From his office at 111 S. Calvert St., Abell Foundation President Robert Embry enjoys a postcard-perfect view of Baltimore, all sparkling water and architectural treats. Few, however, know better than Embry what a checkered history this tourist-friendly image represents. The huge success of the National Aquarium, the sad tale of the Columbus Center, the sagas of the steady-rolling Hyatt Regency and the roller-coastering Power Plant, the vast footprint of two stadiums, the skyline-busting eminences of the Harbor Court Hotel, HarborView condominiums, and the Marriott Waterfront Hotel . . . Embry could write the book. Over 36 years in city and federal government, private business, and philanthropy, he's seen Baltimore showcased as a model of urban rebirth and bemoaned as a sinkhole of urban woes; he has watched as four mayors, dozens of nonprofit groups, and hundreds of businesses have struggled to reverse the city's steady downward spiral.

Embry himself has labored on many fronts, including education and housing, that are crucial to the city's success, but--as his picture window attests--the central chore of attracting job- and revenue-producing enterprise has never been far from his mind. "If you're running a city," Embry declares, "you want to persuade people to do business in the city."

Fifty years ago, he notes, Baltimore was the heart of a muscular regional economy, and businesses stumbled over each other for a piece of the action. But in the post-industrial age, "You're going against the market," he says. Labor is cheaper in the South, or overseas; taxes are lower across the city line; the suburban work force is better educated than the city's labor pool; the consuming public, on the whole, would rather be in Disney World.

That's why, since the mid 1960s, economic development in Baltimore has become a routine of offering elaborate and increasingly urgent enticements, not only for businesses and institutions but also for out-of-town consumers with discretionary cash. Leaders as unalike as former mayors William Donald Schaefer and Kurt Schmoke have worked on the premise that without tax breaks, federal subsidies, prime locations, parking garages, and state-of-the-art sports facilities, Baltimore's businesses will abandon the city and new businesses won't come. Business leaders, individually and in groups like the Greater Baltimore Committee, have strenuously agreed.

But the consensus falls apart when public and private leaders get down to particulars--and when the citizens of Baltimore get involved. What sorts of business, and what parts of town, deserve priority? At what point does demand for incentives take on the smell of blackmail? What are, or will be 20 years from now, the net benefits for Baltimore? And, as powerful mayor after powerful mayor grapples with the challenge of revitalizing the city--the whole city--the question remains: Can Baltimore develop its way out of its problems?

The pattern for this continuous debate goes all the way back to Mayor Theodore McKeldin's 1965 bond initiative to fund the reconstruction of the Inner Harbor, a plan that was greeted with skepticism and emotional resentment. The skepticism and resentment flared up again periodically as mayors and projects came and went. The Schaefer administration's lending of federal Urban Development Action Grant money to build the Hyatt Regency hotel in 1981--in a deal that, Embry says, generated millions of dollars for neighborhood development--was decried as using public funds to pamper rich tourists. Under Kurt Schmoke, the city admitted that it wasn't even keeping track of its loans to developers or the numbers of jobs created by subsidized projects. Today, Mayor Martin O'Malley is attacked by wealthy developers on the west side of town for favoring wealthy developers on the east side of town. With every major development initiative, critics among community groups and the media have complained of back-room deals, overly generous subsidies, and neglect of communities and residents.

Critics, however, have often found themselves shouting into the wind. Activist Ralph Moore, now director of community programs at the St. Frances Academy in East Baltimore's Johnston Square neighborhood, found himself in the national spotlight 22 years ago, when producers of ABC's Nightline thrust him into a head-to-head debate with then-Mayor Schaefer, with the harbor-based City Fair in the background. Although the Inner Harbor's rebirth was still in its early phases--and although Schaefer had inherited the project from previous administrations--the colorful mayor had become the national media's favorite exemplar of urban renaissance. "Criticizing Don Schaefer on City Fair weekend," Moore recalls, "was akin to criticizing Santa Claus on Christmas Eve in Macy's department store."

Moore, then an organizer for St. Ambrose Housing Center, argued that the glittery harbor plans would suck resources away from needy communities. At the time, he didn't believe that the Inner Harbor would ever become a successful tourist mecca. While his prediction was wrong, Moore still believes that the city's practice of wooing businesses with public subsidies has failed to bring benefits to low-income residents. "I still don't believe the trickle-down theory works--giving all the breaks you can to rich people," he says. "It's never quite been proved that if we help [wealthy businesses] that it'll somehow help everybody else."

Embry, who was working at the federal Department of Housing and Urban Development at the time of Moore's Nightline appearance, counters what he describes as the "popular mythology . . . that Baltimore has created a facade, spent all its money downtown, and not spent on the neighborhoods."

While serving at HUD under President Jimmy Carter in the late '70s, Embry was directly involved in creating the Urban Development Action Grant (UDAG) program, one of the most important financial mechanisms used by Baltimore to leverage private investment. UDAGs were direct federal grants to cities, to be distributed as loans to businesses. As the loans were repaid, the funds would be used to finance further development efforts. Most of the time, Embry says, UDAGs and other federal grants worked as intended.

"Baltimore was spending more federal money in the neighborhoods than any other city," Embry says. "Baltimore built more public housing than any other city, per capita." Repayments of a $10 million UDAG loan for the construction of downtown's Hyatt Regency, Embry says, were overwhelmingly directed to neighborhood uses. Altogether, Baltimore won UDAG grants totalling about $100 million, which leveraged $450 million in private investment in the city. The UDAG program, however, was killed by Congress in 1988, under the Reagan administration. At the time, conservatives denounced UDAGs as "an urban slush fund [that] lines the pockets of developers."

Complaints about Schaefer's harbor-centered development plans grew louder after Harborplace opened. Critics in local media accused Schaefer of favoring his personal friends and cutting too many deals with little more than a cursory nod to public oversight and accountability. After President Carter hired Embry to work at HUD, Baltimore's development policy and financing were informally taken over by what The Sun dubbed "the Shadow Government," led by city finance director Charles Benton.

Meanwhile, Schaefer's highly personal approach to development issues earned him both admiration and mockery. On one legendary occasion, Schaefer boasted of having struck a handshake deal with developer David Murdoch over a meal of oysters at Lexington Market. The city would support Murdoch's construction of the Harbor Court Hotel; in exchange, Murdoch would take the lead in the redevelopment of the run-down Market Center area on the west side of downtown. Harbor Court, still owned by Murdoch, is the favorite stopover of movie stars and other glitterati passing through town. Market Center, still largely occupied by beauty salons, shoe stores, and check-cashing businesses, is presently the focus of a major redevelopment effort initiated by private entities during the Schmoke years--with no help Murdoch.

The "Shadow Government" charge, by other names, still clings to Baltimore's high priesthood of public-private partnerships, now centered in the quasi-public Baltimore Development Corp. (BDC). The agency's current president, M.J. "Jay" Brodie, shares Embry's frustration with what he sees as a deep and continuing misunderstanding of the fundamental dynamic of business recruitment and retention, particularly on the part of the city's news media.

"They try to present us as a super-secret organization," he says with a wry grin. The agency is set up as an independent nonprofit, working on contract for city government, and not for the most part, Brodie contends, "influenced by politics."

To some, however, BDC's political independence means that the agency lacks public accountability. Al Barry, a former city planner currently serving as board chairman of the Citizens Planning and Housing Association (CPHA), says that the nonprofit CPHA has been critical of BDC's "lack of transparency and inclusiveness," which can lead to decisions that ultimately alienate the public. "It's best that you use [the planning] process as a way of building consensus and public support," Barry says.

The election of Kurt Schmoke to City Hall in 1987 was, to some extent, a rejection of Schaefer's father-knows-best approach to governing. But activists who expected Schmoke to be an innovative, community-oriented mayor were to be bitterly disappointed. Some of the Schaefer era's most committed and experienced housing and planning staffers felt pressured to resign or left in frustration, while a new network of private-industry insiders cozied up to the administration.

The all-important leadership of Baltimore Development Corp. was originally assigned to one of Schmoke's campaign activists, Honora Freeman, who soon proved to be out of her depth in the post. At Housing and Community Development, Schmoke installed Robert Hearn, a risk-averse academician. Schmoke's first Planning commissioner, Ernie Freeman, was as passive as Hearn; Freeman's replacement, Charles Graves, was better qualified but fell into a similar habit of going through the motions. Throughout the Schmoke years, "the business community wasn't given the level of import to which it was accustomed," says Anirban Basu of the Optimal Solutions Group, a consulting firm based in East Baltimore. "The city lost tens of thousands of jobs during the '90s, and there seemed to be no effort or rejoinder [from City Hall] to stem this loss."

The Schmoke administration also inherited a large number of shaky projects from Schaefer. Halfway through the Schmoke era, in 1992, Sun reporter Joan Jacobson compiled a grim summary of city subsidies gone sour. Of more than 200 loans made by the city between 1976 and 1992, 50 loans--totalling around $60 million--had been written off or categorized as "troubled" and unlikely to be repaid. Jacobson dug through city records to arrive at the figures. When she queried Schmoke about loan repayments and the numbers of jobs produced by loan recipients, she was told that the city lacked the resources to track such statistics.

A disheartening example of an Inner Harbor project gone wrong was Harrison's Pier Five, a 71-room hotel adjacent to the Columbus Center, built in 1988 with a $6.6 million loan guarantee from the city. After the developer defaulted on his construction loan--and on more than $1 million in property taxes--the city took over the property in 1993, at a cost of $5.25 million. Two years later, the city sold the hotel to a group of investors headed by real-estate magnate and Schmoke ally Otis Warren Jr. for $5.5 million.

While the Schmoke administration tended to play a passive role in planning and development, private entities seized leadership, with mixed results. On downtown's west side, Orioles owner Peter Angelos teamed up with the University of Maryland, Bank of America, and the Weinberg Foundation, a philanthropic entity based on the bequest of one of the area's most acquisitive landlords, to redevelop the faded commercial corridor centered on Howard Street. To the east, between Little Italy and Fells Point, H&S Bakery mogul John Paterakis used his overwhelming wealth and political clout to brush aside plans that had been painstakingly assembled over 10 years by the multidisciplinary Waterfront Taskforce. Despite vigorous protest from Fells Point residents, and legal challenges funded by the Abell Foundation, Paterakis' Marriott Waterfront Hotel now dominates the eastern harbor skyline, subsidized by more than $6 million in city outlays and $20-$50 million in forgone tax payments. Meanwhile, Johns Hopkins University, the city's largest employer, began to demolish entire blocks of real estate under its control along the Broadway corridor, replacing neglected housing stock with new employee housing and a new nursing school; currently, Hopkins is developing an 80-acre biotechnology park. On all sides of the harbor, and in the heart of downtown, the development firm of Struever Bros. Eccles and Rouse has parlayed its white-hat reputation and its talent for obtaining public financing into an amazing array of projects, including newly built residences for well-heeled gentrifiers and recycled industrial buildings for office and retail use. Meanwhile, in the absence of a proactive city Planning Department, smaller-scale planning fell increasingly to private consultants like Al Barry, whose firm AB Associates has been hired by a variety of nonprofit groups, businesses, and neighborhoods.

In the latter half of his term, Schmoke moved to replace some of his failed department heads. Jay Brodie was brought back to BDC, where he has remained since. Coming to the agency at a time when the entire development apparatus was in disarray, Brodie became the indispensable man both for working out deals with private developers and--in the absence of a fully functioning Planning Department--for creating a vision for downtown's future.

Schmoke also brought in his close political ally Daniel Henson III as head of Housing and Community Development. Where Robert Hearn had seemed almost paralyzed at Housing, Henson veered to the other extreme, gaining a reputation for brashness as he focused his energy on demolishing the city's hated high-rise public-housing projects and putting two-story structures in their place.

Urbanologist David Rusk's 1996 book Baltimore Unbound, commissioned by the Abell Foundation, had sparked debate about "the rot beneath the glitter" of the shiny new harborside developments, and anti-poverty advocates had taken up Rusk's call to begin moving poor families into stable middle-class communities. While critics took issue with Henson's style and many of his tactics--such as demolishing decrepit midblock rowhouses--he deserves credit for destroying highly visible monuments to urban despair, and for fostering middle-class housing projects such as Spicer's Run, off North Avenue. Henson's initiatives, however controversial, helped force the issue of what to do about the city's heavy concentrations of poor families, many of which were displaced by the high-rise demolitions.

While some of Martin O'Malley's supporters describe Baltimore under Schmoke as benighted and stagnant, the new mayor elected in 1999 inherited a city that was actually on the move, although the movement lacked a unifying strategy, public accountability, and meaningful oversight by entities committed to the broader benefit of the city. O'Malley spent much of his first term focusing on crime, on the theory that a sense of security would help stanch the city's hemorrhage of population and capital. To date, there is no landmark new development that citizens can point to and say about O'Malley--as they said about Schaefer--"The mayor made that happen." But O'Malley--like every mayor before him--is sharing credit for inherited projects that are proceeding while he occupies City Hall; BDC currently boasts of $1.6 billion in private development "recently completed or underway."

This September, O'Malley won the Democratic mayoral primary largely on the public perception that he has succeeded in his initial goals of rebuilding confidence in the city. Economist Basu, a frequent commentator on WYPR (88.1 FM)'s Marc Steiner Show, practically gushes with optimism: "There actually is economic development happening now. The business community has become re-engaged." What's more, Basu notes, "There has been a slowdown in flight from the city, and in particular . . . the Census Bureau tells us from its estimate that white flight has slowed"--although the broad-brush Census data may merely reflect an influx of wealthy gentrifiers to the premium enclaves of Canton and Federal Hill.

Basu pooh-poohs the dark predictions of Rusk's Baltimore Unbound, which argued that the city's heavy concentrations of poverty and attendant problems created a burden beyond the uplifting power of economic-development plans. "The city has come a long way since that book was written," Basu says. "The city has enormous potential to revive itself."

In some ways--and not all the best ways--O'Malley resembles the testy, boosterish William Donald Schaefer. Like Schaefer, he seems more comfortable at a ribbon cutting than discussing the technical snarls of finance and policies. Like Schaefer, he takes his work personally, and sometimes shoots his mouth off. Less strategic about his blowups than the crazy-like-a-fox Schaefer, O'Malley has ruffled the feathers and tweaked the noses of some of Baltimore's wealthiest and most powerful Alpha Males, as in his current squabble with Peter Angelos over funding for west-side development.

Nonetheless, O'Malley has taken an obvious and active interest in the city doing development right. Under O'Malley, Brodie has instituted a more rigorous cost-benefit analysis of proposals that come to his agency for financing. Two years ago, BDC began to report to the city's Board of Estimates every other week, updating the status of city loans, job creation goals, and construction of sponsored projects. Brodie also assumed some de facto leadership in the realm of planning--at least, up until O'Malley's recent appointment of 29-year-old ally Otis Rolley III to replace Charles Graves at the Planning Department.

Since O'Malley's triumph in this fall's Democratic primary, his administration has released an "Economic Growth Strategy Plan" for the city, based largely, but not exclusively, on the objective of "creating wealth for residents and businesses." The document characterizes development strategy as a "three-legged stool," the "legs" being business recruitment, work-force development (including education), and a clean, safe environment. The 48-page document outlines broad principles for creating wealth and improving quality of life; it identifies priority locations for retail and streetscape improvements throughout the city; it addresses concerns about the engagement of minority-owned businesses. Overall, it conveys the reassuring impression that City Hall is balancing its attentions between community needs and the demands of developers.

Still, concerns over process cloud BDC's recent endorsement of plans for a 750-room, $200 million Hilton hotel adjacent to Camden Yards stadium and the Baltimore Convention Center. While there is widespread consensus about the need for a large hotel that will help bring in lucrative convention traffic, the Hilton plan proposed by Black Entertainment Television chief executive officer Robert Johnson has been strongly denounced on aesthetic grounds. It promises to blot out one of the city's signature views--the skyline seen from the baseball stadium, punctuated by the classic Bromo-Seltzer Tower.

And critics worry that much apparent progress under O'Malley has been based on canny public-relations work rather than governmental substance. Even the strategy document, they say, is chiefly a device for reassuring potential investors. "Marketing is an important part of attracting new businesses," says Marian Gillis, a consultant on community development. "But when you get beyond that, is there a structure to support [what O'Malley] proposes? The answer is no."

Gillis and other community advocates argue that O'Malley, like mayors before him, has emphasized deal-making at the expense of less glamorous governmental functions, such as housing and education, that also have a role in wooing private investors to the city. While the mayor has entrusted Brodie with broad responsibilities, he has kept Housing Commissioner Paul Graziano and other department heads on shorter tethers. Rolley, the new man at Planning, has begun a rapid restructuring of the agency; last month he required his senior staff to reapply for their positions. It is still too early to see if this housecleaning--a hallmark of O'Malley's loyalist department heads--will pay off in morale and performance.

The public, however, seems to have been cheered by the sight of accelerating construction and a flurry of commercial development in neighborhoods, including construction of 17 new grocery stores, improvements in targeted commercial districts, and the reopening of the long-moribund Belvedere Square shopping center. But there remains for many Baltimoreans an undercurrent of anxiety about O'Malley's commitment to the city. It's assumed that the mayor will run against Gov. Robert Ehrlich in 2006, leaving City Hall in the hands of City Council President Sheila Dixon, who would then be very well-positioned to succeed O'Malley in the next mayoral election.

News that Peter Angelos and former Mayor Schaefer seem to be backing Montgomery County Executive Douglas Duncan for governor--posing a direct Democratic challenge to O'Malley's well-known ambitions--is vaguely reassuring to many who would like to see the mayor stick around and master the complexities of his job. With a full four-year term behind him, O'Malley has just begun to set his own course. In his second term, O'Malley will have to show that he and his team can move beyond the politics of perception.

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