TIFs, affordable housing, and the "Dollar House" program
Back in October, City Councilwoman Mary Pat Clarke moved to revive the city’s “Dollar House” program to revitalize blighted neighborhoods. On Wednesday, Councilman Zeke Cohen and a group of housing advocates delivered a petition with 20,000 signatures calling for more affordable housing in the city. And yesterday, the City Council had a hearing on Tax Increment Financing, or TIFs, like the $660 million deal Sagamore Development made with the city to develop Port Covington. WYPR’s city hall reporter Dominique Maria Bonessi joins Nathan Sterner to connect the dots.
NATHAN: So, first we need a primer on the dollar house program and on TIFs, just to make sure we’re all on the same page.
DOMINIQUE: So, the Dollar House program is a product of the 1980s. The city sold abandoned homes for $1 and helped finance the rehabilitation of those places through low-interest loans if the homeowners agree to stay in them for a certain amount of time.
TIFs are deals where the city floats bonds—in the case of Port Covington, $660 million dollars’ worth of bonds—for infrastructure projects and then repays that through future taxes.
NATHAN: Now, why the push to revive the dollar house program and increase the affordable housing stock?
DOMINIQUE: Councilwoman Clarke says she’s aiming the dollar house program at least partly toward small, Baltimore based contractors to help them get a piece of the pie. And Councilman Cohen says the push for affordable housing is at least partly related to education. Here’s what he told the advocates Wednesday.
COHEN: "If we are going to get serious about educating our kids, then we have to get serious with stable, affordable, safe housing in Baltimore."
DOMINIQUE: He also said he wants the city to put $40 million in the budget for demolition blight and constructing affordable housing development.
So there is this push for new and different development than we have seen pre-dominantly in the downtown area of Baltimore that residents want to see spread out into the neighborhoods.
NATHAN: Ok, now how is that connected with TIFs and other private development incentives? And why did the council hold this hearing?
DOMINIQUE: Right so in order for Cohen and Clarke to really put these initiatives forward and fund them, they want to understand how these private developers, like Sagamore, end up with such the large slices of the pie.
At the opening of the hearing, Councilwoman Shannon Middleton said the three objectives were to identify current and planned uses of development incentives, how incentives can be used more equitably in the future, and what are some of the options to improve transparency and accountability to Baltimore citizens in how incentives are awarded.
NATHAN: Did Middleton’s questions get answered? What did the council learn for this hearing then?
DOMINIQUE: The answer is sort of. Representatives from the Baltimore Development Corporation and the Finance Department both spoke at lengths about the pros of various city incentives. Some of these incentives helped get rid of blight in the centralized downtown areas like Harbor East and the Hippodrome. Other incentives, known as Tax Increment Financing programs, or TIFs, have led to the controversial development of Johns Hopkins's bio park and Port Covington.
Johns Hopkins's Bio Park and East Baltimore Development Inc. specifically relocated or displaced many people from Mid East Baltimore from their homes. What the Department of Finance does with TIFs is a put them to the But-For test; in other words, a project would not be able to exist but for city’s tax incentives.
I met with Executive Director of Johns Hopkins’s 21st Century Cities Intiative, Ben Seigel to understand more about tax incentives and here he gives an example of Port Covington’s But-for Test.
SEIGEL: "The But-for test is once the sight is built out is it going to be of greater value than it would have been if it had not been for the $660 million in TIF financing."
DOMINIQUE:So really this But-For test then determines whether the city will give money to these developments, but also helps the city determine and see if the development will help speak economic growth, increase jobs, and other incentives.
NATHAN: Does Ben Seigel say what the city could be doing better to promote small and large development?
DOMINIQUE: Yes he said that the city can look more towards other types of incentives besides tax-based ones. For example, the city could boast their human capital to help create jobs that meet the education and skill levels of residents. And Seigel says…
SEIGEL: "One thing I think we can do a better job at is once these tax incentives go into place, how are we evaluating the impact of these incentives going forward."
DOMINIQUE: He goes on to say that while the state has already passed a tax credit evaluation act and is doing a good job on make sure incentives are being evaluated from their inception, Baltimore needs to be more concerned at keep performance measures and benchmarks along the way as the development takes off…
SEIGEL: "And then are there consequences if their tax incentives are meeting their stated goals. Are there claw backs? Is there a way for the city to de-risk some of their tax incentives and share them more with the entities that are receiving tax incentives?"
NATHAN: Finally, I understand there is a fly in the ointment for all these programs. Money, right? Tell us about that.
DOMINIQUE: As I reported last month, there is no federal money being put toward the Dollar House program and Councilwoman Clarke is really struggling to find the funds.
Also, Port Covington’s debt to the city is approximately $660 million, and yesterday the Finance Department told city council that the city would not be able to afford another TIF as large as Port Covington. With 11 current TIF projects the total TIF debt to the city is approximately $773 million. So really there is the question remains how is the city going to provide small, Baltimore-based contractors and residents to get a piece of the pie.