Debt from Baltimore TIF financing deals expected to grow to nearly $1 billion

The debt owed on tax-increment-financing deals in Baltimore, including the Port Covington development, is expected to grow to nearly $1 billion.
The debt owed on tax-increment-financing deals in Baltimore, including the Port Covington development, is expected to grow to nearly $1 billion. (Kim Hairston / Baltimore Sun)

Debt owed on tax-increment-financing deals in Baltimore is expected to grow fivefold in the near future, according to new data from the city’s finance department.

Currently, nine development deals approved by the city account for about $200 million in city-issued debt. But four newer, larger deals are expected to grow the cumulative debt to nearly $1 billion, according to Stephen M. Kraus, the city’s treasury chief.


The biggest future deal is the $660 million in tax-increment-financing bonds approved for the Port Covington development in South Baltimore.

“It takes a long time to retire this debt. Could be 25 or 30 years,” Kraus told City Council members at a hearing last week on special tax deals.


Tax-increment financing deals involve a jurisdiction floating bonds to pay for a development's infrastructure. Increased taxes from the development are used to pay off the debt instead of going toward city services, such as schools or police.

Kraus said the city will have an auditor track the progress of the newer deals, such as Port Covington, in creating jobs and providing benefits for nearby communities. Older deals did not have such auditing.

“We don’t have the resources for that,” he said.

Kraus’ testimony came at a hearing called by City Councilman Bill Henry over what he called a “great deal of frustration” with how the city has awarded tax deals for developments in recent years.


Henry questioned why the City Council doesn’t have a greater role in structuring the deals. By the time they get to the council, their parameters are largely set, he said.

“How does the council get involved in that part of the negotiation?” he asked.

Baltimore Development Corp. President Bill Cole testified that the 14 active economic development projects in Baltimore that have been awarded payments in lieu of taxes status — known as PILOTs — paid $2.1 million in taxes and received $12.5 million in tax breaks in 2017.

Cole said the ratio of tax breaks to taxes paid was expected to even out within a decade. A new PILOT is planned for Eager Park in East Baltimore, Cole said.

In a PILOT, a developer pays a lower fee than the city’s property tax rate instead of paying the tax.

City Councilman Ryan Dorsey noted that existing PILOTs have subsidized the creation of more than 6,000 parking spaces, and questioned whether government should be incentivizing automobiles instead of public transit and bicycling.

Cole said few developers want to build parking garages with their projects, but that was the prevailing wisdom of past administrations.

“Any developer would tell you if they can avoid building parking, they would,” he said.

Baltimore's $5.5 billion Port Covington project is moving ahead despite a slowdown at Under Armour.

Arguing that economic development needs the boost of public assistance, city officials for years have approved a wide range of tax breaks for projects built on vacant or under-utilized land.

City officials argue such deals are necessary to lure development and thousands of jobs to Baltimore given that the city’s property tax rate is about twice as high as the rest of the state.

Baltimore-approved TIF deals and their current outstanding debt levels:

• East Baltimore Development Initiative: $81.6 million

• Harbor Point: $75.3 million

• Poppleton: $12 million

• Mondawmin Mall: $10.7 million

• Clipper Mill: $6.5 million

• Harborview: $5.3 million

• Strathdale: $4.8 million

• Locust Point: $2.1 million

• Belvedere Square: $1.6 million

Total: $199.9 million

Baltimore-approved TIF deals coming soon:

• Port Covington, $660 million

• Harbor Point, $49.7 million

• Poppleton, $46.3 million

• University of Maryland BioPark: $17.5 million

Total: $773.5 million

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