City board set to approve boost in TIF bonds for Harbor Point
Unexpected costs for roads, a central square and sewer lines at Harbor Point have more than tripled the amount of money the city plans to borrow this year under its public financing deal with the developer.
The city’s Board of Estimates is poised to sign off today on the sale of $39 million in bonds to pay for the improvements, which include a new pump station and sewage “force main” that were not initially part of the plans for the 27-acre waterfront project.
The money is part of a total $125 million, including $107 million for infrastructure, in so-called “tax increment financing” or TIF bonds that the city approved for Harbor Point in 2013. Such bonds are to be repaid from the increased property taxes generated by the project.
Developer Beatty Development initially estimated it would need about $12 million for infrastructure needs when the second round of bonds was issued this year. Now,
the infrastructure needs are estimated at about $37 million, according to an analysis presented to the city’s Board of Finance. (Other proceeds from bond sales go to items such as issuance costs.)
The design and scope of items included in the second phase have changed, with more infrastructure expected to be built at this stage, said Marco Greenberg, a vice president at Beatty Development. While the firm has encountered some cost overruns related to environmental conditions, the overall cost to the city will not change, he said.
“If it costs more than $107 million, it comes out of our pocket,” he said. “We have to make it work.”
Estimates for the next part of the project show sharply reduced costs for future parks and a waterfront promenade.
Those estimates have changed as the developer has refined its understanding of what it takes to build on the site, Greenberg said.
Still, some remain worried the extra spending at this stage means the city will eventually need to use general funds to support Harbor Point’s development.
“Twenty-five million dollars is a lot of money,” said City Councilwoman Sharon Green Middleton, one of three council members who voted against the TIF in 2013. “A lot of things have happened since this project was approved, and they need to go, if need be, go back to the table and re-think certain designs that are going to be less costly for this city. I’m feeling like there’s no respect.”
The city has approved some additional resources already: In March, the Board of Estimates signed off on $500,000 in wastewater utility funds to pay for the part of the new force main — a pressurized line to push the sewage away from the site — located outside of the official TIF district.
The initial plans did not adequately account for the impact of sewage from the site, which the existing system cannot handle, said Art Shapiro, chief of the office of engineering and construction at the city’s Department of Public Works.
TIF funds are not allowed to be used for parts of the project outside the TIF boundaries, Greenberg said.
“I’m always worried about the overall budget for everything we do … but I’m not concerned that we won’t be able to make it work or that we won’t be able to meet all our commitments to the city,” he said.
The first building opened at Harbor Point in 2010, with offices for Morgan Stanley.
Beatty Development completed the dark glass tower that will house a new regional headquarters for Exelon earlier this year, with 1,500 employees expected to start moving in in October.
About half of the 103 apartments in the Exelon building have been leased, with about 20 tenants already moved into the units, Greenberg said. The apartments start at $1,800 a month.
The buildings associated with the next phase, known as the Point Street Apart- ments and the Wills Wharf, include apartments, offices, retail and a Hilton Canopy hotel. Construction of Point Street Apartments is already underway and Beatty is seeking office tenants for Wills Wharf, Greenberg said.
The $107 million Harbor Point TIF is the second-largest such deal to move forward in Baltimore after the $301million approved for the city-owned Baltimore Hilton. Both are dwarfed by the $535 TIF deal requested by Sagamore Development, Under Armour CEO Kevin Plank’s private real estate firm, to fund infrastructure for the massive Port Covington redevelopment project.
Members of the Board of Finance declined to approve the Harbor Point bond sale this spring at a widely attended meeting, which coincided with discussions of Port Covington, requesting more information about developer profits. But they voted to approve the bonds in a special meeting last month.