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Op-ed

The problem with Baltimore’s ‘TIF’ strategy | GUEST COMMENTARY

As legendary heroes go, Robin Hood is as popular as any. Who can be against robbing from the rich to give to the poor? Unfortunately, for too long Baltimore has been using a redevelopment strategy that does the opposite: We frequently punish the poor and working-class while privileging the well-connected and well-to-do.

The latest example is a proposal to create a “downtown TIF district” to rescue that area from decline. For readers not up on the latest urban renewal jargon, “tax increment financing” involves giving developers a big subsidy on their upfront project costs. Usually, the local government borrows a large amount of money (via a bond sale), hands it over to the developer for “infrastructure costs” and then hopes to pay off the debt by collecting future property taxes from the developer.

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TIFs are Baltimore’s go-to method of attracting new investment because the city’s confiscatory property tax rate — more than double the surrounding county’s — repels investment and therefore has contributed to job flight, population loss and poverty for decades. City officials (or at least some of them) know this is true, but rather than solve our basic problem via tax reform aimed at a competitive rate, they rely on TIFs and other special subsidies to bring the costs of new projects here more in line with other areas.

There are two problems with this: It doesn’t work, and it’s terribly unfair.

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Baltimore has been subsidizing large-scale renewal projects in the downtown area since Charles Center in the late ‘50s, and at every ribbon-cutting we’ve heard that this is the start of a renaissance. Indeed, city officials are heralding our latest subsidized project — the new Lexington Market — as evidence that, finally, a “renaissance is on the horizon.”

It’s pretty to think so, but all the evidence points in the opposite direction: Baltimore has lost population in every census since 1950, even as other cities with better investment climates have enjoyed real and sustained turnarounds. This has been true as crime rates waxed and waned, and as TIFs have increased in size and number.

At over 80 square miles, though, Baltimore is just too big for TIFs to do much good. Subsidies may attract some new buildings to a couple hundred acres here or there, but since we continue to punish smaller, far-more-numerous smaller investors — those making home improvements, or startup enterprises — the rest of the city has been in a long, unrelieved decline.

The best evidence of the inadequacy of the TIF/subsidy approach is the city’s remarkable stock of abandoned houses (now estimated at over 15,000). Consider what must be true for someone to walk away from her property: the cost of owning it — not just the expenses of upkeep or improvement, but the tax liability when one does so — simply exceeds the benefits. A subsidy might help reverse that inequality, but most homeowners or businesspeople just don’t have the pull to go to City Hall and win a TIF.

And that’s the most outrageous thing about a narrow subsidy-driven renewal policy: Those with pull get the breaks, and those without pull — whether by virtue of the small size of their stake, neighborhood, race or something else — wind up paying tax rates that are, in many cases, a large multiple of the effective rates paid by those who were connected enough to obtain a TIF or some other break before they put a shovel in the ground.

This inequity is also part of downtown Baltimore’s current problems. As newer, TIF-subsidized properties came on line over the years, they poached business from the older, unsubsidized, and therefore more expensive properties. Now, we are told, the solution is simply a bigger, broader TIF district, with hoped-for new investment guided by an all-wise set of planners and policymakers.

This will be both ineffective and inequitable. It would be, in fact, a reverse Robin Hood policy.

Instead, we must reform Baltimore’s tax system to be competitive not just in specially-designated areas for well-connected people, but for all Baltimoreans in all its neighborhoods. We can do this by embedding a competitive tax rate in the city’s charter, to be achieved in a series of steps that allows ample room for adequate funding of vital city programs. Unless we do so, a genuine Baltimore renaissance will always be out of our reach, just over the horizon.

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Carl Stokes (carl2411@aol.com) is a former member of the Baltimore City Council; Steve Walters (swalters@loyola.edu) is chief economist at the Maryland Public Policy Institute.


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