Friday, July 15, 2016

Profits, taxes, and community benefits

Just in time for another hearing of the Port Covington project at the Planning Commission the Developer and six community leaders signed a compact that both sides described as unprecedented.

 Photo: Baltimore Brew, Fern Shen
The benefits agreement ups the cash payments to surrounding communities above the $10 million originally envisioned. Maybe more importantly, it established a long term framework of collaboration combined with milestones in which additional benefits would accrue based on actual proceeds. Delegate Brooke Lierman and Senator Bill Ferguson, both no slouches when it comes to standing up for their constituents felt that there was enough to lend their name and reputation to it. In a Facebook comment Ferguson explained: 

The agreement sets up a 30 year partnership. Community leaders in these six neighborhoods fought incredibly hard and reached an excellent deal. Feel free to armchair quarterback all you want, but I watched these communities come together and fight for their future. They didn't sit back and post on social media, they organized together, engaged in respectful yet pointed negotiations, and established a historic partnership to aid their efforts to improve their communities. I was also impressed with the folks from Sagamore throughout the negotiations. They were honest, thoughtful, and creative. It's easy to throw stones from afar, these community leaders actually did work. We need more of this in Baltimore and less complaining from the sidelines.
Ultimately, the value is less in the total dollars and more in the ongoing partnership with technical assistance, advocacy, and support for community driven projects. This wasn't sagamore saying we'll do x, y, z; it was communities saying we need your partnership for next 30 years to accomplish major community development and people investment objectives. Of course the money matters, but the coordinating partnership is as important.

Not everyone is so positive. Councilman Stokes who has to still review the deal in his Finance Committee said something about not needing someone "to give us fish" as the SUN reports. The BUILD Coalition, not having participated in any negotiations to date, is still trying to deliver a letter to Plank in person, with another list of requests. The ACLU still testified against the plans as they are on the grounds that they will deepen the divisions in Baltimore. 

But State Delegate Lierman was part of the announcement  and is, like Ferguson won over by the Benefits Agreement. She said this on her Facebook site:

 SB6 - the community members from 6 South Baltimore neighborhoods (Brooklyn, Cherry Hill, Curtis Bay, Lakeland, Mt. Winans, Westport) announced a new partnership with Sagamore Development Corporation. This 30-year agreement and partnership will create a new entity (TBD) that will be a central organizing and resource hub for community development in all six neighborhoods. In addition to a hard dollar commitment by SDC ($10 m in first three years, $10 m raised together over the next 5 as a minimum), Sagamore will also be sharing the wealth - an initial annual charge per square foot for each for-profit user of commercial space and a transfer fee on each sale of real property will go to the new entity to be used in the neighborhoods. Just as important as the money, though, is that SDC will be at the table working with and providing resources and knowledge and advocacy for the SB6 neighborhoods.

Mt Winans Community leader Anne Robinson

Although it may be tempting to see the rich Kevin Plank and the poor Cherry Hill through an almost Marxist lense of class struggle, especially in a polarized city like Baltimore, it is also necessary to understand that doing well and doing good doesn't have to be mutually exclusive. There is such a thing as social impact capitalism. It should occur to us that there may be a baseline understanding on both sides that Sagamore/UA's fate is, indeed, intertwined and that there may be enough overlapping interest to create a foundation for workable collaboration. I think it is dawning on a small but  increasing number of investors and developers that even the successful won't succeed in the long run if everything around them crumbles. 

That could well be the reason why UA doesn't just propose an isolated HQ, but surrounds it with a small city. It is, then, only logical that the small city can't succeed either if the six communities around it don't succeed as well. 

That larger Sagamore mini-city project entails a hell of a lot of risk. Most of the critics seem to assume that the proposed development must be automatically super profitable. Anybody who knows about development knows that this isn't so, especially not on something that large.  Broad consensus on what success should look like is a prerequisite for any community to achieve it.  Success is a very elusive thing unless it rests on many shoulders.

As Andrea Mayor, the Brooklyn association representative, who saw her neighborhood go down with now 746 boarded houses and a deadly shooting the day of the announcement put it at the Planning Commission meeting: "This is an important deal. It makes me sick to think it doesn't go through."  

The Planning Commission debated three City Council bills dealing with 

  • the Repeal of the Urban Renewal Plan. (Permitted uses would only be M1, M2 but the underlying zoning is limited to M3 creating conflicts within the URP and with the proposed Masterplan. Jon Laria, Sagamore's legal counsel said:"It is not clear what purpose that URP ever served". 
  • The establishment of the Port Covington  Development District 
  • The establishment of the Port Covington Taxing District (Only Sagamore parcels)
During the presentation to the Planning Commission it was clarified that the affordable housing criterion is 60% of AMI (area income) and not 80% as first intended. The requirement is still 10% of the planned 7,500 units. Commissioner Graziano added that 60% AMI for a household of three persons equals currently $43,700 and that vouchers will be used in the area which have no income bottom.

The benefits agreement (CBA) is a legal document which was crafted with professionals and attorneys (Lawyer's Committee for Civil Rights under Law, Washington DC, Diane Glauber) supporting the participating community associations. The up front cash payments may seem low to some looking at the overall project cost. The key provision in the CBA may be the ones that stipulate that there will be surcharges and transfer fees to channel money into a benefits fund that will be managed by a mutually agreed on entity for 30 years. In other words, the CBA avoids to front-load the project with cost that may prevent it from getting off the ground but guarantees the communities a continue participation in proceeds that get accrued over time.

This article was revised and updated due to uploading errors in the earlier version.

Klaus Philipsen, FAIA

The Benefits Agreement is temporarily available here
Baltimore SUN article about the benefits Agreement
2011 City TIF Task Force report