Subsidizing the Low Road: Economic ... - Good Jobs First

Maryland in revenue but costs the state’s taxpayers is $14 million a year. On the otherhand, the owners of the two sports franchises have benefited substantially from thetaxpayer-subsidized facilities.The city continues to focus its economic development resources downtown andalong the waterfront, including luxury apartments and retail in the West Side, officespace and parking garages downtown, and the conversion of abandoned factories intohigh-tech office space. In 2002, the city budgeted more than $150 million to supporteconomic development projects; of this, $40 million was appropriated for tourism andalmost $30 million was set aside to build parking lots downtown.Baltimore is also planning around $200 million in public subsidies for a 25-acrebiotechnology park north of the Johns Hopkins University Medical Center that woulddislocate many homeowners, tenants and small businesses. However, many of theassumptions behind that project’s public-benefit projections seem overly optimistic;the industry is still highly speculative and dependent on venture capital, and manyother cities also have “cluster” site-location advantages. Only if research succeeds andcreates commercialized drugs can the park create production jobs that are most likelyto benefit current Baltimore residents; most such jobs are 10 to 20 years away, andthere is no guarantee production will occur in the city. Nor is there any guarantee thecompanies will stay once they succeed.The city’s development efforts are increasingly reliant on local tax expenditures.Within the past five years, the state legislature has passed legislation allowing the cityto use both property tax abatements (called payments in lieu of taxes or PILOTs) andtax increment financing (TIF, a diversion of property taxes) for development projects.The city's first PILOT was awarded to the Waterfront Marriott hotel in 1999; it willcause the city to forego $2.3 million in uncollected property taxes in 2002 andapproximately $30 million over the next 25 years. 1 The city recently authorized its firstTIF project; it will divert more than $8 million in tax revenues to finance waterfrontinfrastructure.Despite the high costs of PILOTs, the city does not attach any kind of job qualitystandards – such as wage or healthcare requirements – to them, even though theprogram is targeted to hotel and retail developments, two industries that pay very lowwages and benefits and use high rates of part-time labor.Driving the use of these costly new subsidies is the Baltimore DevelopmentCorporation (BDC), the city’s dominant economic development agency. The BDC iseffectively controlled by the mayor, who appoints the BDC board; neither the CityCouncil nor the Board of Estimates has any statutory influence over BDC personnel,although the Council, Board and Planning Commission do review various types or partsvi