Artist’s rendering of Habor Point, from Beatty Development website.

Let’s face it. America has become a highly polarized society on many fronts. We have drawn battle lines from race to class to even geography. So, when a city that has as many ills as Baltimore learns that our local government is giving “tax breaks” to a big developer like the Beatty Development Group LLC, you could assume there would be a call to arms to fight the good fight against corporate greed and corrupt government.

But it’s just not that black and white. We need to step back and take a breath to see what’s going on here.

This is a public-private partnership and the process calls for a little give and take. The city helps the corporation build essential infrastructure to get the job done and the corporation delivers jobs and pays taxes on what it builds. In many cases, no incentives equals no development because there is always some other municipality out there looking to bring in development and the future revenue stream it can create.

The key is to bring in development without hurting the municipality it’s intended to help.

So what’s up with the deal that the Harbor Point project is getting?

Back in the day to raise funds for projects, politicians would have hiked up property or sales taxes. But we live in Baltimore, MD. and that ship sailed years ago. In fact, a federal report released this February by the Office of Revenue Analysis reviewed the estimated property, sales, auto and income taxes for a hypothetical family at various income levels in 2012 in the largest city within each state. We came in with the fourth highest tax burden.

Option number 2?

An alternative funding method that many cities have turned to is tax increment financing (TIF). This mechanism allows a city like Baltimore to sell bonds based on the forecasted tax revenues — such as the property taxes from buildings at Harbor Point.

And it seems the way the Harbor Point deal is structured makes it different than most financing packages. According to Baltimore Development Corporation President Brenda McKenzie, the risk of failure for the bonds falls on the developer and not the city. Beatty Development Group LLC has a lot of skin in the game and that is a good thing.

Strong cities make for a strong America

There have been forecasts that Harbor Point will support nearly 7,200 construction jobs and about 6,600 permanent employment positions. Apparently, as U.S. cities grow, so does the rest of America.

The United States Conference of Mayors (USCM) is the official non-partisan organization of the nearly 1,400 cities with populations over 30,000 people. It was born out of the dire situation cities found themselves in at the beginning of the Great Depression where mayors could deliberate and share ideas on national and urban policy.

On June 20, at their meeting in Dallas, the USCM released their “U.S. Metro Economies” report for 2013 which showed that most of the nation’s largest metropolitan areas economies experienced growth last year. The study also demonstrated that this expansion is directly linked to the health of the U.S. economy overall where U.S. metropolitan areas accounted for 80 percent of all U.S. jobs.

This report was not lost on our own Mayor Stephanie Rawlings-Blake — being that she is the Vice President of the Conference. But, I hope she took into account all of the study’s findings as it shed some light on a very disturbing trend seen with these growing economies. It’s a realization that’s been all too prevalent in Baltimore for the past few years.

No Trickle-Down Economics here

The same report touched on an alarming development that’s happened as these metropolitan areas have experienced growth: income inequality also grows.

The gains are going to higher wage earners and the creators of the report don’t see the trend reversing. Many mayors have even seen an uptick in poverty along with the increase in growth.

Alan Berube of the Brookings Institute published an article back in February where he looked at income inequality statistically by using the “95/20 ratio”.

To put it in laymen’s terms, the ratio shows the distance between a household income that just checks in at the top 5 percent of a city with that of the income of a family that just falls into the bottom 20 percent.

This discussion is definitely prevalent to Baltimore. For 2012, the bottom of the top five percent of earners made $164,995 while the top of the bottom 20 percent came in at $13,522 — that’s a difference of more than 12 times and ranks us 10th on the list of cities with the widest income inequality levels.

What’s more disparaging is that from 2007 – 2012, Charm City ranks 8th in cities experiencing the largest increases in income inequality over that period.

Development helps but doesn’t solve all

We know these numbers to be true because we see two different Baltimores every day. Last summer, a number of citizens from the Perkins Homes Housing projects voiced their dissatisfaction at the then proposed tax incentive financing deal for the Harbor Point Project.

Looking back on it, the focus should have been less on the deal and more about what happens after this “no-brainer” for the city comes about.

We’ve been led to believe that more jobs for the city is better for all of us — except the numbers don’t support this assertion. Since this illusion has been cleared up, residents need to actually demand policy initiatives. We can no longer allow corporate development to be used as a cure-all for the ills of our city.

It hasn’t worked so far.



