By Stephen Janis and Taya Graham,
Special to the AFRO
For decades, Baltimore has doled out tax breaks to spur development, but the increasing use of incentives has not been matched with the requisite scrutiny of how much they cost the city and who is benefiting.
State Sen. Jill Carter, D-Baltimore, has introduced a bill that intends to right that imbalance and study a variety of tax breaks in-depth, with the purpose of determining if their tax breaks are equitable and cost effective.
“I think it’s important that people pay attention to how much money is thrown out to wealthy developers with no accountability,” Carter said.
The bill would authorize a task force to gather data and recommend processes to increase transparency and accountability for how tax breaks are used. It would also seek ways to measure how effective the subsidies are and if they deliver equitable or even quantifiable outcomes.
Carter said an in-depth study of the city’s reliance on subsidies is long overdue.
“We don’t really know what the outcomes are going to be and how they are benefiting the community,” Carter said. “We just take for granted that when a tax break is awarded, it’s for an area where it’s needed, and it follows that good things are going to happen for the people. But, we don’t see the results—we can’t even begin to truly measure their impact.”
The push for more transparency comes after the release of the investigative documentary “Tax Broke.”
The film recounts how federal redlining, racial segregation and state laws designed to intentionally isolate Baltimore economically, politically and racially led to policies of publicly subsidized development. The documentary revealed that a vast majority of tax breaks have been targeted at majority-White neighborhoods that were already wealthy.
Carter points to that history as impetus to closely examine the justifications for tax subsidies which Baltimore has relied upon to stimulate growth.
“Everytime we want to do a tax break for the average citizen, it’s always a problem,” Carter said. “But without hesitation TIFs and PILOTs are just used routinely under the guise that they’re benefiting the community. We need to know why.”
The tax breaks in question include a variety of incentives with innocuous acronyms like TIF and PILOT. Tax Increment Finance (TIF) allows developers to invest up to 30 years of future property taxes into construction costs and infrastructure. Phase in taxes over time, commonly referred to as PILOTs, offer a discounted rate from 10 to 25 years.
Both are responsible for incentivizing the bulk of new developments in Baltimore.
But the city also must, in part, pay for tax breaks tied to an array of state programs. Among them, the Brownfields Revitalization credit offers incentives to rehabilitate environmentally degraded property and Enterprise Zone credits award tax breaks to businesses that add jobs and build in impoverished neighborhoods.
Maryland currently has a site that lists the credits awarded through state authorized programs, however, it does not break down the costs or benefits to a specific locality, nor does it measure outcomes — an area the task force legislation plans to address.
A report on the effectiveness of Maryland’s transparency laws by Good Jobs First, an organization that advocates for improving disclosure regarding tax subsidies and incentives, noted the lack of outcome-based reporting.
“Disclosure of subsidy recipients and performance metrics makes it possible for researchers and advocates to determine whether subsidized companies are doing what they promised to do in exchange for public support,” the report concluded.
The city’s reliance on tax incentives has been blamed on Baltimore’s uniquely high tax rate, which is roughly double the surrounding counties. City officials also point to Baltimore’s declining population and the desire to convert vacant office buildings into residential apartments.
But the policy has been controversial, particularly the use of TIFs.
City officials have argued TIFs are necessary to finance infrastructure costs that often accompany projects built on undeveloped land. However the value of the TIF, which determines how much money a specific project receives, is calculated by estimating future tax revenues from the property—not how much infrastructure a developer is required to build.
In 2016, shortly after the uprising in the wake of Freddie Gray’s death in police custody, the city approved an approximately $600 million TIF to Under Armor founder Kevin Plank to build a massive development on a waterfront property known as Port Covington. Activists decried the move as tone deaf and ill-designed to address the entrenched poverty that plagued the Gilmor Homes neighborhood where Gray was arrested.
But since then, the scope of the project has been substantially scaled back and developers have struggled to lease the office space. The project has also been rebranded from Port Covington to Baltimore Peninsula.
As of 2022, the city’s treasury department estimates the city has committed roughly $580 million in future property tax revenues to finance a variety of TIFS. That includes $240 million for interest on the bonds alone.
A consultant study commissioned by the city in 2021 found that an array of property tax breaks cost the city treasury roughly $128 million in 2020. The study did not include TIFS. It also tallied subsidies like the homestead tax credit that caps the property increase for an owner-occupied property if its assessed value rises.
Baltimore City Comptroller Bill Henry pushed a bill through the city’s finance board to require additional reporting on a variety of metrics pertaining to TIFs. Baltimore City Councilwoman Odette Ramos (D-District 14) has also requested more data outcomes related to TIFS and other tax incentives through a series of investigative hearings.
Among the data, she is seeking is how much of the city’s public safety budget is consumed by TIF districts that do not pay into the general fund. She has also requested data on jobs generated and affordable housing constructed as the result of development tax incentives.
“Any efforts for transparency about the impacts of the TIFs is really important, “ Ramos said of Carter’s legislation. “I asked for a variety of data from the city and they have said they are willing to share it.”