Department of Planning, told the Senate Budget and Taxation Committee. By eliminating the cap, "the best projects from a historic preservation and economic development perspective will be funded."

Ehrlich has called the tax credit program the most effective revitalization and economic development tool ever developed in the state. It has made possible projects such as the Tide Point office complex in Locust Point, a former soap factory; Montgomery Park, the former Montgomery Ward catalog warehouse that is now the city's biggest office building; the American Can Company office and retail complex in Canton; and many of the redeveloped apartments, shops and offices on the city's west side.

But several committee members argued that the cap had been set for good reason: to keep Baltimore from taking the lion's share of credits and allow projects from outside the city a chance to compete.

"I just disagree with this," said Sen. Gloria G. Lawlah, a Democrat from Prince George's County. "We had good reason for doing that [instituting a cap]."

Sen. Ida G. Ruben, a Montgomery County Democrat, said the cap had been set as a compromise when the program was in danger of being cut altogether.

"We tried to find a way to reduce the cost, and that was one of the reasons for the 50 percent," she said. "There is a lot of need all around the state."

Lawlah suggested keeping the cap, but changing the law so that unused tax credits could then be redistributed to qualified projects in areas that had reached the 50 percent limit.

Sen. Nathaniel J. McFadden, a Baltimore Democrat, argued that Baltimore is where much of the state's older housing stock and aging commercial buildings are located. The program has been a significant economic development tool for revitalizing older portions of the state, he said.

"This is one of those tax credits that has truly worked," said Donald C. Fry, president of the Greater Baltimore Committee, noting that it has been used to redevelop projects not only in Baltimore, but in Silver Spring, Cambridge and Frederick.

He said Tide Point had generated $75,000 in tax revenue per year before its redevelopment.

Joseph M. Getty, the governor's director of policy, likened the cap to Olympic judges handing out medals based on merit, but then saying no country would be allowed to win more than three.

"This is a statewide program and the selection should be based on merit," Getty said.

lorraine.mirabella@baltsun.com

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