Intense Harbor Point debate could scare developers away from future projects

In a recent and similar public debate here in Philadelphia over TIF financing on a new hotel project, Baltimore experiences public push back on public assistance to attract large scale commercial development.  Arguably, TIF forecasts used to make an argument for a project are often overstated, but do we really want think about what happens in the absence of development incentives?

The "vitriolic" debate over Harbor Point's $107 million tax-increment financing plan this summer has sparked fear that developers could be scared off from future projects and indicates residents don't think the city has a clear plan for incentivizing development, city officials said Tuesday.

Those and other concerns were aired during a Baltimore Efficiency & Economy Foundation Inc. meeting that offered the first opportunity to begin distilling the public's response to the massive incentive package offered to Harbor Point developer Beatty Development Group LLC. The highly contentious City Council meetings, all of them televised, often descended into raucous reproaches to developer Michael Beatty and elected officials.

The meeting also provided an outlet for critics of incentives to argue that tax breaks and public financing are an admission that the city's tax rate is too high to support large-scale development.

"It opened up the discussion about fairness and equity in our tax system," developer David Tufaro said of the Harbor Point debate. "If projects are consistently given tax breaks and the rest of the city is subjected to high tax rates, it discourages attracting people. We have a desperation mentality, which leads us not to carefully scrutinize things."

City officials and the forum's moderator, former BDC president and Baltimore Business Journal contributing writer M.J. "Jay" Brodie bristled at the description of Harbor Point's tax incentive plan as tax breaks because taxes on the development are paid, but are used to fund infrastructure improvements. Harbor Point, which is a former brownfield and currently has no infrastructure, will also receive tax breaks because the area has been designated a state Enterprise Zone.

Many of the public officials in attendance, including Baltimore Development Corp. President Brenda McKenzie, defended the use of incentives, saying, "we have to be creative and nimble in how we're [incentivizing] development in our city." But others, such as Greater Baltimore Committee CEO Donald C. Fry, said there is concern the incentives have been too piecemeal and it's not clear how they fit into a "comprehensive approach" for economic growth in the city.

"There has been a lot of opposition, but the reality is that I don't think we're going to have taxes substantially reduced over five years. So the reality is we're going to have to do something special" to incentivize development, Fry said. "Has it really been articulated well to voters that this is what's really being done?"

Several city officials at the forum said the answer to that question was no. City Councilman William H. Cole IV, who represents downtown, said the debate over Harbor Point has given rise to a perception that there's a downtown versus the rest of the city approach.

"If we didn't have TIFs and PILOTS [Payment in Lieu of Taxes], we'd be in a much deeper hole than we are right now," Cole said. "Somehow we have to find a better way of communicating what these tools are as a whole. It should never be a conversation about what's happening here in downtown or not happening in northeast Baltimore."

But Councilman Carl Stokes said it's impossible for residents in poor neighborhoods not to have that perception when the city's poverty rate has climbed since the introduction of publicly led projects such as Charles Center and the Inner Harbor.

"We have promised people in neighborhoods across the city that [incentives] would inure to the benefit of residents, and frankly, it has not," Stokes said. "There is no opposition to PILOTs and TIFs. It is an opposition to not having a game plan that will benefit the city."

Even so, it was Stokes as chairman of the council's taxation committee who conducted long public hearings where opponents to big business, development and to Beatty (sometimes described as a "rich developer" during hearings) railed against the city's TIF plan. City Solicitor George A. Nilson questioned whether those hearings had given the city an image of being unfriendly to development.

"It had gotten so intense, and in some respects sufficiently vitriolic, to make one wonder whether a developer would ever want to go through the intensity of that," Nilson said.

He went on to question "whether the public debate might be harmful and counterproductive."

Brodie dismissed that argument, saying the debate was a function of democracy and adding, "I don't think that should be a question."

But developers such as Tufaro said the debate may have been a result of poor communication, saying, "We have to convince people, we have to persuade people, and if we fail to do it, it's our fault."

Streuver added that, in the future, he hopes the city can "rise above" the messy Harbor Point controversy and find solutions.

"There was a very open process about Harbor Point in dealing with height and traffic and parking, and it ended in unanimous support [from neighborhood groups] and a unanimous vote by the City Council," Streuver said. "This was the endorsed plan. Same with State Center. And we allow the process to be attacked and sabotaged and descend into vitriol. My hope is we can come together and work on the issues."

Source:  Baltimore Business Journal