Sagamore Development, a private real estate firm owned by billionaire Under Armour CEO Kevin Plank, has proposed a plan to redevelop Port Covington, a mostly industrial waterfront area in South Baltimore. Over the next two decades, the ambitious plan would remake the area with offices, homes, shopping, restaurants, waterfront parks and a new state-of-the-art campus for Under Armour.
Sagamore has requested $1.1 billion in support from local, state and federal governments for needed infrastructure for the roughly $5.5 billion project. This includes $535 million in tax increment financing from Baltimore City, with the money coming from municipal bonds and repaid through new property taxes generated by the project. This is by far the largest tax-increment financing deal, or TIF, ever proposed in Baltimore and among the largest in the country. The developers of Harbor Point, for example, received $107 million in TIF funding for a roughly $1 billion project.
Supporters say the project, which encompasses about 260 acres, changes the city for the better, creating thousands of jobs, securing Under Armour’s growing presence and revitalizing another part of the city’s waterfront.
Critics charge the proposal gives too big a subsidy to Sagamore, given the firm’s resources and Baltimore’s critical needs in other areas. They say city support for the improvements will exacerbate the city’s economic divide as repayment of the TIF restricts the general use of additional tax revenue for decades. They also voiced concerns about how fast the deal was moving through the city’s approval process.
Below we examine the proposed project and criticisms.
Sagamore Development Co., the real estate firm privately owned by Under Armour CEO Kevin Plank, plans to create a new street grid and ring of riverfront parks on mostly empty industrial land in South Baltimore.
The firm owns about 160 acres of the roughly 260-acre master plan area, a peninsula south of Interstate 95 and Federal Hill. The area contains a Walmart, which closed this year, and a former Sam's Club, that’s already been converted into Under Armour offices, as well Swann Park, City Garage, Nick's Fish House and The Baltimore Sun’s printing plant, for which the newspaper has a long-term lease.
The firm is seeking more than $1.1 billion in support from local, state and federal governments for needed infrastructure. This includes $535 million in tax increment financing (TIF) from Baltimore City, with funding coming from municipal bonds and repaid through new property taxes generated by the project. Sagamore will sell land to partners who will build new apartments, stores and offices, as well as manufacturing space and a new headquarters for Under Armour.
The master plan divides Port Covington into several districts: West End, Cromwell Street, Hanover Street, Founders Park, East End, East Waterfront, East Waterfront Park, West Waterfront Park and UA Campus.
It will feature several new parks and greenways.
The development will include shared-use recreational paths, bike lanes, bike-sharing stations and eventually a bike and pedestrian bridge to Westport.
Phase 1: Distillery, City Garage, Bike Path, Nick's
Phase 1 of the project, which already is underway, redeveloping City Garage as offices and incubator space and building a whiskey distillery for Plank's Sagamore Spirit rye as well as creating a bike path.
Phase 2: East Waterfront
Phase 2 will focus on the property's eastern end with designs calling for a lively shopping and residential district. The plans for this phase allow 1,000 residences -- nearly 900 of them studios or one-bedroom apartments -- as well as more than 500,000 square feet of retail space, 300 hotel rooms, 45,000 square feet of so-called "maker space" and a 2,500-square-foot "civic" building, possibly a post office. A new water taxi stand, eastern waterfront park and 1.5-acre plaza, as well as 3,000 parking spaces are also planned.
Phase 3: Hanover, Cromwell, McComas, I-95 and light rail
Phase 3 would focus on Hanover and Cromwell streets, with room for more than 1,886 additional residences; more than 240,000 square feet of retail, 1.15 million square feet of office space; 46,500 square feet of maker space and 3,350 new parking spaces. The firm also expects changes to I-95, a light rail spur and the addition of about 4,000 square feet of civic space.
Phase 4: West End
Phase 4 would focus on building out a largely residential "West End," with 2,000 more residences, including a smattering of about 74 townhouses. The West End would also include about 800,000 square feet of offices, 130,000 square feet of retail; 54,000 square feet in retail space; and 95,000 square feet in manufacturing. This phase would also involve west shore park, 13,000 square feet of civic space, including a possible school, paddock and "cultural center" or music venue.
Phase 5: West End and Founders Park
The final phase involves the involves the relocation of The Baltimore Sun, which has a long-term lease with Sagamore for its printing plant. The Sun's plant would be replaced by more than 8,500 new residences; more than 300,000 square feet of retail; about 300,000 square feet of office space and 200,000 square feet of maker space and 7,900 parking spaces. Founders Park and 11,500 square feet in civic space, identified as a possible library, would also be built as part of this phase.
If approved, the master plan and zoning allow for significantly more construction than the firm says it expects its partners to build.
In its TIF application the firm said it expects the development to include:
Tax increment financing is not a tax break. But the project would receive tax breaks because it is located in an Enterprise Zone and involves environmentally damaged property. The Enterprise Zone and brownfields credits could be worth more than $760 million, according to an estimate by MuniCap, a Columbia-based consulting firm hired by the city to assess the proposed TIF.
A TIF does provide tax benefits, since all of the new taxes are being used for needs generated inside the district.
The buyer of the bonds -- in this case, at least initially, Sagamore and its financial partners – can count the income from those bonds as tax exempt.
Not until 2038, according to MuniCap. But Sagamore, or whatever companies the firm sells land to, would need to pay "special" taxes estimated at $291 million to make up the difference. Sagamore or its partners also would be responsible for covering the TIF's costs through special taxes if property values plunged in a real estate crash.
The TIF under consideration is structured to allow the firm to earn a profit of about 9 percent, or about $402.3 million. That calculation only includes the impact of the TIF as well as tax credits and land sales by Sagamore to partners.
The city and Sagamore have not yet settled on a "profit-sharing" agreement, a typical part of TIF deals.
MuniCap estimates the project would generate $1.7 billion in revenue for the city over 41 years, after expenses.
The expenses include $1.4 billion in interest payments on the TIF, as well as about $2.16 billion that includes additional city services, such as fire and police.
Those costs would be offset by new revenue that includes $1.5 billion in new property taxes, after the TIF payments, as well as $1.6 billion in personal income taxes from those living or working in Port Covington.
At this point, it's unknown. City schools are jointly funded by the city and the state. As it stands now, the increase in property values associated with the project – without an equivalent increase in tax revenue available for school funding – would lead to reduced state funding for schools. Lawmakers have said they plan to change how the state distributes school funding to account for TIF projects.
MuniCap expects the project to generate nearly 35,000 permanent jobs when fully built out, including positions that are part time or located elsewhere in Baltimore. MuniCap also estimates that there will be the equivalent of about 14,603 new full-time, temporary construction jobs at the site over the life of the project.Read more questions and answers about the TIF
Sagamore has requested federal, state and local funds to pay for infrastructure for the Port Covington project. It estimates there will be $4 billion more in private investment in the project.
$535 million has been requested for infrastructure from Baltimore City*, including:
$349.5 million is what Sagamore expects to seek in in state funds, including $165.4 million for a Light Rail spur.
$327.8 million is what Sagamore is contributing to the project.
$224.2 million is what Sagamore expects to seek in federal funds, including $199 million for modifications to Interstate 95
MuniCap projects that the Port Covington properties owned by Sagamore would be worth $2,608,900,706 at full build out – more than 35 times the present value, $72,766,300.
Baltimore as a whole is assessed at $35,729,796,000.
Critics have raised a number of issues about the proposed TIF project
Critics wonder if the city is being a tough negotiator, pointing to the speedy progress of the $535 million proposal through the Baltimore Development Corp. and Board of Estimates. Baltimore Sun columnist Dan Rodricks questions the city’s ability to objectively review the proposal and get the best deal for Baltimore. "City officials simply can't be objective about Port Covington; it's too big, too exciting, and it involves Plank, a guy politicians are reluctant to question or alienate." Rodricks suggests "we should get a civic-minded shark to take a look at this deal" and negotiate the best deal for the city.
Sun columnist Dan Rodricks also brings up the "but for" standard applied to public involvement in private development. "But for financial incentives from the city, this project won't happen." Rodricks points out the Plank has invested approximately $100 million of his own money to purchase property in Port Covington and is unlikely to walk away from the project as a result.
Critics point to millions of dollars in subsidies, including tax credits, for downtown projects (such as Harbor Point and the University of Maryland BioPark) that don’t reach neighborhoods and, by extension, most city residents. They say those resources could be better spent to address the myriad of social problems in Baltimore City, like lead paint poisoning, underperforming city schools and a soaring crime rate. City Councilman Carl Stokes, an outspoken critic of city subsidies, says: "We've always been concerned that the amount of public resources that have gone into downtown have not benefited the neighborhoods. We've got to look at the details of the deal. We can't just take Plank at his word that this is going to be good for all of Baltimore."
David Tufaro, founder of Terra Nova Ventures and former Republican candidate for mayor, asks whether the city financing should be used for some parts of the project.
“Should the taxpayers be contributing to an idyllic corporate campus on the waterfront? The beneficiaries are the company, the employees, and the stockholders. Why does the success of a private company require taxpayers, who are already overtaxed, to help pay for that success? A TIF for UA will not make things better for Baltimore."
Sagamore has signed an agreement that commits the firm to a goal of making 10 percent of new residences affordable. However, the agreement defines affordable homes as pitched to families earning less than 80 percent of the median household income, meaning that rents could starting at $1,255 a month for a studio, according to city calculations.
Baltimore waived a requirement that 20 percent of new residences be affordable. Such waivers are fairly typical since the law is structured so that the city is required to compensate the developer for the units. But some say the TIF monies should be used for that housing.
Sagamore has offered to pay prevailing wages -- about equal to union wages -- on a quarter of the infrastructure work on the site. But some unions say that's not good enough. They want the company to guarantee higher portions of the work are dedicated for union employees. The group Baltimoreans United in Leadership Development (BUILD) is demanding a public profit-sharing agreement between the developer and the city, a 51 percent local hiring guarantee for all jobs related to the deal and a commitment that the city be reimbursed any state school aid it loses because the project increases local wealth, a factor in the state's formula for determining aid.
The tax-increment financing deal proposed for Port Covington would be the city's largest by far. The TIFs, both proposed and existing, are ranked by size below.
Port Covington: $535 million for a $5.5 billion project
Baltimore Hilton Hotel: $301 million for hotel
Harbor Point: $107 million for a roughly $1 billion project
Poppleton: $58.3 million for a $460 million project
University of Maryland BioPark: $17.5 million for a $110 million building
Mondawmin Mall: $15 million for redevelopment
Woodberry/Clipper Mill: $7.96 million for mill-area redevelopment
Harborview: $7.48 million for condominium project
Sources: City of Baltimore, Baltimore Development Corp.
On June 22, the city Planning Commission unanimously approved the Port Covington master plan that outlines a street grid, parks, building heights and transit aspirations for the South Baltimore area. The City Council is currently considering the proposal and holding a series of public hearings to hear testimoy from those both for and against the deal (more).
If it moves forward, the request would be the largest tax-increment financing deal in Baltimore history and among the largest in the country.