The deal could bring an estimated $39 million in the neighborhoods of Brooklyn, Cherry Hill, Curtis Bay, Lakeland, Mt. Winans and Westportover the next 30 years. (Algerina Perna/Baltimore Sun video)
The proposed massive redevelopment of Port Covington enters what may be its most crucial phase tomorrow when the City Council holds what is expected to be the first in a series of public hearings and work sessions on Sagamore Development's request for $535 million in tax increment financing. The company, backed by Under Armour CEO Kevin Plank, is promising a once-in-a-lifetime opportunity — not just the new headquarters campus the rapidly growing sports apparel company needs but also retail, residences, parks, manufacturing space, offices and more. In terms of size, scope and potential to define Baltimore as a city of opportunity, it dwarfs anything that has come before.
On this deal, we need to get to yes. But we're not there yet. Here are some of the questions the City Council needs to explore as it decides whether and how to approve the financing request.
•Does it really have to be $535 million? Sagamore is requesting that the city issue bonds sufficient to cover a wide variety of infrastructure costs for the proposed development over the course of the coming decades. Much of it covers the basics — roads, water and sewer, utility connections and the like, but almost $140 million is for parks. Those and other signature elements would certainly enhance the final project, but are they really crucial? The independent analysis of the proposal commissioned by Baltimoreans United for Leadership Development noted that the TIF request includes funds for "road preparatory work for a new rail-in-street trolley circulator system, kayak landings and trails, constructed wetlands and micro-bioretention systems." A TIF is supposed to meet the "but-for" test, meaning that the project wouldn't get built "but for" this public financing. Is this multi-billion-dollar, multi-decade effort really a no-go without a publicly financed kayak landing?
•Will this become an enclave for the rich? Baltimore's inclusionary housing ordinance is supposed to ensure that 20 percent of units in a development receiving a TIF deal are reserved for low- and moderate-income households — but only if a city fund dedicated to the purpose is able to help defray the cost. Port Covington was exempted because the fund has far less than the $184 million that would be required to cover a project this large. Instead, Sagamore entered into a memorandum of understanding with the city setting out a "goal" that 10 percent of units in the area be affordable for those making 80 percent of the Baltimore region's median household income. That's not nearly good enough. A goal is not a requirement, and Sagamore could wind up instead contributing $3,000 to $5,000 per unit to the city's inclusionary housing fund to support low-income housing elsewhere. Even if the "affordable" units are built on site, that income level means no actual poor people would live there. City calculations say that would translate into a rent of $1,255 a month for a studio apartment. The council needs to find a way to do better.
•Who will get the jobs created by this project? Sagamore and the city have agreed to memorandums of understanding related to both local hiring and support for minority and women-owned businesses that they say exceed any requirements in law. MuniCap, which analyzed the TIF proposal for the city, projected that it will generate more than 14,000 temporary construction jobs during the life of the project and that more than 22,000 full time employees will work on site in retail, manufacturing and office jobs when it's complete. MuniCap expects about a third of them to live in the city. The council should probe the details. What kind of jobs are these, and what kind of training will be necessary for city residents to compete for them? Given the isolated nature of Port Covington, how will residents without cars get there? Sagamore has committed to paying a local housing coordinator for five years and to promote hiring opportunities to city residents. What strategies will it employ? The company says it will work with the city and state to ensure public transportation access. How might this fit in with the state's proposed overhaul of Baltimore bus routes? The company has floated the idea of private job site shuttles. What areas might they serve?
•Do the numbers make sense? Under Armour recently bought its future headquarters site from Sagamore for $70 million — double what the development company paid. Sagamore says it made no profit from the deal and that the increased price reflected improvements made to the property. In analyzing the TIF, the Baltimore Development Corporation factored in expected profits when Sagamore sells off pieces of the land to those who will develop the residences, offices and so on. Does the analysis properly capture the magnitude of the increased values we can expect to see as the area is improved — in large part by TIF-funded infrastructure?
The BUILD analysis, conducted by Bethesda-based TischlerBise, also questions how the sequencing of the development will impact the property tax revenue the project will generate to repay the bonds. As is standard with TIF deals, the developer is required to pay a special tax if at any point the new tax revenues fail to cover the debt payments, and as TischlerBise points out, the Port Covington proposal anticipates from the outset that such payments will be needed for nearly two decades. How does that impact its viability?
•What's Baltimore's piece of the action? It's standard for TIF deals to include what amounts to a profit sharing provision for the city in case the development turns out to be more profitable than anticipated. Comptroller Joan Pratt recently voted against a new bond issue for the Harbor Point TIF to protest what she considered an insufficient revenue-sharing deal with that development, which only kicks in if profits exceed 20 percent. The city has not yet reached such an agreement for Port Covington, and council members should press the point.
•What happens if the project doesn't get anticipated federal funds? In addition to the $535 million in TIF financing, Sagamore is anticipating a like amount in state and federal transportation funds. But getting that money is no sure thing, as we just learned. Port Covington was in the running for federal FASTLANE funds, as was a proposal to retrofit the Howard Street rail tunnel to allow the double-stacking of cargo. Neither project made the cut, which is perhaps unsurprising since they were among 200 applicants nationwide seeking $9.8 billion in funding from an $800 million pot. How would it affect the viability of the Port Covington plan if the federal money doesn't materialize soon — or ever? What would happen if the city and state focused their lobbying on the Howard Street tunnel — an immediate and pressing need — and relegated the new I-95 off-ramps Sagamore is requesting to a later time?
•Would approving this request impact the city's ability to issue bonds to cover other needs? TIF bonds are different from general obligation bonds, which are backed by the full faith and credit of the city. But do bond rating agencies consider TIF bonds to convey any kind of moral obligation by the city, should the private developers somehow prove unable to pay? Is there a possibility that such large bond issuances could impact the city's credit rating? Some have suggested selling the bonds through a third party, like the Maryland Economic Development Corporation or the Maryland Stadium Authority. How does that impact the overall cost of the financing?
•What are the ancillary effects? MuniCap sought to predict additional costs to the city for schools, police, fire protection and so on, but what about the added strain on other community resources, like hospitals? The legislature has provided a temporary measure to ensure that TIF deals like this one don't impact state aid for schools, but what happens when that expires?
To be clear, we do not view the fact that questions remain at this stage of the proposal's consideration as a sign that this is a bad deal or that Sagamore has been insufficiently forthcoming. On the contrary, its TIF proposal, at more than 500 pages, is notably comprehensive, and the company has shown a real commitment to explaining its plans not just to politicians, the Baltimore Development Corp. and the Greater Baltimore Committee but also to community groups throughout the city. Sagamore has agreed to provide $10 million over five years for city youth and education programs, and this month it announced a $39 million, 30-year community benefits agreement with six nearby neighborhoods.
The reason questions remain is simply that this is a very, very big deal. It is breathtakingly ambitious in terms of its scope and vision for a long abandoned part of the city, and it is breathtakingly huge in terms of the public and private investments needed to bring it to fruition. Now it's up to Sagamore and the council to make sure it is breathtakingly great not just for Under Armour, Kevin Plank and his investors and partners, but for the entire city of Baltimore.