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.
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.