Tax Dodgers’ report
Checking up on the developers who get city tax breaks
Published: June 19, 2013
Ever since the city sold the 28-acre waterfront parcel between Harbor East and Fells Point, known as Harbor Point, to H&S Bakery magnate John Paterakis for less than half-a-million dollars, the project has been the subject of protests because of the city’s endless accommodations to the billionaire developer. Perhaps most colorfully, the Occupy Baltimore folks showed up to a Baltimore Development Corporation meeting last August decked out in the uniforms of the “Tax Dodgers,” sarcastically cheering dough boy’s ultimately successful attempt to have the city expand an enterprise zone—reserved for impoverished areas—to the ritzy Harbor Point area, giving him millions more in tax breaks.
Why should city taxpayers subsidize a billionaire developer building office space for huge corporations and high-end housing, protestors ask, while basic needs go unmet and ordinary taxpayers get socked with ever-increasing fees? The new development—which, with the addition of yet another hotel, has expanded from 1.8 million to 3 million square feet and is projected to include more than 1.5 million square feet of office space—will by definition drain tenants from the already under-utilized central business district. And tax revenue from the project will not begin trickling in for more than a decade, according to detailed analysis by MuniCap, Inc., the city’s consultant, as reported by the Baltimore Brew.
As the City Council takes up a series of ordinances meant to cement the public subsidy for Harbor Point project, City Paper decided to map the Enterprise Zones, TIF, and PILOT deals already in place and see how they have performed.
First, definitions: An Enterprise Zone is a federal designation for impoverished areas, offering substantial tax breaks to businesses that locate there.
Tax Increment Financing (TIF) is a system under which the city pays to build infrastructure for a project—roads, sewers, and the like—so the developer won’t have to. In exchange, part of the increased tax revenue from the completed project is pledged to pay back the cost of the new infrastructure. Conceptually, it is as if you could get taxpayers to rebuild your sidewalk, driveway, and the pipes leading into your house in exchange for the increased property taxes you would pay. Somehow, though, it only happens when big developers come calling. City leaders say the development would not happen at all but for the freebie.
A payment in lieu of taxes, or PILOT, is just a tax break. Your new development would, under a normal assessment, owe $1 million per year in property tax? Claim it’s for the greater good (and throw a lot of campaign contributions around) and chances are you’ll get a big discount—say, $950,000 for 15 or 20 years. Given that, in a city like Baltimore, almost any development is considered to be a public good, PILOTs abound. But companies associated with John Paterakis—such as H&S Properties— get most of the breaks: Of the more than $170 million in property taxes the city is forgoing, 63 percent is going to companies associated with John Paterakis.
So, how do all these projects perform?
Notes: Developers are listed in parentheses after project name. All performance figures are as of 2011. Request for updated figures were incomplete. “Time to payoff” means how long it would take the taxes generated to pay off the subsidy—without accounting for interest or inflation—rounded to the nearest year.
TIFs (in orange)
1. Harborview, Key Highway (Harborview Development Co.) - Conceived as 88 townhouses, in 2003 it received a $7.5 million TIF, of which $5 million was spent on bulkheads and a waterfront promenade. Developers promised 176 residents, 106 of whom would be “new residents.” As of 2011 there were 60 residents paying estimated income taxes of $122,000 and property taxes of $177,000. Time to payoff: 25 years.
2. Frankford Estates (Streuver Bros.) - 170 starter houses get a TIF worth nearly $6 million, $3.9 million goes to road, sidewalk, and utility construction. Streuver Bros. promised 170 owner-occupied households and delivered same, paying $780,000 in taxes annually. Time to payoff: 8 years.
3. Belvedere Square (Streuver Bros.) - Retail and entertainment project gets $2 million TIF to pay for parking “and related public improvements” in 2003. No projections of jobs or taxes were offered, but 345 jobs created at an average pay of $45,500. Total taxes paid: $518,000. Time to payoff: 4 years.
4. Clipper Mill (Streuver Bros.) - 90,000 feet of office and artisan space, 120 apartments, and 101 for-sale homes. $8 million TIF in 2004, of which $5.5 million went to sidewalks and other public infrastructure. The pitch was 227 jobs. Actual results not published.
5. Locust Point Key Highway Extension (City of Baltimore) - This is a $3 million road extension project with no job promises associated.
6. Mondawmin Mall renovation, 2008 (General Growth Properties) - $15 million TIF, of which $12 million went to site preparation, demolition, and other infrastructure. Developer GGP promised 400 jobs. Total jobs on site are 930, 655 of which are city residents. Total taxes paid: $961,000. Time to payoff: 16 years.
7. Charles Village Streetscape improvements (Streuver Bros.) - $2 million TIF in 2010 carries no job or other revenue promises.
8. Westport Waterfront (Pat Turner) - Megaproject to include 4.8 million square feet of mixed-use goodness. Approved in 2008 for $160 million TIF, no bonds have been floated, and CitiGroup moved to foreclose. Turner’s company filed bankruptcy.
9. West Baltimore/Gateway South, Rosemont (Samuel K. Himmelrich got the project in 2008 but was not able to deliver) - In the works a decade, the former Acme warehouse in Rosemont is still awaiting a developer, and the TIF—approved in 2004 but undefined in these documents—is unused.
10. Harbor Point (Paterakis) - Now expanded to 3 million square feet with 1.6 million in office space, the proposed TIF is down to $107 million (from $150 million in the original proposal). Added to that is an Enterprise Zone break estimated at $169 million. All of this is prospective, subject to approval by the City Council and other officials.
11. Hilton Baltimore Convention Center Hotel (City of Baltimore) - Funded by $301 million in city-backed revenue bonds, the hotel project—which could not find private financing of any kind—promised 550 jobs. It and its city-resident workers, which number about 460, reportedly pay about $3.5 million in taxes annually to the city. The hotel has struggled to pay its bond-holders from the revenue it generates, dipping repeatedly into a contingency fund (and this year, the city’s general fund) to do so. Time to payoff (assuming the project remains solvent):86 years.
PILOTS (in blue)
1. Marriott Residence Inn (Urgo/Hotels Hospitality Management) 170 hotel rooms; taxes rebated 2010/ 2011: $631, 020.
2. The Fitzgerald (Bozzuto Development, Gould Property & McCrary Development) 280 apartments and a parking garage in Midtown, Project came online in 2010.
3. Lockwood Place (A&R Development & David Brown) 220,000 square feet of offices and garage; taxes rebated 2010/ 2011: $854, 250.
4. Baltimore Marriott Waterfront Hotel (H&S Properties) 75 rooms and 620 garage spaces; taxes rebated 2010/ 2011: $2, 832, 160.
5. Spinnaker Bay (H&S Properties) 314 housing units and 420 parking spaces; taxes rebated 2010/ 2011: $1,062,700.
6. Legg Mason (H&S Properties) office tower 500,000 square feet of office and 1,200 parking spaces; taxes rebated 2010/ 2011: $3,998,160.
7. Laureate (H&S Properties) office/mixed use 207,000 square feet of office space, 122 condos, health spa, two hotels, retail, and parking; taxes rebated 2010/ 2011: $954, 260.
8. Redwood Towers (A&R Development) 151 west side apartments and an eight-story parking garage; taxes rebated 2010/ 2011: $11,627.
9. Centerpoint (The Dawson Company and the Bank of America Development Corporation) 370 housing units, 450 parking spaces, and 50,000 square feet of retail, taxes rebated 2010/ 2011: $970,870.
10. The Zenith (LH Zenith, LLC) 191 apartments and 257 parking spaces; taxes rebated 2010/ 2011: $914, 350.
11. Camden Court (RLJ Development) 200 apartments and 111 parking spaces; taxes rebated 2010/ 2011: $512, 790.
12. St. James Place (Wendy Blair and Derrick McDaniels) 25 housing units and 1,800 square feet of retail; taxes rebated 2010/ 2011: $91, 260.
13. Hippodrome Theatre/France-Merrick Performing Arts Center (City of Baltimore) place for touring Broadway shows and such, 20 PILOTs of $1 per year.
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