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Hogan's budget and Baltimore

When Gov. Larry Hogan announced his plans to help eliminate blight in neighborhoods like Freddie Gray's Sandtown, it came with an eye-popping figure attached: $700 million. But as the details emerge, it's looking less and less impressive.

For starters, there's the news this week that the first installment of the $75 million in demolition funds Mr. Hogan promised over four years isn't actually in his budget. He has said it will be included in a supplemental budget issued later in the General Assembly session — he even included mention of this plan in the budget highlights book — but the omission is nonetheless enough to raise concern. Pledging to include spending in a supplemental budget means it could wind up as a political football during the next three months, which are expected to be acrimonious as the Republican governor and Democrat-led General Assembly grapple over Mr. Hogan's agenda. There was simply no good reason not to include it in the governor's initial budget proposal.

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But even if that matter is straightened out, as we expect it to be, the remaining $625 million or so the governor promised turns out to be almost entirely a repackaging of incentives, tax credits and other funds that would have been available anyway.

The bulk of the funds Mr. Hogan's administration has identified come in the form of revenue bonds to be issued by the Department of Housing and Community Development through two programs. One is the Rental Assistance Demonstration Project, an Obama administration initiative to privatize public housing in an effort to tap private sector resources for repairs and renovations. Baltimore is already deeply engaged in that effort. The other is multifamily revenue bonds, which can be used to support acquisition, renovation or construction of low-income housing. Together, they account for about $432 million, or more than half of the promised total. Another $45 million would come from revenue bonds issued through an existing program at the Department of Commerce that provides a similar financing mechanism for small businesses in priority funding areas to acquire land, build facilities, buy equipment, etc.

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The way the bonds work is that the state sells bonds to raise money for developers or small business owners, as the case may be, who then pay the debt back by dedicating a portion of the revenue from their projects. This is different from tax increment financing, an incentive city residents are more familiar with, in which bonds are paid off through the property taxes a project generates — a substantial benefit to the developer. The only incentive here is that developers may get a somewhat lower interest rate than they would by going through a bank, but the spread isn't always great enough to make up for the hassles associated with public financing, which is to say that just because the state is willing to authorize that much doesn't mean developers will necessarily take them up on it. From the state's perspective, the bonds don't necessarily count against the state's debt limit, so it can engage in this form of financing largely without jeopardizing its ability to fund other projects.

Another $45 million of the total comes from federal low income housing tax credits, a long-standing program routinely used by DHCD to help such projects. The state received $27 million in credits in the last fiscal year, so a pledge of $11.25 million a year for four years isn't a stretch.

The Hogan plan says about $11.5 million will go to the Baltimore Regional Neighborhoods Initiative, a DHCD program that funnels money through local organizations in various communities in Baltimore City and Baltimore and Anne Arundel counties in hopes of supporting clusters of small projects. That program is budgeted at $3.75 million this year, so merely keeping current funding levels would provide more than $11.5 million over four years. The long established Community Legacy program, which provides funding to local governments and community development organizations to support projects related to business retention, homeownership and commercial revitalization, is listed as contributing $5.2 million to the total, during a period when the program was already slated to receive $24 million.

Even the money slated for demolition isn't entirely new. Mr. Hogan promised a combined $94 million in state and local demolition money over four years. The state's share, $75 million, or an average of $18.5 million a year, comes from the pre-existing Strategic Demolition and Smart Growth Initiative, which had previously been funded at $7.5 million a year statewide. Historically, about 45 percent of that had been spent in Baltimore, so under the status quo, the city might have expected to receive $13.5 million in state demolition funds over the four years anyway. And Mayor Stephanie Rawlings-Blake had already committed to $40 million in city funded demolition during that period; a spokesman said the $19 million did not necessarily represent additional funding beyond that.

Thus, out of the promised $700 million ($713.67 million, to be precise) from the state government, just $61.5 million represents a clear, increased pledge of taxpayer funds that would not otherwise have been available to help rebuild Baltimore over the next four years. That's a decent commitment but less than 9 percent of the ballyhooed total. And now not even that is actually in the budget.

Meanwhile Baltimore City schools are budgeted to receive $24 million less from the state next year because of enrollment declines and the effect of rising city property values on funding formulas. Mr. Hogan's budget proposes $5.6 million in one-time grant funds to make up for enrollment-driven funding losses in three rural counties, but nothing for Baltimore City. Between that, his refusal to spend education money legislators fenced off last year, his cancellation of the Red Line and the inflation of his promised blight package, you could excuse people for being cynical about his commitment to the city.

We have full faith and confidence that Mr. Hogan will come through with his promised demolition funds, but the longer he waits to put them in the budget, the more that cynicism is going to grow.

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