Thursday, July 28, 2016

What should be the Port Covington Litmus Test?

Once again the setting and timing was dramatic. In front of City Hall a small group of protesters of the Black Lives Matter movement. An angry State's Attorney had seen herself forced to drop all charges against the Freddie Grey officers.
Inside the War memorial (behind the steps on which Marilyn Mosby had announced the charges) up to 800 people were listening to the questions and answers of the Baltimore City Council's Finance Committee hearing about the bill for the Port Covington TIF application. When finally, hours into the deliberations, the floor was opened to public testimony it was after 8pm.
A packed audience in the War Memorial Hall

The first to speak was the consultant of TischlerBise, Macolm Munkittrick, an analyst who had reviewed the TIF application on behalf of BUILD. His conclusions were that no market analysis was done, that the operating costs of the City in the proposed development were "underestimated", that Public Capital cost outside TIF are not included and that it would be prudent to represent several scenarios not just one baseline case as Sagamore had done. He cited an example of one of their own analysis they had done in a similar case where they had used "stress tests with four scenarios". Overall, though, the analyist concluded, the project could very well be "transformative" and would "likely have benefits for the city". Pressed by Councilman Costello whether the analyst attempted to speak to those involved in the TIF process, be it BDC, Sagamore or MuniCap, the other reviewer of the application, the analyst got testy. "We shouldn't have to do this". Applause from the hall. Then he added, "we have never seen something like this before". More applause from those in the crowd with the blue BUILD T-shirts. Sagamore supporters in their yellow T shirts seemed to be outnumbered.

Those were all good points, professionally presented and extremely helpful for the full array of council members present (all except Nick Mosby).

Then the tone changed when the BUILD testimony was continued by Reverend Glenna Huber. "Here we go again", she began, "It is as if Baltimore has its own version of Groundhog Day." She allueded to the promises made and then continued: "They said the same thing when the built the Inner Harbor, Harbor East and Harbor Point. We are still waiting for promises that were never fulfilled. It is impossible to trust when you have played so many times."  Thundering applause. Addressing the council members she asked: "Are you going to stand this time to support the tax paying residents? Under Armour says We protect this House. Who is going to protect this house that we call Baltimore?" She mentioned the Harbor East cost overruns and recent TIF increase, demanded 20% affordable housing and repeated her call "on you to stand up". Finally her testimony heightened to the type crescendo that only pastors and a few Convention politicians master, the perfected oratory that brings the crowd to their feet and clap until the words were drowned out by the noise of the cheering and the the speaker overtaxing the sound system.
"Say no until it is clear how this affect me and our city for the next 41 years," is a BUILD demand, until Johnston Square, Harlem Park, and Oliver are included. "We are here to stand up for those in the invisible communities." said BUILD pastor Calvin Keene. "Hold off until the whole of Baltimore can benefit."
The almost complete City Council

 The ACLU representative at the hearing went far outside her expertise with the statement that "this is a fiscally irresponsible proposal". She repeated the observation that there was no market analysis. Those comments overlook the fact that the developer will invest billions and is the first who would want to avoid fiscally irresponsible endeavors. It isn't the ACLU that has made Under Armour into the successful enterprise it is, so how is it that the civil rights organization wants to teach Sagamore and Kevin Plank capitalism?

Of course, as a plaintiff in the housing consent decree reached with Baltimore Housing, the ACLU is rightly interested in the inclusionary zoning law that she admitted "is weak" but, as she said, not as weak as reported. "The city can use any source to fund affordable housing" she said, including the TIF itself. A notion that Sagamore's attorney Jon Laria disputed.

At a recent event about Port Covington Barbara Samuel of the ACLU had this to say (according to the Baltimore Brew):
“They want that first $64 million ASAP and the only use for that ‘tranche’ is parks – not streets, not sewers, not streetlights,” she said. “Oh, and an archaeological pier. Does anyone here know what that is? I don’t.”

It is easy to rile the masses with populist arguments, Sanders and Trump have shown this in recent months. Unfortunately groups like BUILD and the ACLU are on that bandwagon as well.
There are plenty of populist arguments one can make about the Port Covington development. Such as the comment about the first tranche going to parks, an archeological pier and the much maligned kayak landings. The height of frivolous spending, right? 

Sagamore's Mark Weller (first row, third  preson from the right) listens to
testimony
But if you look at the DC Navy Yard redevelopment at the Anacostia River, that is exactly how they started. With a very good park that became an amenity for the entire community! Beginning brownfield redevelopment with a public amenity that creates a "there" there is a widely used best practice and by no means frivolous.

Likewise, the archaeological pier is about the industrial history of the place. Is that bad? Kayaking in the Harbor is considered "cool" by many. Does it take anything away from anybody to have them accommodated on piers that are built anyway?

The question the City Council should ask themselves is this: Would any part of Baltimore better off if the TIF would not be granted and if Port Covington would not be built? That should be the litmus test or as engineers sometimes say, the "fatal flaw" inquiry. If the answer is yes, then the deal certainly needs to be held off.  Even with all costs properly accounted for, the City should not have to carry any new burden from the new development.

The next set of questions question should be about specific benefits agreements and about the overall City benefits. Will the surrounding disinvested communities benefit and are those benefits sufficient? Will the City overall see a benefit in revenue, how and when? Will Baltimore grow, will it become more competitive? The application and the MuniCap report answer these questions but only for one scenario. How would other scenarios look like?

Yes, those Sagamore provided "numbers" need scrutiny, especially the issue of "operating cost" for the city (snowplowing, trash removal, road repairs, policing etc.). Yes the TIF is "front loaded". That is why it is requested in the first place: The high up front cost of clean up, piers, bulkheads, streets and utilities cannot be yet paid from any type of existing revenue stream coming from the development. While it is the whole point of the TIF to finance these costs without using city funds, the fact that the repayment of bonds relies for a long period on assessing special taxes within the taxing district of the development is disconcerting. A high quality design is certainly desirable to ensure the long-term value proposition but the burden should only be such that the regular tax proceeds of the tax district should pay the bond bills, not extra assessments, at least not in the base-line scenario. Extra assessments should be left for the worst case scenario. Taxes on top of the already high City tax burden would make it far less likely to create sufficient demand to fill all the envisioned stuff.

The totally understandable desire to have those same investments made in disinvested communities lacks reality because an investment there wouldn't be followed by revenues to pay for them. Those revenues only materialize if some folks with money move in. That, too is a characteristic of a TIF, it can't be used where there is no market and no increased tax revenue stream. Yes, the new community of Port Covington should be diverse and inclusive. To find the right measure of inclusion affordable housing needs to be part of the mix. But the balance needs to be such that there will be enough revenues generated to pay the bonds. Plain and simple. 

Loading up the cost side too much won't work, neither will dumbing down the project too much in order to reduce cost. The only way such a large development can work is by providing something that is competitive and better than anything else in the region. To have a strong investor willing to put a large chunk of many into it is indeed an ideal starting point for excellence. A situation many other places wished they had.

Klaus Philipsen, FAIA

Baltimore SUN article
BBJ article