Baltimore Bailout Redux
In August 2016, we warned you that Maryland taxpayers would wind up on the hook for millions of dollars in revenue that Baltimore was losing thanks to Tax Increment Financing (TIF) of the Port Covington project.
The Maryland General Assembly passed a bill that is expected to save Baltimore’s public schools from losing more than $300 million due to special tax deals awarded to developments that make the city appear more prosperous than it really is.
The legislation — sponsored by Del. Maggie McIntosh and Sen. Bill Ferguson, both Baltimore Democrats — applies to certain tax deals awarded to developments across Maryland, but will have the biggest effect in Baltimore, which has authorized one of the largest such deals in the nation on its southern peninsula in Port Covington.
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The legislation indefinitely extends protections for Baltimore schools and other districts from the negative impact of developments subsidized by tax-increment-financing deals, known as TIFs. HIgh-end developments built using TIFs make the city look artificially richer on paper, resulting in a loss of school funding.
While the legislation ostensibly applies to all counties, the legislation was specifically designed for Baltimore City and their addiction to TIFs and Payments in Lieu of Taxes (PILOTs).
The bills sailed through both chambers, with most Democrats and Republicans voting for the bills (though confusingly some Republicans voted for one bill but voted against the other). Ultimately, the state was forced to provide additional funding to Baltimore City schools. As I mentioned previously, the State is ultimately responsible for public education and in making sure that these schools are operating.
But that doesn’t mean this legislation isn’t ridiculous. And it goes far beyond the already existing TIFs. Senator Ferguson and Delegate McIntosh are not just bailing our Baltimore City governments for past mistakes. They are bailing out future governments from making the same mistakes again and again and again. As I wrote in 2015:
Equally damning is the fact that city government and the Baltimore Development Corporation is robbing themselves of future tax revenues in order to finance these schemes. Payment in Lieu of Taxes (PILOTs) see businesses pay an agreed-upon tax rate instead of the regular tax rate. Tax Increment Financing (TIFs) see the city actually float bonds for private businesses to build things and hope that the property taxes make up for the bonds later. So the city is screwing over the taxpayers coming and going: by artificially reducing the amount of tax revenue the city brings in, while also paying debt service on bonds issued to private businesses.
And of course, the recipients of these PILOTs and TIFs are always among Baltimore’s most politically connected business owners and investors.
So not only has the General Assembly bailed out the city for the already existing tax revenue, but is giving Baltimore City carte blanche to give handouts to politically connected investors without any fear of losing state education funding.
This is no way to run a city.
The General Assembly made a grave mistake in eliminating the sunset provision on TIF funding. The passage of this legislation sets Baltimore up for continued mismanagement of the city and the continued failures of the city to develop an economy. Governor Hogan should veto this legislation.