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The Nose

If You Threaten to Tax It, They Will Come

Posted 3/6/2002

Nothing unites the city's splintered array of politicos and power brokers like a hat-in-hand trek down I-97 to Annapolis, where a who's-who of Baltimore boosters ventured Feb. 27 for a hearing of the House Ways and Means Committee. Mayor Martin O'Malley was there, as was Baltimore Development Corp. (BDC) head M.J. "Jay" Brodie. Development giants Southern Management and Struever Bros. Eccles & Rouse were in the house, along with street-level activists from Mount Vernon and Charles Village. At one point during the standing-room-only proceedings, the Nose was wedged between City Council Prez Sheila Dixon and American Visionary Art Museum maven Rebecca Hoffberger. They'd all come to bash House Bill 759, which aims to curtail the Heritage Structure Rehabilitation Tax Credit, aka the initiative that launched a thousand scaffolds. Birthed in 1997 and tweaked through the years to increase its largess, the credit promotes the rehabbing of historic buildings by offering developers a state-tax break equal to 25 percent of a project's renovation cost. When combined with a similar federal program, it has proved amazingly effective in turning cost-prohibitive redevelopment projects into doable ones. Baltimore's ubiquitous Struever Bros. has parlayed millions of such credits into high-profile rehabs like Canton's Can Company and the Congress Hotel downtown. They enabled Southern Management to convert the old Howard Street Hecht Co. department store into the swanky Atrium at Market Center apartments. More than $50 million in credits have been doled out to date, and the program's popularity is growing: State budget analysts estimate its annual cost could rise as high as $84 million.

But it's one thing to forgo millions in tax revenue when Maryland's coffers runneth over. Now, the Free State faces a potential billion-dollar-plus shortfall, and that's put the historic tax credit on the legislature's hit list. Among other cost-controlling provisions, HB 759 would cap annual historic-tax-credit outlays to $20 million, and limit to $1 million the break for any individual project for which the credit had not won final state approval by Feb. 1. House Speaker Casper Taylor (D-Allegany County), one of the bill's supporters, called tax credits a "direct expenditure of state funds" and stressed the need to focus on the "core responsibilities" of government in these recessionary times. Del. Clarence "Tiger" Davis (D-Baltimore City), one of the bill's sponsors, was even more blunt, reminding the room of the state's need to fund education, elder care, and such. Indeed, Davis said he was "livid" over a recent O'Malley TV appearance wherein Hizzoner accused Annapolis of reneging on promised drug-treatment money. Unless tax-credit boosters were prepared to tell him what else should be cut, the delegate intoned, they were just "bullshitting."

Davis' tirade did little to stem the tide of bill foes, whose testimony turned the hearing into an all-afternoon affair involving some strange bedfellows. Preservationists, who rarely share the political trenches with BDC and big-time developers, were out in force. Preservation Maryland head Tyler Gearhart brandished a freshly commissioned study by Lipman Frizzell & Mitchell LLC, a Columbia-based real-estate consulting and appraisal firm, purporting that jobs and economic activity generated by credit-fueled redevelopments would eventually bring in more tax revenues than the program costs. Builders said the Feb. 1 switch-off would freeze out nearly $100 million worth of credit-seeking projects already in the pipeline statewide. Several echoed Wendy Blair of Baltimore-based Blair McDaniels LLC, which hopes to use the credits to help convert a chunk of the 400 block of Howard Street into apartments and retail space, who said she felt "betrayed."

The nays were still being said when the Nose slipped out to the lobby and spied Del. Davis with a pack of cigarettes in hand. We positioned ourselves by an outside ashtray and scored some face time with the East Baltimore Democrat. Soothed by a smoke, Davis' pique at O'Malley lifted some. "I love that young fellow," he said with a grin. "He just needs a spanking from an old-timer now and again." Davis' take on HB 759 had mellowed too: The bill would likely be "massaged" to make it "more palatable" to the tax program's backers, he said, citing the $1-million-per-project cap as one of the provisions that might be in play. It all fit our theory that the bill was written hastily and harshly so as to bring all the players to the table for negotiations. In other words, the scaffolds might not be going back into storage just yet.

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