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Editorial

Setting a limit on developer tax deals in Baltimore | COMMENTARY

One of the criticisms of Baltimore’s approach to taxes raised by Renew Baltimore’s unsuccessful effort to rollback the city’s property tax rate is that the current approach smacks of preferential treatment, and that is unquestionably true. When the city inks deals that abate taxes for deep-pocketed developers seeking to build projects in parts of the city that have already attracted significant investment, the average homeowner in a distressed neighborhood is inclined to wonder: What about me? Throw in the appearance (at minimum) of racial bias as Baltimore’s high-value projects are often in predominantly white neighborhoods, and the contrast between have’s and have-not’s becomes even more alarming. And that’s not even considering the just-as-terrible-looking possibility of backroom political deal-making, as developers inevitably donate to the political campaigns of mayors and other elected officials who support their plans. Put it all together and you have, well, a fraught system that deserves significant scrutiny.

Recently, Baltimore’s Bureau of the Budget and Management Research released a 42-page report providing quite a bit of scrutiny on this difficult subject. City residents should take the time to read it, if only to get a detailed description of the various tax credit programs, their histories and purpose. We might quibble with some of its conclusions. It seems pretty safe to assume, for example, that Harbor Point would never have been developed to the level undertaken today without Brownfields tax credits, given the site’s 130-year history as an Allied Chemical Chrome Plant. But it is fair to question whether it might it have happened with less public investment. Indeed, virtually any major project where tax dollars are spent or taxes deferred can always be second-guessed. And so it has been for decades, particularly as Baltimore responded to the loss of industry and suburban flight by writing a lot of checks to those willing to buck the tide of disinvestment.

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One of the major points made by the authors deserves to be highlighted: Whatever the benefits of such tax credits, Baltimore needs to put some limits on how much is handed out this way. Why? First, because the cost of the tax breaks is gradually eating up the city’s budget and, if the trends continue, will not be sustainable. The bottom line is that the city needs to set some limits on how much it offers in tax credits. Today, they collectively represent a 14% loss to Baltimore’s property tax revenue. But secondly, there is also the matter of bang-for-the-buck and the disparity of so much investment going to the well-to-do. Even the city’s participation in the statewide Homestead Tax Credit, which, in Baltimore, caps property taxes increases at 4% each year for owner-occupied dwellings, clearly favors those with higher-valued homes in neighborhoods like Roland Park or Canton over lower-valued homes elsewhere.

So here’s what needs to be done. If Baltimore is going to set a cap on the total amount of tax credits, the city’s elected leaders, in concert with local residents and business owners, are going to have to decide what that limit should be and how it should be apportioned among the various programs. Is historic preservation important? Targeted revitalization? New construction? Enterprise zones? Creating new uses for polluted land? There are some tall weeds to navigate through. In a perfect world, the thrust of public investment would go exclusively to distressed neighborhoods. But isn’t there something to be said for expanding existing assets? The Inner Harbor was a shining example of the latter with its highway access and waterfront potential. And while downtown is perhaps less shiny today than four decades ago, there are still lingering benefits to be observed in various tax-abatement efforts from Charles Center to Harbor East.

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Kudos to the BBMR and Ernst & Young for undertaking this four-year study of the various tax abatement choices made and exploring the hard questions about affordability and effectiveness. This provides much-needed context to ongoing conversations about Baltimore’s future. Still, those who completely dismiss the idea that city leaders should ever pick “winners and losers” with development plans may be disappointed to find out the matter is more complicated than that. Baltimore offers far more of such tax incentives than other parts of Maryland chiefly because Baltimore has more concentrated poverty and the disadvantages associated with it. Whether those incentives have always been handed out wisely? Well, that’s another story.

Baltimore Sun editorial writers offer opinions and analysis on news and issues relevant to readers. They operate separately from the newsroom.


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