Port Covington Community Investment Poised to Launch. Promises to be fulfilled?

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The question of who will benefit from the Port Covington TIF will take years to answer. [Source: Lawrence Lanahan]

In 2016, Baltimoreans organized to demand community investment from a developer seeking one of the largest subsidies in city history.

Sagamore Development had planned a brand-new mixed-use waterfront neighborhood that would host a corporate campus for Under Armour, one of Baltimore’s biggest business success stories. In pursuit of a $535 million package to finance roads, rail, parks, and other public improvements at Port Covington, the developers appeared at a Baltimore City Council hearing, displaying projections that Under Armour staff would quadruple over two decades and saying, “It’s grow here or grow somewhere else.”

Community leaders and citizens showed up by the hundreds, buoyed by the civic energy that had followed Freddie Gray’s death a year earlier. Many objected to what they saw as inequitable development: the city’s repeated use of financing packages to spur development of downtown and waterfront neighborhoods rather than the city’s poorer sections.

The city and Sagamore struck a deal in September 2016 after months of acrimony over whether the package was truly beneficial to all city residents or a giveaway to a well-connected developer. Four years later, Baltimore is about to learn whether lofty promises about affordable housing, jobs and minority investment will come true.

Tax increment financing (TIF) packages are meant to subsidize development the city believes would be too expensive for builders and investors to undertake otherwise. It’s essentially a gamble: the city bets that a development will eventually bring the city more property tax revenue than if it were left alone. The city sells bonds to fund the infrastructure, and any increase in property tax revenue in the area is used to repay the loans. It can take decades for a development’s property taxes to start flowing into the city’s general fund, and some critics believe the strategy benefits big developers at the expense of already underinvested city neighborhoods.

If Sagamore Development was to get a nine-figure TIF, much of the crowd in Baltimore’s War Memorial Building that evening in 2016 wanted to see city residents get something in return. And they wanted to make sure that this new neighborhood, situated on a peninsula that already contained the 93-percent-white neighborhood of Locust Point, did not become a rich white enclave in a city that is nearly two-thirds Black.

Activists and organizers pressured Sagamore all summer through direct negotiations, rallies, and testimony at several City Council hearings.

A large crowd gathered inside the War Memorial in July 2016 to testify before the Baltimore City Council on the Port Covington TIF [source: Lawrence Lanahan]

Sagamore got its record TIF package, but not before promising an historic $100 million community investment. A memorandum of understanding (MOU) committed Sagamore to affordable housing and local hiring benchmarks, as well as multimillion-dollar funding for parks, workforce development, and education.

This commitment was on top of a separate $39 million agreement with a coalition of South Baltimore neighborhoods called SB6 to fund a long list of community needs, such as affordable housing, education, and workforce development.

The city and Sagamore agreed that the $100 million agreement would begin once the city borrowed money to pay for the new infrastructure. Four years later, the city has yet to borrow the money. Under Armour’s star has fallen, with dipping stock prices, founder Kevin Plank’s resignation as CEO, and an SEC investigation over whether the company misrepresented its sales figures. These developments all cast doubt on the development of the much-ballyhooed Under Armour headquarters at Port Covington. And now the pandemic is wreaking havoc on the commercial real estate market.

However, with a $233 million equity investment from Goldman Sachs Urban Investment Group, the team— with Weller Development taking the lead from Plank’s Sagamore — has begun work on its first phase of development. An appraisal and market study of the plans says the new phase will add eight buildings to Port Covington, which already includes the City Garage incubator space, the Baltimore Sun offices and printing plant, Nick’s Seafood restaurant, a distillery, a tavern, and Under Armour office space.

In June, the city took its first step toward borrowing money for Sagamore’s infrastructure project, approving the sale of $148 million in bonds. That sale will officially trigger Sagamore’s $100 million pledge, testing an informal and more fragile bond forged four summers ago between a global brand carrying the blessing of city and state power brokers and a newly energized community in pursuit of economic and racial justice.

The Maryland Economic Development Corporation says the bond sale could take place as soon as late October, at which point Weller Development’s historic promises to the city will be put to the test.  Among the questions soon to be answered: How inclusive will Port Covington to be in its housing, hiring, and contracting under the agreement? Who is holding them accountable for their obligations in the agreement?

To gain insight into the answers, Baltimore Fishbowl reached out to Weller Development, city and state government officials, and community leaders.

Weller declined to make anyone available for an interview. John Maroon of Maroon PR, a public relations firm hired by Weller, provided information via email. Maroon also sent a summary of Weller Development’s “community impact” to date.

The official memorandum of understanding can be found here.

Affordable Housing On Site. But for Whom?

One of the most contentious provisions of the community agreement was a promise to make 20 percent of housing at Port Covington “affordable,” doubling Sagamore’s original offer of 10 percent.

Still, the ACLU of Maryland and other community advocates noted loopholes in the final agreement. The language defined “affordable” as high as 80 percent of the area median income for the entire Baltimore region, or $83,200 for a four-person household, according to the Maryland Department of Housing and Community Development. (This area includes six counties surrounding the city, two of which are among the richest in the nation.)

The final housing provision also allowed the developer to create affordable units in other parts of the city rather than on site, potentially in areas of concentrated poverty, or even to simply pay into a city housing fund without creating any units if the developer considered construction impossible “on a financially reasonable basis.”

Maroon wrote to Baltimore Fishbowl in a July e-mail that “while the program may evolve,” Weller intends to make 20 percent of 445 total units affordable, all on-site, in the first round of housing development. The official agreement set a goal to make half of that 20 percent of units affordable at 60 percent of the area median income. Maryland DHCD multifamily housing director Greg Hare says 54 units of the site’s Rye Street Apartments will be affordable at 50 percent of the area median income, thanks to a combination of Low-Income Housing Tax Credits and what Hare called a “very large” tax-exempt loan. Hare said his agency’s $72 million in financing would allow rent for Rye Street’s affordable units to be set between approximately $843 and $1,250 per month — a significant discount compared to the 200 market-rate units set to rent for between $1,800 and $3,000 monthly.

Less clear is the availability of rentals for poorer households at Port Covington. The developer agreed to make one-tenth of required affordable units, or two percent of all on-site housing, affordable at 30 percent of the area median income, or $31,200 for a four-person household. But the memorandum of understanding places the responsibility on the city, saying the 30 percent units will materialize as long as the Housing Authority of Baltimore City or another city agency provides housing vouchers or other assistance.

Maroon said that Weller “will have offerings ranging from 30% to 80% AMI, with the 30% AMI units receiving housing vouchers from the Housing Authority of Baltimore City.” Baltimore Fishbowl asked the city housing authority if the agency had dedicated any vouchers to Port Covington. Spokesperson Ingrid Antonio responded via e-mail that the authority has “no record of Weller Development contacting HABC regarding vouchers for any units to be developed in Port Covington.” Sent that response, Maroon responded via e-mail: “Because we are committed to truly equitable, mixed-income development, we intend to provide 30% units and have had conversations with HABC around its vouchers for those units in accordance with the MOU.”

Meeting and Surpassing?

Weller says it has spent more than $10 million toward its obligations in the $100 million community agreement. The company has also met two milestones that came due before the bond sale: funding 100 positions in the city’s youth job program every year since 2016, and paying $5,000,000 toward a “center for recreation, entrepreneurship, and workforce development” at Pleasant View Gardens, the former site of the Lafayette Courts high-rise housing project. That center is now UA House at Lafayette, run by the Living Classrooms Foundation. “We had a great experience” working with the developer, said Living Classrooms president and CEO James Piper Bond.

Weller’s numbers on contracting indicate that they have significantly exceeded their goals. The agreement requires Weller to contract 27 percent of infrastructure work to minority-owned businesses and 10 percent to women-owned businesses. Weller’s community impact summary claims that 81 percent of the work has been awarded to minority-owned businesses and another 18 percent to women-owned businesses. In addition, Maroon wrote, about 36 percent of on-site employees are city residents, surpassing a requirement of 30 percent. Weller “has met and will continue to meet all obligations under the MOU,” Maroon said.

Baltimoreans United in Leadership Development, a community organizing group involved in MOU negotiations, is encouraged by Weller Development’s progress. But a statement sent to Baltimore Fishbowl by Rev. Andrew Foster Connors, co-chair of BUILD, stresses the city’s ongoing responsibility.

“We urge the Mayor, City Council and respective agencies to verify these reports and maintain oversight as outlined in the development agreement,” the statement reads. “If the City holds Weller Development strictly accountable to the community benefits agreed upon in the deal, Port Covington will increase opportunities for residents in south Baltimore and across the City.”

A key to that accountability is contained in the agreement, which requires Weller to pay $151,000 per year for a Level 3 Auditor in the city Comptroller’s office — solely dedicated to Port Covington-related compliance. That 20-year requirement kicks in when the bonds are sold. The city hasn’t assigned an auditor yet, according to James Knighton, a spokesperson for Comptroller Joan Pratt.

“The Department of Audits is considering restructuring to better serve the city,” Knighton wrote in a July 15 e-mail. “The goal is to have the restructuring completed in the next few months. Auditing the MOU is an important factor in allocating staff resources as part of the restructuring.”

In 2021, Baltimore will have a new mayor and comptroller. The likely incoming mayor, current City Council President Brandon Scott, cast the sole vote against the issuance of Port Covington bonds in June. The likely incoming comptroller, City Councilman Bill Henry, defeated Pratt with a campaign message of transparency and accountability, and he abstained on a 2016 committee vote to authorize the tax increment financing package partly because of a disconnect he saw between developers’ “glowing” affordable housing promises and what the official language of the agreement actually required of them. And he has been pushing the city to adopt stricter inclusionary housing requirements for years. (Democrats Henry and Scott each won their primaries, and are expected to win easily in the November general election, given the city’s overwhelmingly Democratic voter base.)

“If you look at the MOU, it’s binding: we will be able to take legal action and other action to recoup and ensure that the city is not harmed in this process,” Scott said in an interview. “This will not be something that we’ll just let go off on its own like we’ve seen happen with other big projects in the past.”

Scott said that if elected, he would use more than just the developer-funded auditor to monitor Weller’s performance. “Every agency that can be involved will be involved,” he said, including the city’s wage enforcement, minority contracting, and employment development offices. He also said he’d pressure the Baltimore Development Corporation to work more outside of its Inner Harbor “comfort zone” and develop Black- and minority-owned businesses at Port Covington.

Ultimately, enforcement of the agreement lies with the city solicitor’s office. Scott emphasized that, as with other city contracts, it’s important to first communicate if a developer falls behind on a goal: “You say, ‘Listen, this is a problem.’ You see where things are versus where they should be.” But, Scott said, if the developer is “blatantly” missing goals, “severe action” might be necessary.

“Hopefully we don’t get to that point, but we know all the tools that we have,” Scott said.

At a well-attended July 27, 2016 Baltimore City Council hearing, Sagamore Development showed the audience this graph, saying, “It’s grow here, or grow somewhere else.”

Unity in the Community?

Much is riding on the sale of the first chunk of Port Covington TIF bonds. But the city won’t be selling the bonds itself, instead leaving that to a quasi-governmental entity called the Maryland Economic Development Corporation (MEDCO).

James Knighton of the city comptroller’s office wrote in an e-mail that the city’s finance department told him city officials didn’t want to jeopardize Baltimore’s AA bond rating by adding the massive Port Covington TIF obligations to its $200 million in outstanding TIF debt.

Technically, the bond sale could happen in less than two months. MEDCO director of bond financing Jeff Wilke wrote in an August e-mail that his agency projected closing on the bonds “towards the end of October.” That date, however, could “shift a bit,” Wilke wrote. Wilke pointed out that while the people investing in the TIF bonds want assurance that there is enough private investment in the development, the private investors want reassurance that they can count on the bond proceeds. The bond sale hangs on the “successful financing” of the first phase of development.

The Board of Estimates’ June vote to issue the bonds had revived a fracture in the community. When Sagamore Development signed the agreement in September 2016, leaders from BUILD appeared with them to announce it at City Garage, a Sagamore property in South Baltimore. Two other coalitions, known as PORT3 and Build Up Baltimore, had refused to accept Sagamore’s last offer. The appearance of the bond issuance authorization on the Board of Estimates agenda in June prompted several PORT3 organizations, including ACLU of Maryland and Maryland Consumer Rights Coalition, to ask the city to postpone the vote.

“We believe the Port Covington project and TIF financing is neither fiscally responsible nor consistent with the City’s race equity policies,” they wrote in June.

The coalition argued that the public had gotten little notice of the vote, and that since the 2016 approval of the TIF, the project’s “financial viability has become shakier and shakier.” They also objected that bond sales would reimburse Kevin Plank for more than $400,000 worth of “legal costs associated with securing approval of the TIF ordinances and negotiation of the MOU.”

Maryland Consumer Rights Coalition executive director Marceline White said that the city’s track record of development-related accountability is spotty. “That could change under a new mayor and new leadership, but past experience in Baltimore has shown that the city has not been great about going back and really enforcing projects,” she said.

White said the project reflects a larger failing in how Baltimore approaches economic development. “Do we have a vision that’s coming from the city, with community participation, of where we want to be and how we want to get there?” she said. “Or are we open to all bids from developers? Is it a developer-driven process, or is it a process set by city leaders and community leaders?”

Keisha Allen, a co-founder of the coalition of South Baltimore neighborhoods that negotiated its own agreement with Sagamore Development, is also critical of city government’s record on community development. But to Allen, a 13-year resident of Westport in South Baltimore who served as president of her neighborhood association for nine years, the Port Covington developers are a breath of fresh air.

Alicia Wilson, then of Sagamore Development, spoke at the unveiling of the memorandum of understanding at the developer’s City Garage property at Port Covington on September 9, 2016. The event included Mayor Stephanie Rawlings-Blake, City Council President Jack Young, and several BUILD representatives. [source: Lawrence Lanahan]

Westport backs up to the Middle Branch of the Patapsco, the same river that Port Covington overlooks. Westport is nearly 90 percent black, with a median income far below that of the region. Allen says she has seen developers and speculators play games with her neighborhood for years.

“When you’ve gone through these disappointments before, you put your guard up not to get too disappointed,” Allen said.

Weller Development has not disappointed her. Allen’s coalition negotiated a funding stream tied both to sales of Weller properties and to the amount of square footage of commercial space occupied on site. Allen is happier dealing with these developers than with city government, which she believes has favored East and West Baltimore while letting infrastructure and public safety fall behind in South Baltimore neighborhoods like Westport and Cherry Hill.

“They don’t care,” she said. “They’ve shown for 50, 60 years that they don’t care.”

Allen supported the bond sale and criticized Scott for voting against it. (Scott said his vote reflected a “process” issue; the vote appeared on the Board of Estimates agenda so quickly, he said, that he didn’t even get briefed. “If they’ll spring things on me, they’ll spring things on Cherry Hill in a heartbeat,” Scott said.)

White, the consumer advocate who protested the bond sale, says Baltimore City too often operates in silos.

“There’s not one group that speaks for the city,” White said. “I think as a city we have a lot more work to do to be able to have conversations where we can really develop a shared vision of what’s best for the city, an economic vision that’s not driven by developers. If you look at other cities’ economic plans, you see a really clear vision of how they want to build out.”

However, White wants to see the city benefit from this deal, and she wants to see Weller fulfill the most ambitious requirements and goals in the community investment pledge. “This is a case where I’d like nothing more than to be proven completely wrong,” White said.

It will be years before anyone is proven right or wrong about Port Covington. Weller claims to have met or exceeded obligations thus far, but this is just the first chapter in the construction of the new Port Covington—literally “Chapter 1B” in the developer’s plans. There’s a lot left to go—assuming the next chapter materializes. Ultimately, Weller plans to build out 45 square blocks over 235 acres, with 14 million square feet of housing, retail, offices, hotels, and other developed space. They claim the full development will create $11.5 billion in economic activity, with “54,000 construction jobs and an additional 25,000 follow-on jobs.”

“If Port Covington is actually as they say it will be, if they pull it off, it will be transformative,” said Henry, the presumptive comptroller.

That is the next question Baltimore faces in Port Covington: if—not when—they can pull it off.

Lawrence Lanahan is a Baltimore-based freelance reporter and the author of ‘The Lines Between Us: Two Families and a Quest to Cross Baltimore’s Racial Divide.’ (The New Press, 2019). Last summer, he wrote a Baltimore Sun opinion piece challenging the use of the Opportunity Zone program at Port Covington.



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