In the face of opposition from an extraordinary coalition of workers, clergy, and downtown business interests, the City Council Monday approved a package of tax subsidies worth hundreds of millions of dollars to the developer of the $1 billion waterfront project Harbor Point by an 11-3 vote.
Among the most controversial of the elements is a $107 million Tax Increment Financing (TIF) package to pay for roads, parks, and other infrastructure for the 28-acre mixed-used development, which is slated to house Exelon Corporation's regional headquarters, other offices, and a hotel.
The TIF will increase the profit for one developer at the expense of other property owners. Because the TIF will divert taxes to pay off bonds for the infrastructure, Harbor Point is not expected to pay property taxes for more than 10 years. Without the TIF, the project's return on investment is projected to be 10.7 percent. With it, it is 14 percent.
The road to the Harbor Point approval was smooth and straight, if slow-until the final week, when roadblocks suddenly appeared. The Greater Baltimore Committee, a pro-business group, expressed concern about the TIF and suggested the expenditure be broken down into phases, with $34 million up front. The Downtown Management Authority, representing owners of office and commercial buildings in the downtown business district, came out in opposition to the TIF. And the Fells Point Residents Association called a special meeting on Aug. 6 to reconsider its support for the project.
In a conference room at the Admiral Fell Inn, 60 residents and property owners listened to a debate between Marco Greenberg, vice president of Harbor Point developer Beatty Development, and Ronald Kreitner, a former Maryland State Planning Director who opposed it.
Dimitris Spiliadis, whose family owns the Inn at the Black Olive, said that on a recent morning at 3 a.m. he saw a front-end loader on the Harbor Point property loading material into a dump truck. "There were people in white suits," he said. "I have the video. There were clouds of dust coming from that dump truck. That concerned me."
Greenberg asked to see the video. Spiliadis stood to deliver the tablet. "Not just now," Greenberg said.
As the association voted privately to ask for more information about the environmental issues surrounding the development (a vote that would apparently be mooted the next day by a City Council committee vote), Greenberg watched Spiliadis' video. A day later he said he doubted it was taken at 3 a.m. and that a parking-lot company had a truck working there the night previous until about midnight doing routine maintenance.
Harbor Point is an abandoned industrial site where toxic chromium is interred under a 5-foot-thick clay cap and other impermeable barriers. The buildings will require many punctures of that cap. It is unclear how that process works or how safe it is.
At the Fells Point meeting, Charles Cohen, a resident (and CP contributor) asked Greenberg to confirm that the cap puncture process is "not fully approved yet."
"Let's be clear: This is not an experimental procedure," Greenberg replied, citing three other projects he says used the same process. One of these is Atlantic Station, a 138-acre mixed-use project in the heart of Atlanta.
He said these projects all had caps over chromium, and all were breached like Harbor Point's will be.
But this is not true. Documents indicate that the Atlantic Station project involved the removal of contaminated soil-more than 12,000 truckloads, according to one source.
Much of the opposition focused on the subsidy. Harbor Point is an office project being built in a market already glutted with office space. Downtown property owners-already fighting the State Center project-will face competition from newer, waterfront buildings subsidized with taxpayer dollars.
Greenberg said that Harbor Point will offer modern and better office space than currently exists, and may spur existing property owners to renovate their buildings.
"We are able to deliver what some modern tenants are looking for," he told the Fells Point residents. "Exelon wanted a 75,000-square foot trading floor, which was unavailable in other locations downtown. Those other buildings are old and out-of-date. By providing new space, we are expanding the tax base. Legg Mason-they moved and their old building was renovated, and now we have Transamerica."
The Transamerica Corporation moved to the renovated Legg Mason Building in 2011, mostly from offices in Mount Vernon.
"That musical-chairs argument has not been born out as favorable to the city," Kreitner replied. "That's why the job numbers are falling. For some buildings, when the music stops playing, they're empty. We now have over 2 million square feet of vacant office space. Office-space rents are declining."
Some saw the hand of Peter Angelos behind the sudden push to stop Harbor Point. One resident asked how much Angelos subsidizes the WestSide Renaissance, which Kreitner runs from Angelos' law office.
"This is a clash between two developers," said Victor Corbin of the Fells Prospect Community Association, which remained in favor of the development. "We're like a pawn in their fight."
Councilman Carl Stokes, whose Taxation, Finance and Economic Development Committee held raucous hearings over the past several weeks, says Beatty's lawyers have used Angelos' ties to try to discredit him and other opponents of the subsidies, a strategy he calls "bullshit. I never spoke to Peter about this, he never called me and said, 'This is what I would like you to do,'" Stokes, whose last campaign collected more than $50,000 from the developer, says. "I think he is, like others, concerned about the cannibalization of the core of downtown Baltimore."
That, indeed, is the policy question in the center of the room. As Beatty (and Paterakis, proprietor of the Harbor East development) collects high rents on new buildings with big tax subsidies, owners of other buildings nearby with no subsidy are placed at a competitive disadvantage.
"Peter Angelos is probably the single biggest champion of the central business district," Councilman Bill Henry says. "He's saying let's focus on revitalizing the central core rather than developing glitzier office space somewhere else. As a policy approach, there is a lot of sense in that, whether you own property there or not."