State agency questions financing for $700M investment in Baltimore

Earlier this month, Gov. Larry Hogan and Mayor Stephanie Rawlings-Blake stood in Sandtown and touted a plan, dubbed Project Creating Opportunities for Renewal and Enterprise, or C.O.R.E., that would spend nearly $100 million knocking down vacant homes and $600 million more in community investment.

But the Department of Legislative Services (DLS), a nonpartisan research office for the Maryland General Assembly, found that approximately 90 percent of the funding was "either already-planned [Department of Housing & Community Development] funding, already-anticipated tax credits, or subsidized financing that is not appropriate for demolition work and is not direct State support."

The Jan. 11 letter, addressed to the chairs of the Budget and Taxation Committee in the State Senate and Appropriations Committee in the House of Delegates, goes on to say it's unclear how the project will affect other state programs or projects that rely on these funding sources.

A spokeswoman for the governor, Shareese DeLeaver-Churchill, defended the program, writing in an email that it will do just as it says.

"Not a single public official in Baltimore or anywhere else in Maryland has come out in opposition to Governor Hogan's transformative plan to finally do something about the blight inflecting the city's neighborhoods," she wrote in an email. "The administration is allocating $75 million for demolition and $600 million in financing for potential redevelopment – those are the facts. Every single penny is being directed to Baltimore and it will make a huge difference to the good people who call the city their home. Project C.O.R.E. stands for Creating Opportunities for Renewal and Enterprise and that is exactly what it is does."

A representative for Mayor Stephanie Rawlings-Blake did not immediately respond to a request for comment.

DLS' findings call into question the reliability of two of the major financial components, revenue bonds issued through the United States Department of Housing and Urban Development's Rental Assistance Demonstration (RAD) program and state-level housing revenue bonds.

State revenue bonds, which account for $210 million in the proposal, cannot be used for "property assembly and demolition," the letter says. Typically, the bonds are issued much later in the process to lower costs.

"[I]t is important to note that this financing does not constitute direct State funding support but rather offers developers with a form of subsidized financing intended to lower developer capital costs," the letter says.

C.O.R.E. calls for $322 million in RAD revenue bonds, and it is also not clear how that amount will overlap with several projects already using federal dollars from the program, which allows private developers to purchase and rehab public housing.

An op-ed in this morning's Sun, written by an attorney for the Public Justice Center and two board members of the North East Housing Initiative, noted that: "Unlike grants, revenue bonds must be repaid by the development. While any increase in funding for demolition and affordable housing is welcome, to be sure, the 'game-changer' that was marketed to the public is, to say the least, not accurate."

DLS determined that $75.2 million of the plan is new investment. Of that, $67.5 million is set to come from the Strategic Demolition and Smart Growth Initiative (SDSGI) and $7.7 million from the Baltimore Regional Neighborhoods Initiative (BRNI).

But funding levels for both of these have not yet been determined for 2017 and beyond, and the amount of money given to SDSGI would need to increase substantially to fully fund Project C.O.R.E.

The SDSGI received $7.5 million in fiscal year 2016, and historically, 55 percent of the money allotted toward the initiative goes to jurisdictions outside Baltimore City. Assuming SDSGI remained at 2016 levels, an additional $52.7 million would be required over the course of Project C.O.R.E., the letter says.

BRNI is a different beast. It received approximately $3.8 million from the state this year. Project C.O.R.E. calls for $11.5 million in BRNI funding over the four-year course of the program, or about $2.9 million per year.

But there's no guarantee these grant funds will be directed to Sandtown or any other blighted neighborhood, since areas throughout the city are eligible for them. In 2013, for example, the Central Baltimore Partnership was awarded $1.485 million through the initiative to help fund 12 projects, including the rehabilitation of the Parkway Theater and Centre Theatre and two Seawall Development projects in Remington.

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