SUN IN­VES­TI­GATES Debt will grow on TIF projects

To­tal ex­pected to ap­proach $1 bil­lion for Baltimore’s tax-in­cre­ment-fi­nance deals

Baltimore Sun Sunday - - NEWS - — Luke Broad­wa­ter

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.

“We don’t have the re­sources for that,” he said.

Kraus’ tes­ti­mony came at a hear­ing called by City Coun­cil­man Bill Henry over what he called a “great deal of frus­tra­tion” with how the city has awarded tax deals for de­vel­op­ments in re­cent years.

Henry ques­tioned why the City Coun­cil doesn’t have a greater role in struc­tur­ing the deals. By the time they get to the coun­cil, their pa­ram­e­ters are largely set, he said.

“How does the coun­cil get in­volved in that part of the ne­go­ti­a­tion?” he asked.

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.

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