By Carrie Wells, The Baltimore Sun
5:40 PM PDT, April 8, 2013
Developers converting older office buildings into apartments or building new complexes could get a significant tax break under a measure the Baltimore City Council approved Monday.
The legislation is aimed at addressing a glut of vacancies in office buildings downtown, encouraging new or converted apartments in six other neighborhoods, and drawing new residents to the city.
The list of requirements to qualify for the tax break is short: The development must be in one of the seven areas, must be a project involving at least 50 apartment units, and must have an environmentally friendly certification. Supporters said this tax break would be more "predictable" for developers, who typically have to lobby City Hall for individual incentives.
"It can open up the development market to outside developers," said Kirby Fowler, president of the Downtown Partnership of Baltimore, which lobbied for the credit. "Before, developers had to know the system in order to access some [tax] credits. It will create more predictability and transparency."
The break would be applied not to an owner's total property tax bill, but to whatever value is added to the property as a result of the project. It would start as a 100 percent break on taxes on that additional value for years one and two, with that percentage gradually decreasing over a period of 15 years.
Areas eligible for the incentive are portions of downtown, Reservoir Hill, Jonestown, Poppleton, and the York Road, Belair Road and West Cold Spring Lane corridors.
"That, to me, is kind of exciting because one of the knocks has been that tax credits only benefit downtown," said Councilman William H. Cole IV, who represents downtown. "Now we have something to show that it's just not true."
Mary Pat Clarke was the only member of the City Council to vote against the measure. She said she liked the fact that some of the money could benefit neighborhoods outside downtown. But she called the 15-year period for the break "ridiculous" when the city is struggling to pay for basic services, and said she would have preferred a five-year period.
"It just seems like an inopportune time to be stretching 15 years of tax breaks in so many directions," she said. "Fifteen years? That's way too long. The people that own those properties, by that time, they won't even know they had a tax break."
It's impossible to know how much property tax revenue the city will lose from the tax credit, but proponents argue that some tax revenue from the improvements is better than no additional tax revenue if projects would not have gotten off the ground otherwise.
Developers can apply for the tax credit through 2017.
The Downtown Partnership released a study in August showing the greater downtown area could support 5,800 new residential units — 60 percent of those rental apartments — in the next five years. Thousands of people have moved into the city's core in the past decade, and growth is considered strong there. But renovating an old building for apartments or building a new one can be prohibitively expensive for developers, Fowler said.
"You never know if these projects will happen with or without a tax credit," Fowler said. But, he added, "I'm a firm believer that these projects would not happen without the tax credit."
A couple of projects that could benefit from the tax break are a proposed conversion of 10 Light St., a 520,000-square-foot office building, into about 445 apartments, and a proposed conversion of 520 Park Ave. from a 225,000-square-foot office building into about 340 apartments.
Copyright © 2014, The Baltimore Sun