Stretching downtown

Economy, Business and FinanceInner HarborFells PointJohn Paterakis Sr.

According to Google Maps, it's about nine-tenths of a mile from Constellation Energy's current headquarters near the intersection of Pratt and President streets to the site company officials have chosen for a new office tower, assuming the firm's merger with Chicago-based Exelon is approved. That's six minutes by car, 17 by foot.

But to hear some downtown boosters talk, you'd think Constellation is planning a move to the dark side of the moon. They are expressing disappointment and worry that, instead of adding a new office tower to Baltimore's historic downtown, the company will be adding to the already burgeoning Harbor East area. They worry that the decision will sap vitality from the city's central business district, result in more empty office space downtown and further a shift of energy to the shiny, hip new neighborhood bakery magnate John Paterakis has constructed near Fells Point.

The concern about the future of Baltimore's central business district is valid, but the angst over the Constellation/Exelon decision is overblown. It's not as if the new building is going to be in the suburbs (or, for that matter, Delaware). It will likely actually be visible from some of the downtown sites that had been under consideration for the new tower. It will still contribute to Baltimore's tax base, and it will bring workers into the city and fill the restaurants at lunch. Exelon and Constellation officials made a business decision based on price, size, amenities and the ability of the developer to deliver. Rather than moping, downtown boosters should think about the issue from Constellation's perspective and consider what would need to be done to make the next company's decision come out differently.

One of the first things to think about is the city's pattern of handing out tax breaks to private developments, a practice that has led to a patchwork of incentives throughout the downtown area. Harbor East's construction has been facilitated through various tax incentives, and others apply to the area around the Inner Harbor and central business district. But not everywhere; one of the parcels the downtown crowd most wanted Exelon to consider, the former McCormick site across Light Street from the Inner Harbor, was outside of the downtown enterprise zone, and its owners were in the midst of seeking the recommendation of the Baltimore Development Corporation for inclusion when Exelon announced its plans.

That means that whether Constellation moved to Harbor East or another spot downtown, it would have been leaving a building that was assessed full freight on its property taxes and going to one that was receiving significant breaks. The same happened with Legg Mason. The better approach would be to strive for simplicity and uniformity in the tax code so that it doesn't lead to unintended consequences.

Exelon officials have said a significant factor in their decision was Mr. Paterakis' ability to deliver the kind of building the company needed and to do it on time. Given the miraculous transformation he has effected in what was once a wasteland between the Inner Harbor and Fells Point, it's hard not to give him his due. Rather than viewing Harbor East as a competitor, downtown property owners should welcome a development that has added so much to the city. They should also consider this: Once the Exelon headquarters is completed, there won't be much land left for development in Harbor East, which is boxed in by two historic neighborhoods. That points to the likelihood that the development pendulum will eventually swing back to the west. If downtown property owners want to take advantage of it, they will need to be ready to invest just as Mr. Paterakis has.

No question, this move makes it less likely that the McCormick site or the former News American site will be redeveloped soon. And the move out of Constellation's current headquarters will only add to a relatively high vacancy rate for downtown office space. But that would have been the case regardless of where Exelon went. Instead of arguing about whether an existing business moves a mile to the east or west, downtown boosters need to focus on making the entire area more attractive to new employers.

The recent success in increasing the number of people who live downtown has been a step in the right direction. The construction of the Red Line light rail through downtown would help, too. And there is a potential game-changer on the horizon: the proposal to expand the convention center and to build a privately financed arena and hotel on the same site. The Maryland Stadium Authority's study on the issue should be completed this month, and Gov.Martin O'Malley has included some planning money for the effort in his capital budget proposal. Downtown property owners need to do whatever they can to make this project more feasible because it has the potential to inject much more life into the area than a new Exelon building ever would.

Copyright © 2014, Los Angeles Times
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