Over the weekend, the Baltimore Sun's Scott Calvert and Jamie Smith Hopkins analyzed Baltimore City's use of "Enterprise Zone" tax credit, which exempts property owners from up to 80% of their tax bill for improvements on property. This program has cost $16 million in tax expenditures, split evening between the state and Baltimore City.
While the merit of offering tax exemptions for the purposes of business development may be left for another day, the real concern is that these "Enterprise Zones", intended to encompass impoverished areas of the subject jurisdiction, are being "gerrymandered" (as the article references) to include Harbor East. If you look up "swank" in the dictionary, you may see a picture of the Charleston restaurant with the new Under Armour super-store in the background.
We all can admit that at one time including Harbor East in an "Enterprise Zone" may have made sense. That time was at least ten years ago. The City has attempted to reign back the zone to cut out this valuable real estate (grandfathering exemptions for existing structures), but property owners have persuaded the Baltimore Development Corporation, which oversees this program, to apply the zone tax scheme to new projects along the water.
Now, what do I mean by "gerrymandering" Enterprise Zones? These zones are drawn to meet certain criteria with the predominant factor being families below the poverty line. Those who know your Baltimore City geography can probably figure out how these lines are drawn. "Start at the water, go North."
When making tax expenditures to spur growth, the premise is investment. Income lost on property taxes may be gained in income taxes or long term business growth. With Enterprise Zones in profitable areas like Harbor East, the question becomes - But for these property tax credits, would this development occur? In my experience observing government and politics, I never like to see my elected officials have to answer that question. The conversation quickly devolves from what is best for the community to what is best for the corporation. There are certainly areas of overlapping interests, but the overlap is outpaced by competition amongst municipalities.
And Enterprise Zones are only the beginning. Just last week, we were told that Morgan Stanley was having a difficult time meeting the terms of a $3.25 million loan forgiveness agreement with the City. Let's turn that around. Baltimore City essentially granted $3.25 million to Morgan Stanley, which has not met the promises of that original grant.
We can probably all agree that tax expenditures and "loan forgiveness" programs have their place in the business development tool-kit, but only with the acknowledgement that they overwhelmingly favor the more-sophisticated, wealthier, tax-payer, whether that is an individual or a corporation. There is a floor below which these credits are not available. Meanwhile, the residents of Baltimore City pay one of the highest property tax rates on the East Coast and small businesses exist under the plain-Jane tax code that is unquestionably hostile to business.
You see, Baltimore's not such a bad place to do business. You just need the right friends.
That's all for today. Have a great Tuesday doing what you love! Please consider "liking" my campaign Facebook page to get regular updates on local issues (like this one) and campaign events.