Tax Break: A yet-to-be-released study concludes that the City isn’t getting its full share from property taxes

By Van Smith

Published in City Paper, Oct. 13, 2004

This spring—as happens almost every spring—Baltimore confronted a budget crisis. City Hall’s $2.1 billion spending plan for fiscal year 2005 entailed cutting 533 government jobs and curtailing city services to pay for it. On April 14, Mayor Martin O’Malley proposed an alternative: a suite of new taxes and fees that would preserve the jobs and services with $48 million in revenue.

Five weeks later, with the budget process complete, the City Council had trimmed O’Malley’s tax proposal down to three elements that would generate $30 million from taxpayers: doubling levies on real-estate sales and imposing new fees on phones and energy use.

“It happened so fast,” City Councilman Keiffer J. Mitchell Jr. (D-4th) says in summing up this year’s open-and-shut budget battle in Baltimore, the most heavily taxed jurisdiction in Maryland. Mitchell chairs the council’s Taxation Committee and thus led the legislative body’s tax debate. In a recent interview, he remembered how he and his council colleagues felt as if “we had our backs against the wall” when confronted with the mayor’s proposals.

Since April, Mitchell has learned that there was an unexplored option—going after millions in untapped revenue potential from the city’s existing property-tax rolls by appealing low assessments. While O’Malley touched on this idea in passing in a Sun article in December 2003, saying that “generally the state underassesses city properties,” a strategy to get the state to do more accurate assessments never made it into his set of gap-closing proposals in April 2004—or into the City Council’s ensuing tax debate.

Property assessments are the basis for calculating how much property owners are taxed for their holdings, and are conducted by the state in three-year cycles—a third of the city is assessed each year. Baltimore City’s property tax rate, just shy of $2.33 per $100 of assessed value, is much higher than in any of the state’s 23 counties. Thus, underassessing property in Baltimore shortchanges city coffers—and, due to the high tax rate, those coffers are being shortchanged more dramatically than in other parts of the state. Montgomery County is the only jurisdiction in Maryland that appeals property assessments it believes are too low, but under state law any jurisdiction is free to do so.

Unbeknownst to Mitchell and the public during the five-week debate this past spring, a privately funded study about the revenue potential locked up in underassessed city commercial property had already been underway for more than two years. While the City Council was weighing its options, a draft report from this effort was in the hands of a select group of people for review and comment, including staff at the city’s Department of Finance. Its fundamental finding: The city should consider going after millions in unrealized revenues by appealing underassessments of commercial property within its borders. By the time Mitchell learned of the draft report, the new taxes had already become law.

“I guess it was July when I first heard about it,” Mitchell recalls, “and that was through some businesspeople. I’ve asked for a copy of it from the [city’s] finance department, but was told it was in draft form.”

The study, which has yet to be released, was overseen and underwritten by the Abell Foundation, the renowned research and grant-making outfit that works to improve quality of life in the city and state. In mid-September—five months after first hearing rumors about the study—City Paper obtained a draft copy of the report, titled “A Costly Problem: Commercial Property Assessments in Baltimore.” Its preliminary conclusions, based on comparing assessed values to the sales value of a sample of 121 commercial properties, show that nonresidential property in the city is significantly underassessed.

For example, one of the properties study author John Hentschel looked at as part of his research was the old United Iron and Metal site at Pulaski Highway and Haven Street in East Baltimore, a scrap-metal processing facility on one acre of land with a 4,400-square-foot building. The property sold for $220,000 in 2000, yet Hentschel discovered that it was assessed at $42,000—less than a fifth of the sales price. He also looked at the old Abbey Schaefer Hotel at 723 St. Paul St. in Mount Vernon, which sold for $650,000 in 2001; its assessed value was $315,020, less than half of the sales price.

The question of exactly how much city commercial properties are underassessed is still a matter for discussion as the study continues to wend its way through the review process, but it is enough to translate into millions in unrealized tax revenue—potential revenue that Mitchell believes should have been on the table when the council was weighing its budget options.

While the councilman still hasn’t seen the report, he says that what he’s heard “suggests to me that I didn’t have all the tax information that I would have liked to have had before we went raising taxes on everyone.”

Steve Kearney, O’Malley’s director of policy and communication, says that the mayor’s office wasn’t “aware of the report, because it was still a draft that was under review.” He adds that “the purpose of the report is to promote public discussion, but you don’t have the debate before you have the facts.”

“As soon as the report comes out,” Mitchell promises, “I’m going to have a hearing—one that we should have had before we started biting the hands that have invested in this city.”

The Abell Foundation was not pleased that a copy of its report-in-progress had gotten into the press’ hands.

“We’ve got a problem here,” said a stern-voiced Gilbert Sandler, Abell’s spokesman, in a late-September phone call to City Paper. “That report has not been vetted. We have no idea what’s true and what’s not true, so it is not ready, by any means—we are not ready to release any piece of it.”

Later, after talking it over with other staff at Abell, Sandler called back to say, “You do what you want to do, and we’ll do what we’re going to do.” Abell’s people would not be available for interviews or meetings to discuss the study, he explained, and he cautioned that “there are many points of view that need to be taken into account that aren’t in that draft. It’s a work in progress. You shouldn’t publish [its findings] until we release it.”

On Oct. 4, City Paper learned that Abell’s position had shifted—the study’s author would be allowed to discuss the study and address its shortcomings. John Hentschel, a real-estate appraiser who served as the city’s real-estate officer from 1982 to 1992, is founder and president of Hentschel Real Estate Services, an Abingdon-based consulting firm, and an internationally recognized expert in public-sector real-estate practices. An afternoon meeting with Hentschel at the White Marsh Mall food court presented a clearer picture of the study’s findings.

During the meeting, Hentschel—a friendly, forthcoming, well-dressed fellow who chooses words carefully as he wrangles complex real-estate concepts into clear language—readily concedes that his draft report contains some errors in analysis. But, he adds, his overall conclusions stand: The city is missing out on substantial revenues due to underassessed commercial properties, and there are steps—at both the local and state level—that can be taken to remedy the situation.

The road to the “A Costly Problem” report started, Hentschel recalls, late in 2000 or early in 2001, when “Abell called me and said, ‘We are thinking about doing a study about this, are you interested in doing it?’ And I said, ‘Sure,’ and I wrote a proposal.” He had noted, while perusing newspaper reports, that when major commercial properties sold the assessed values were well below the sales prices. “It would make you scratch your head,” he recalls.

And so, starting in late 2001 or early 2002, Hentschel embarked on a lengthy project that would ultimately lead to the draft report, “A Costly Problem,” which he submitted to Abell in late January or early February 2004. It was based foremost on looking at recently transacted commercial property sales and comparing the sales prices to the properties’ assessed values.

“The more you got into it, the more you would say, ‘Well, why is this, why is this, why is this?’” he says. “So you start asking more and more questions. And if you are not coming in with a pre-conceived conclusion, it takes you where it goes.” And where it went, Hentschel says, indicated that underassessments of commercial properties were a real problem that could be remedied if the city chose to appeal low assessments.

“Each year,” Hentschel wrote in his conclusion of the draft, “taxpayers diligently review their property tax assessments to ensure that they are being asked only to pay their appropriate share of property taxes, and no more. Isn’t it reasonable to expect local public officials to exert a similar degree of fiscal prudence on behalf of all City residents by diligently performing a similar annual review to ensure it is receiving its fair share of revenues from the assessable tax base, and no less?”

The main constructive criticisms of the “A Costly Problem” draft so far, Hentschel explains, have come from Doug Brown, supervisor for public-policy analysis in the city’s Department of Finance, who handed over his thoughts in writing to the Abell Foundation on Sept. 28.

First, Hentschel says, Brown identified a link between tax rates for real property (land and improvements, such as buildings and parking lots), which are levied against property owners, and personal property (equipment, machinery, furniture, fixtures, and the like), which are levied against business owners. The draft report, Brown pointed out, did not consider that link.

“The personal property tax rate is computed at two and a half times the real-property tax rate,” Hentschel says. Thus, he continues, if the city were to lower its real-property tax rate in response to more revenue from increased commercial-property assessments, it would have “a corresponding effect of reducing the personal property taxes” entering the community chest.

The draft report also failed to include the impact of increased property-tax assessments on the amount of state education aid to the city. If the city, on its own, successfully appealed assessments upward to the tune of millions of dollars, Hentschel says, then Brown’s “projections show there would be an adverse affect on state aid to education.” (In 2004, the state provided $533 million of the city school system’s $931 million operating budget.) Since the state divvies up education aid based on each jurisdiction’s wealth, as measured by the assessed value of its real estate, then a rise in Baltimore’s assessments—without a corresponding rise in the rest of the state’s assessments—would lead to a reduction in state aid to Baltimore’s cash-strapped education system.

Thirdly, Hentschel continues, if the city unilaterally appealed state assessments upward, “there may be an adverse reaction from an economic-development standpoint, in terms of perception” among businesses that feel they’re being picked on.

Donald Fry, president of local business group the Greater Baltimore Committee, says he knows that in the one Maryland jurisdiction where appeals of underassessments are routinely brought by local government—Montgomery County—“it has resulted in some consternation among some property owners.” Given the city’s “financial strains,” he adds, “City Hall is going to want to look at that very closely, as will we.”

However, Hentschel adds, “the report basically re-emphasizes and re-emphasizes again the matter of parity, equity—that it has to be done in an equitable and above-board fashion. There have to be safeguards put in it so there are no maneuvers to aggressively or capriciously go after certain taxpayers.”

In order to calm such concerns, Hentschel suggests a process by which the city could “look for anomalies that might give basis for appeals” of low assessments. “You need to be comparing apples to apples,” he explains, so the city should find an average assessment value for different types of properties, classified by use, age, size—whatever category works best.

“Once you have each group’s average assessment,” he continues, “you look for outliers—properties that appear to be underassessed because their values are so far below the average. And then you try to find out why. Maybe they are in an off location or they’re deteriorated with age. Then the low assessment is either explainable or not, and if not, you consider it for appeal.”

That’s a fair and equitable way, Hentschel says, to find assessments that don’t pass the smell test. The city could take up such cases with the state’s assessments office in Baltimore City for initial appeal, then, if necessary, to the Baltimore City Property Tax Assessment Appeals Board, and finally—if a case goes this far—to the Maryland Tax Court for a final, binding decision.

But, Hentschel says, Brown makes a good point on behalf of the city: Appealing for assessment increases has to be done on a statewide basis. “Otherwise,” he says, “there would be certain unintentional and adverse effects on the city because of these various linkages in other things—personal property tax, and state aid to education, and adverse perception.”

Though Hentschel did not provide a copy of Brown’s comments to City Paper, Kearney did, faxing them to the paper on Oct. 6 and asking that the document not be quoted directly. (Brown was out of the country and unavailable for comment until after press time.) Computations and conclusions contained in Brown’s written comments reveal the city’s analysis of the revenue impact of seeking to raise underassessments.

According to Brown’s written comments, an 18 percent increase in nonresidential property assessments overall would yield $26.5 million annually in new revenues for the city; and that the same assessment boost on all city property—residential properties included—would add $76.8 million to the coffers. (Brown’s analysis, in the second instance, assumes the same kind of underassessment for residential properties as well.) If the city’s response to this was to try to give taxpayers a break and reduce the real-property tax rate by the same proportion as the boost in assessments—18 percent—there would be a corresponding 18 percent decrease in the personal-property tax rate, the document explains. In other words, any reduction in the real-property tax rate would lead to a reduction in the personal-property tax rate, as well, which would result in a greater over-all revenue reduction.

When Brown’s comments turn to the subject of the aid-to-education impact of increased assessments, he uses a slightly different example—a 15 percent increase in assessments. If the city increased assessments 15 percent without any increases in property assessments in the state’s 23 counties, the city would lose $21.5 million in state aid for education, much of which would shift to other counties. If, however, each county reassessed its properties to the tune of 15 percent, then the city’s share of state aid would increase by about $7 million.

Without delving further into the mathematical and statistical minutiae of Brown’s comments and Hentschel’s draft report, it is clear that addressing underassessed properties in Maryland would have a significant impact on local-government budgets—all the greater if the job was undertaken state-wide, as Brown recommends.

For now, the state agency in charge of property assessments is staying mute on the subject. “The Abell report hasn’t been officially released,” John Sullivan, head of the state’s Department of Assessments and Taxation, says in a phone conversation. “We received the draft in April, and we responded to everything in the report, and so far the Abell Foundation has not gone forward with it. Our response to their draft is in their hands, and I’m not obliged to give you my response to that draft until it is officially released.”

However, Sullivan says that he does not think there is an underassessment problem in Baltimore, much less Maryland. “We treat all property owners the same,” he says. “Each one is our customer, and we treat that customer as we would want to be treated. And all of our assessments—every one, and we have 2 million properties we’re responsible for assessing—are valued uniformly and equitably across the state.”

While Sullivan won’t share his written comments on Hentschel’s draft, he reveals that there was at least some administrative reaction to what it contained. “It did show many examples of inaccurate assessments that have since been corrected,” he says. “I think 90 percent of the properties he cited have been adjusted.”

When City Paper reviewed some of the properties Hentschel sampled as underassessments, state Department of Assessments records indicate that nearly all have been adjusted since the study was conducted (see “The Short Lists”). Some assessments were raised to almost equal the sales price—but several upward adjustments were minor, and a couple were adjusted downward, so that the gap between assessed value and the sales prices actually widened.

In addition, City Paper did an analysis on its own set of sample properties (see “The Short Lists”). Anyone with Internet access and a minimal amount of database searching skills can go to the Department of Assessments Web site and do his or her own analysis of assessment-to-sales-price comparisons.

Even before Hentschel’s “A Costly Problem” draft report was sent out for review and comment, rumbles of discontent over possible underassessments statewide were being heard last year in Annapolis. “Property under-assessments are a significant problem facing the State of Maryland,” wrote Ronald Bowers, administrator of the state’s Property Tax Assessment Appeals Board, to state Del. Leroy Myers (R-Allegany and Washington counties) in a May 13, 2003, letter (emphasis in the original). “Many properties in the state are under-assessed at between 10 and 80 percent of the actual market value,” the letter continues. “This translates into inequitable taxes for similar properties and lost revenue for the State and local governments.”

The state Department of Assessments and Taxation “was cut back, budget-wise, and it was kind of hampering them from doing their job,” Bowers said recently when asked about the letter. “They need modern equipment other than clipboards to keep up with this ongoing problem, and they were losing people,” he says—touching on a possible reason why assessments appear to have gotten out of whack in the first place. “The proper equipment and the right amount of people is a good investment,” he continues, “because a little bit for them yields a lot for government—and a greater sense that the process is working fairly. If it isn’t fair, if it isn’t done properly, then the mainstream taxpayer is paying an extra burden.”

Councilman Mitchell echoes that sentiment: “I don’t think the city’s getting its fair share, so let’s recoup what we already have [from correcting underassessments] before we go taxing everybody. And these new taxes—especially the phone taxes—hit everybody at the same level, $3.50 per line per month. At least with property taxes, the amount you’re supposed to pay is intended to be in line with the amount of value you have.

“Right now, there is so much distrust in government that it’s not right,” he says. “We have to do what is right.”

Field of Schemes: A cavalcade of Baltimore projects, done and undone

By Van Smith

Published in City Paper, Nov. 12, 2003

It may sound crass, but development is pure and simple speculation. One can dress it up with high-minded jargon–“public-private partnership” or “urban renewal”–but the game remains a tangled, chancy knot of land deals and debt-fueling projects aided or underwritten by taxpayer dollars.

And so it’s been played in Baltimore since Colonial times, when Baltimore Town, Jones Town, and Fells Point were first laid out in the 1730s. As historian Sherry Olson writes at the beginning of her authoritative tome Baltimore, “the city itself was to be the great speculation,” with its growth driven from the start by the overlapping financial affairs of private and public interests.

Similarly, developers today commonly reduce their risks by relying on public money to build on scarce harbor-front land. This business-government alliance, then-Rouse Co. chief executive officer Mathias DeVito told City Paper back in 1995, “is a part of our culture here.”

Sometimes this development dance has worked, sometimes it hasn’t–and sometimes it turned out differently than intended, or was never done at all. The high-end residences of Mount Vernon Place, built in the 19th century, comprise what many say is the most beautiful urban space in the United States. The high-end condo complex Scarlett Place, on the other hand, looks as much like a Lego creation today as it did in the go-go 1980s, when it rose in the footprint of a closed President Street warehouse. The 6-year-old Columbus Center sits forlornly at the Inner Harbor, an unmitigated failure as a science-based tourist attraction. Next door, though, the brand-name draws at the Power Plant (Barnes and Noble, ESPN Zone, Hard Rock Café) have preserved a striking century-old relic. Harborview Towers along Key Highway broke ground 14 years ago and is only half-built, its lone high-rise bearing a cartoonish resemblance to a lighthouse, but the Howard Street Arts District, meant to revitalize the old west-side shopping district by nurturing the muses, was never built at all.

Successful or not, Baltimore’s drive to build and rebuild has been inexorable, even in the face of the Great Fire of 1904, the Great Depression and other financial disasters, the tenacious flight of jobs and residents to the suburbs, and the riots of 1968. Housing, highways, hotels, industry, office space, public transportation–it’s all gone up, in one way or another, shaped by geography (especially the city’s waterfront and watersheds) and the resolve and resources of the rich and powerful, be they in business or government. And thus we, for better or worse, have places to live, work, play, shop, and travel–places whose stories, sampled below, echo the strains and harmonies of Baltimore’s development.

The Fairfield Ecological Industrial Park 

When Baltimore was awarded a $100 million federal Empowerment Zone grant to boost jobs for poor residents in 1994, city leaders confidently called the proposed Fairfield Ecological Industrial Park the “crown jewel” of the plan. Located on a South Baltimore peninsula far from downtown, the industrial park–a polluting cluster of oil-tank farms, factories, and scrap yards–was to become an economic engine fueled by recycling and reuse; one plant’s waste would be another’s raw material. Residents of the city’s other two Empowerment Zones, one each in East and West Baltimore, were expected to fill the coming jobs, along with the handful of people still living in Fairfield, and businesses would claim tax benefits for hiring them.

Then, nothing really happened. There were planning symposiums, community meetings and strategy sessions–even enrollment in a federal program to make environmental permitting more flexible for businesses there. Much feel-good rhetoric was spun about the eco-industrial park. Then-Mayor Kurt Schmoke and luminaries from Washington used it in speeches as a model for the economy of the future. The city made ambitious promises for capital improvements–new roads, new storm drains, new curbs and lighting. In 1997, the state passed brownfields legislation to make it easier to redevelop abandoned and polluted industrial land, a step that ostensibly would help facilitate the eco-industrial park plan.

Other than the wholesale buyout by the city of the homes of the remaining 300 or so Fairfield residents in 1998, little change came about. In 1999, the eco-industrial park was withdrawn from the flexible-permitting program for inactivity and lack of interest. By 2000, the city was already quieting on the ecological part of the equation, though efforts to bring new business to the area continued. The city has spent about $5.5 million to date on road and drainage improvements in Fairfield. A granite-slab company was enticed with a $150,000 city loan to move there in 2000, the same year that the city forgave $300,000 in debt owed by the Struever Bros. Eccles and Rouse development company, which has been trying since 1989 to revive a polluted portion of Fairfield called Port Liberty. In the end, though, the eco-park concept was abandoned, and Fairfield remains the same old petro-chemical industrial park that it’s been for decades.

The Middle Branch Waterfront 

In 1724, just six years before Baltimore Town was founded on the North Branch of the Patapsco River, landowners in the area approached the legislature with plans for a town at Spring Gardens, near where the Gwynns Falls empties into the Patapsco’s Middle Branch in what is now known as South Baltimore. Their efforts were blocked by John Moale, who owned the land and preferred to mine for iron there–which he did until he died in 1740–so a first settlement was chosen instead on the North Branch. Thus, if not for Moale’s self-interest, Middle Branch would be Baltimore’s Inner Harbor today. Instead, it’s Baltimore’s other, overlooked waterfront.

The Middle Branch was committed to industrial purposes during Baltimore’s formative years in the 19th century. The Baltimore Gas and Electric Co.’s precursor in the 1850s chose Spring Gardens as the site for a gas-making plant, then later chose Westport, across the river, for a giant coal-fired power plant. The Carr Lowery Glass Co., which closed this year, first set up shop on the Middle Branch’s shores in 1889. Rubble from the 1904 fire was pushed into Middle Branch marshland, as was fill from city subway excavations in the 1970s.

The waterway’s other favorite use was recreation, as city dwellers at the turn of the 20th century chose places like Ferry Bar Park and the various rowing clubs dotting the shoreline as weekend destinations. They were always cheek-to-jowl with the smokestacks, but today the BRESCO trash incinerator is the only stack still belching.

Nascent signs of new investment have started to peek through the industrial detritus of Middle Branch. On the former Port Covington railroad yards sits a new Wal-Mart and Sam’s Club that opened in 2002, thanks in part to tax credits. Nearby, at the dilapidated city-owned marina next to the Hanover Street Bridge, a team of investors is planning extensive renovations, including a new restaurant and entertainment venue. The National Aquarium had been planning a $30 million Center for Aquatic Life and Conservation at a 7-acre city park on the west side of the Hanover Street Bridge, but it recently ran into cleanup problems.

Also poking up from the urban detritus–and the refuse and sewage coming into the Middle Branch from the Gwynns Falls and various storm drains–is an ecology of sorts. Herons, kingfishers, and even beavers frequent its shores and rotted piers, which themselves have become vegetated islands of habitat.

For the last quarter century, city planners and local architects have been calling for the Middle Branch to become the city’s “second waterfront” by creating access and amenities along its shores and promoting recreational uses like fishing, biking, and picnicking. As the city strives to solve its extensive leaky-sewer problems and also installs a debris collector to keep trash from entering Middle Branch in the first place, the degraded waterway may yet become a destination again–this time without the heavy industry.

Coldspring NewTown 

Back in 1970, when Abell Foundation President Robert Embry was the city’s housing commissioner, Moshe Safdie captured his imagination. The young Israeli-born Canadian architect had wowed the crowds at Montreal’s 1967 World Fair with Habitat, a complex of modular, mass-produced housing and retail space arranged as a self-contained community for urban markets. With residents fast abandoning Baltimore for the surrounding suburbs, Embry and other city leaders were willing to commit urban-renewal funds to try new things–even something along the lines of Habitat–in order to keep the city’s dwindling middle class. And try they did with Coldspring NewTown.

Located just south of Cylburn Arboretum between Greenspring Avenue and the Jones Falls, the project was initially designed to straddle Coldspring Lane on 370 acres and comprise 3,700 dwelling units for 12,000 people. Some were to live in “deck houses”–raised concrete, aluminum, and-stucco condominium complexes with parking beneath the homes and walkways and green space throughout–and many more in apartment buildings, including a top-entry high-rise to be built down the face of the old Woodberry Quarry. The price tag was $200 million, with $50 million coming from federal coffers. City voters approved a bond sale to insure condo buyers’ mortgages.

In 1977, the first phase was completed: 252 deck houses. They were snatched up by a mixed bag of professionals–including high-ranking city bureaucrats, architects, lawyers, teachers, doctors, and journalists. More public money was spent to lay the foundation for the project’s next phase–the NewTown part of the concept, with stores and community services–when Ronald Reagan became president and nearly turned off the spigot of federal funds that had fueled Baltimore’s urban-renewal gravy train during the 1970s. The project stalled, only a fraction completed.

Until the 1990s, when construction started on a different tack–a hundred or so suburban-style homes along Coldspring NewTown’s boundary with the Cylburn Arboretum–the isolated development was surrounded by vestiges of its failure. Mounds of earth had been moved, sewers and roads installed, foundation work laid down, but much of it was left eerily idle. Almost 900 people, however, now live in what had been uninhabited woodland. Their combined property taxes contribute approximately $500,000 per year to city coffers. That’s not much return for tens of millions of dollars in public investment–unless, of course, you’re one of the original condo buyers who scored unique urban homes for $30,000 to $60,000 with low-rate, bond-insured mortgages.

Inner Harbor East 

Three or four decades ago, Inner Harbor East–a 20-acre parcel around where the Jones Falls empties into the harbor, right next to Little Italy–was slated for a highway interchange. After that proposal crashed and burned, thanks to an epic political battle that spawned several careers (including that of now-U.S. Sen. Barbara Mikulski), a decade-long community planning process started to create a vision for the property.

What was ultimately agreed upon, in a plan made official in 1990–a cluster of upscale townhouses, a marina, offices, retail space, and an 18-story hotel–was “to balance all the interests of neighborhood life with the interests of commercial developers,” as then-Mayor Schmoke explained at the time. New buildings, all agreed, were to have low elevations and a street-level orientation, so as not to overshadow the rowhouses and restaurants of nearby Little Italy and Fells Point.

With a hard-fought plan in place, community activists rested easy. The city held up its end of the bargain, building roads and water lines and completing marina renovations, and then started to sweeten the deal for the property’s main owner–H&S; Bakery owner John Paterakis.

The favors started with $1.5 million in federal money, which was chipped in for a $9.2 million office and apartment complex where Sylvan Learning Systems is now based. Then the city subtracted first $1.7 million, then another $1 million, from Paterakis’ $4 million share of the costs for infrastructure (roads, water lines, marina renovations, etc.). Then, in 1995, the city gave Paterakis another $1.8 million in financial breaks, and deferred his $6.5 million obligation to purchase two city-owned parcels in the development area. But that was just for starters.

The real surprise at Inner Harbor East didn’t come until 1997. At that point, the city’s $150 million Convention Center expansion was completed, but the center needed about 1,000 more hotel rooms in order to support the expected growth in bookings. Two-thirds of the Convention Center’s cost had been covered by the state, so legislators all around Maryland were anxious to see it succeed.

To the surprise of many, Inner Harbor East–about a mile from the Convention Center–was chosen as the Convention Center headquarters hotel’s home in 1997 over two other closer sites. What’s more, Paterakis’ proposed hotel blew the Inner Harbor East plan out of the water–as initially approved, his hotel was to be a 48-story behemoth, costing nearly $150 million, with a third of the cost covered by public funds.

Ultimately, Paterakis’ Baltimore Marriott Waterfront Hotel rose 32 stories–not quite twice the height spelled out in the 1990 urban-renewal plan–and vocal critics have tempered their complaints since its construction was completed in 2000. After all, with a significant public stake in the project, its success significantly impacts city coffers. And now it is joined by a proposal for a $130 million Four Seasons hotel and condo complex made up of two 20-story towers, also receiving healthy public subsidies. So much for Inner Harbor East having the scale and feel of the quaint neighborhoods surrounding it.

HOPE VI 

President Bill Clinton came and went, but Baltimore will bear the mark of $150 million his administration gave to the city’s public-housing program for years to come. The money came in the form of HOPE VI grants, and they were used to demolish and replace antiquated public-housing high-rises with mixed-income townhouse developments for homeowners and public-housing residents alike. Lafayette Courts, Hollander Ridge, Flag House, Murphy Homes, Lexington Terrace, Broadway Homes–for nearly 50 years, these were familiar addresses and home to thousands of Baltimore’s poor. Now they are all gone, some of them replaced with new housing–but for vastly fewer people, and less of them poor, than were living there before.

“When the towers come down, the tenants have to go somewhere, and what they do is fan out to nearby working-class neighborhoods, using federal housing vouchers to pay the rent,” according to an article in the October issue of Governing magazine. “Most of these are aging, fragile communities struggling to stave off dysfunction themselves. A large influx of welfare families brings increased crime and disorder and sometimes threatens a neighborhood’s very survival.” In Baltimore, a study released this year by the Johns Hopkins Institute for Policy Studies found this effect to be the main problem with the HOPE VI program.

The critics aren’t saying the old high-rises–which Al Gore called “monuments of hopelessness”–were preferable. But they make the argument that big-money, big-impact moves like imploding high-rises and replacing them with mixed-income townhouses fails to address the complex root causes of poverty and all its ills. In fact, some call the program government-funded gentrification and complain that HOPE VI amounts to little more than a massive dereliction of duty for the nation’s giant public-housing system, which is supposed to support the poor. Residents lucky enough to obtain housing at the suburban-style complexes, though, find a lot to like–they’re new, clean, and generally safer than what they replaced.

The Public Rails 

Controversial highway plans to link interstates 70 and 95 near Fells Point, then build a bridge over Locust Point, fell through in the 1970s–but not before a portion of I-70 was constructed through a slice of West Baltimore neighborhoods. East-west traffic in Baltimore and those West Baltimore communities have struggled ever since. But part of the strain was meant to be relieved by rail-based public transportation, an idea that has never fully blossomed in Baltimore, despite its demonstrable boost to economic development in cities that have extensive systems.

Baltimore’s extensive trolley system had been phased out entirely by the early 1960s, thanks in part to the indirect efforts of General Motors to shut it down. The new generation of rails now consists of the 15-mile Baltimore Metro subway between Owings Mills and Johns Hopkins’ East Baltimore medical campus, and the 30-mile light-rail line between Hunt Valley and BWI Airport. Combined, the projects cost nearly $2 billion in public funds, with construction lasting two decades.

That price tag is nothing compared to a current proposal, announced earlier this year, to create a six-line, 109-mile, 122-station system for $12 billion over a period of 40 years. The extensive, expensive scheme, dubbed the Baltimore Regional Rail System, was cooked up by an advisory committee of the Mass Transit Administration and has the backing of heavy hitters like the Greater Baltimore Committee, a large and respected business group. But Gov. Robert Ehrlich’s administration is balking at its lofty ambitions, saying a rapid-bus plan may be a feasible alternative, given the tight state budget.

The chilly reception at the State House suggests Baltimore’s rail future, for now, has much more humble possibilities–such as a monorail to carry tourists around the Inner Harbor’s attractions. The idea has cropped up periodically over the last 25 years, most recently in the late 1990s, when then-Mayor Schmoke proposed a $210 million system that officials likened to the one at Disneyland. Others were reminded of the fictional Springfield, where the Simpsons, in a classic episode of the animated show, saw firsthand where monorails lead you–around and around in a runaway train sold to the public by a passing huckster. So, instead of rails for the Inner Harbor, the Greater Baltimore Committee is backing a $26-million electric tram system with dedicated lanes on existing roads. Either way, it sounds like tourists to Baltimore will have their public-transportation problems solved long before Baltimore as a whole does.