Breaking Down the Infrastructure Proposal for Port Covington

| March 14, 2016 | 1 Comments

Last Thursday, Sagamore Development presented a proposal to the Baltimore Development Corporation (BDC) for the infrastructure improvements needed for the redevelopment of Port Covington. Sagamore has developed a 266-acre Port Covington master plan and currently owns 161 acres from recent acquisitions, which it described as 85% of the private parcels. Sagamore envisions a 50-acre campus for Under Armour; 76 acres of mixed-use real estate development; 114 acres of public realm between parks (40 acres), infrastructure, and open space; and, an existing 26 acre NGK-Locke, Inc. facility which Sagamore does not own. Sagamore calls this one of the “largest urban renewal projects in America.”

Sagamore is proposing $534,795,000 in Tax Increment Financing (TIF) from Baltimore City to finance public infrastructure including roads, bridges, utilities, sewers, waterlines, shoreline remediation, walkways, and parks. Projects include nearly 50 new city blocks, many with bike infrastructure; a waterfront promenade; more than 40 acres of parks along the water, underneath I-95, and throughout the area; walking bridges connecting the Westport and South Baltimore neighborhoods to Port Covington; new and rebuilt piers; shoreline remediation; and, ecological improvements.

A TIF is a bond issued to Baltimore City or any other jurisdiction that is leveraged and backed by a real estate development. TIFs use the increased property tax revenues at the development to pay off the bonds. When the bonds are paid off, all property tax revenues will go to the city coffers, but the current property tax revenues at the current rates will continue to go to the city. Sagamore will be paying the same 2.24% property tax rate on all of its properties and on its future assessments, but much of those funds will go to the bonds to pay for the infrastructure. Baltimore City will own the newly-built infrastructure and parks when completed. Sagamore said it is working on a park maintenance partnership with the city.

Port Covington is also part of a Baltimore City Enterprise Zone, which provides a 10-year tax credit on real property improvements with the credit decreasing 10% in years 6-10. It also includes hiring tax credits for business within the district.

The Port Covington TIF would last 25 years or less depending on when the bonds are paid off. Sagamore said that it, not the city, would be “on the hook for the payments or any defaults.”

Sagamore is also hoping to use those bonds to seek matching funds from state and federal sources in the amount of $573,683,000. Projects that state and federal government would contribute to would likely involve the highways and mass transportation. Sagamore’s proposals include new exits off I-295 and I-395 along the northern section of the Middle Branch that lead to Port Covington; the redevelopment of Hanover St., which includes bringing the road back down to grade and increasing the road’s exit capacities to I-95; a light rail spur from Westport with two new stops; three new water taxi stops; and, improvements to the intersection of Key Hwy. and McComas St.

The Baltimore City Department of Transportation (DOT) recently launched a four-year study taking a look at whether to rehabilitate or replace the Hanover Street Bridge as well as the Hanover St. corridor from Wells St. in South Baltimore to Reedbird Ave. in Cherry Hill. Sagamore expects to have a seat at the planning table alongside many others and any improvements it makes as part of its recent redevelopment plan for Hanover St. will be in coordination with the study and the DOT.

Sagamore is proposing to spend $327,756,988 of its own private funds for infrastructure. The total infrastructure investment at the project would be $1,436,234,988. The 50-acre Under Armour Campus will be part of the TIF district, but all infrastructure on the campus will be paid for by Under Armour.

Sagamore projects the entire development project will cost $5,500,000,000, broken down as the $1,436,234,988 for the infrastructure and $4,063,765,012 for real estate projects. Sagamore described the entire project as “incredibly risky” and Vice President Steve Siegel stated “you’d be hard pressed to find another developer that could do this.” Sagamore Development is backed by Under Armour Founder and CEO Kevin Plank.

Plank Industries Managing Partner Tom Geddes noted the building of this infrastructure would not affect anyone else’s property tax bill.

Sagamore sees the entire project as a big job creator, projecting 26,500 permanent jobs and 15,500 construction jobs. Sagamore projects $7.6 billion in economic activity, $3.3 billion in labor revenue, and $242 million in state and local taxes with $108 million going to Baltimore City. At full build-out, Sagamore projects $4.3 billion in annual economic activity and $209 million in state and local revenues annually with $94 million going to the city.

The BDC will review the proposal with the the assistance of its staff, MuniCap, and the Bond Counsel. It will hold as many meetings as deemed necessary and then hold a vote on the proposal. BDC’s vote serves as a recommendation to the mayor.

The plan has received support of Governor Larry Hogan. Mayor Stephanie Rawlings-Blake told WBAL Radio, “This is one of these defining moments in Baltimore’s history where we are a witness to a major transformation.” She also noted that a rigorous process was ahead in deciding whether to support the TIF.

Sagamore Development President Marc Weller said he is hoping to get approval well before the end of the year. He hopes infrastructure improvements start in mid-2017, pad site development begins in mid-2018, and vertical real estate development begins in mid-2019.

Several projects have already been completed by Sagamore at Port Covington, including the fully-leased City Garage and Building 37 at Under Armour’s campus. Construction is currently underway at Sagamore Spirit and Sagamore hopes to begin construction at East Waterfront Park this year.

Statement from District 11 Councilman Eric Costello:

“The prospect of keeping Under Armour, a home-grown company, in Baltimore City forever is a once in a lifetime opportunity. I strongly believe the City must be prepared to do whatever is necessary to ensure Under Armour may continue to grow, right here.

It is also important to note, this is not a tax break. This is the City leveraging borrowing power to build public infrastructure, which the City will own, against future tax revenues. There will be a rigorous review process of the TIF request at multiple levels, and I look forward to being actively engaged in this review once it comes before the City Council.”

Statement from Sagamore Development President Marc Weller:

“We’re excited to be a part of building something great in this City and proud that Baltimore is home to one of the largest urban renewal projects in America right now. The redevelopment of Port Covington will bring thousands of jobs to Baltimore City, new businesses, new parks, new transit, new ways to reach the waterfront and more. Our goal is to build on Baltimore’s hardworking heritage and harness the city’s innovative spirit to create a thriving, active and inclusive waterfront neighborhood at Port Covington. We want everyone to be a part of this and we are committed to building it together.

Currently, the public infrastructure needed for the transformation of Port Covington simply does not exist. In its present state, the roads, bridges and utilities in Port Covington, just cannot support the significant economic growth coming to South Baltimore. TIF is a way for Baltimore to pay for much-needed public infrastructure improvements without raising taxes on City residents or tapping into existing City resources. To put it simply, it’s a way for Baltimore to use future property tax revenue from new development to stimulate much-needed economic growth today. There are no tax breaks for developers involved; there are no subsidies; there are no handouts. This is Baltimore City building up Baltimore City for the future – to attract new businesses, create more jobs and support the continued growth and expansion of Under Armour here at home in Baltimore.”

Renderings Courtesy of Sagamore Development

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About the Author:

Creator of SouthBmore.com and resident of SoBo. Graduate of Towson University and owner of Incept Multimedia, a full service video production company. Diehard Ravens and O's fan, beach volleyball enthusiast, dog lover and "bar food" foodie. Email me at Kevin@InceptMM.com and follow me on Twitter at @SoBoKevin.
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  • John

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