Affordable Housing and Local Hiring at Port Covington Highlight New MOU with Baltimore City

Last Thursday, executives from Sagamore Development (Under Armour Founder and CEO Kevin Plank’s real estate company), Mayor Stephanie Rawlings-Blake, City Council members, and local activists gathered at City Garage in South Baltimore to announce a new Memorandum of Understanding (MOU) between Sagamore and the City of Baltimore for the $5.5 billion, 260-acre Port Covington redevelopment project. It was described as historic and unprecedented in Baltimore City. A previous MOU was debated during many hours of public testimony before Baltimore City’s Taxation, Financing and Economic Committee as they were reviewing Sagamore’s proposal for $660 million in Tax Increment Financing (TIF) Bonds for infrastructure, parks, and ecology improvements in Port Covington (specifics of the deal).

Rendering Courtesy of Sagamore Development 

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 go to the city coffers, but the current property tax revenues at the current rates continue to go to the city. Sagamore would 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 would own the newly-built infrastructure and parks once they are completed. To note, TIF bonds cannot be used for other projects and initiatives around the city; they must be used by the project that backs them.

This new MOU was the result of negotiations by Baltimore City officials and leaders from Sagamore; The South Baltimore Six Communities (SB6) of Brooklyn, Cherry Hill, Curtis Bay, Lakeland, Mt. Winans, and Westport; and Baltimoreans United in Leadership Development (BUILD), as well as input and ideas from more than 90 other groups comprised of workforce training providers, faith leaders, housing advocates, education advocates, and local neighborhood community leaders.

The new MOU was not discussed with the closest neighborhoods geographically to the project – the South Baltimore Neighborhood and Riverside – prior to the announcement. Board members from the South Baltimore Neighborhood Association (SBNA) and Riverside Neighborhood Association (RNA) told SouthBMore.com that both groups need to get more involved in discussions involving Port Covington moving forward and both will discuss the MOU at upcoming meetings with their membership.

A key aspect of the MOU is an increase in affordable housing at Port Covington. The previous MOU stated a goal of 10% affordable housing however, if affordable housing units could not be constructed on a financially reasonable basis at Port Covington, Sagamore would make a payment to the Inclusionary Housing Offset Fund. Now Sagamore must provide income-restricted residential units equal to 20% of all residential units at Port Covington, which could reach 14,000. At least 60% of these affordable units must be provided on-site, while the balance may be developed off-site to address affordable housing needs in other Baltimore City neighborhoods. At least 10% of the units must be available to tenants at or below 30% of Area Median Income (“AMI”) and other units will be at 50% and 80% AMI. In summary, at least 12% of housing units built at Port Covington must be affordable.

The MOU includes $139.5 million in funding commitments from Sagamore including the SB6 Community agreement with $39,000,000 in benefits; $25 million in new workforce development initiatives; $10 million for venture loan and equity in early-stage, minority, and women-owned companies in Baltimore; $35.4 million in acquisition costs of land to be dedicated for public use as parks, open space, and rights-of-way, based on current layout and expenditures for property acquisitions to date; a $6.5 million impact on commitment to prevailing wages; and a $10 million commitment to funding city-wide programs. See specifics in graphic below.

Approximately $20 million of this benefits agreement is projected to be paid out in the first five years following TIF authorization, several million of which will be paid immediately following authorization and before any profits are realized.

In regards to local hiring, Sagamore has agreed to a mandate that 30% of all on-site infrastructure work will be performed by Baltimore City residents. Also, Sagamore has agreed it will work to exceed a goal of 30% permanent job hours performed by City residents.

The TIF’s impact on Baltimore City Schools’ funding from the State of Maryland had also been a point of contention. The more wealth a jurisdiction appears to have, the less state funding it receives through the current formula. Sagamore has made an enforceable commitment in the MOU not to request issuance of any TIF bonds if there is a projected negative impact on State education funding for Baltimore City Schools, unless there is a clear plan in place to mitigate the projected negative impact. There is currently a three-year fix that was passed in the Maryland General Assembly.

The Baltimore City Council must approve three zoning bills regarding Port Covington which include the issuance of the TIF bonds. A vote by the Taxation, Financing and Economic Committee was delayed late last week by Chairman Carl Stokes. If approved by the committee, it will then be voted on by the entire Council. Present at last week’s announcement supporting the MOU were Council Members Eric Costello, Hellen Holton, Ed Reisinger, Ricky Spector, and Brandon Scott, as well as City Council President Jack Young, and Mayor Rawlings-Blake.

However, The Baltimore Sun is reporting that 11 of 16 Council Members have signed a petition to force a vote today at the City Council Meeting to move the bills forward.

Update: The bills were advanced with a 12-0 vote by the City Council, and a final vote will take place next Monday.

The bills received unanimous approval in a recommendation from the Baltimore City Planning Commission.

Sagamore’s plan for Port Covington includes Under Armour’s 50-acre, 3.9 million sq. ft. global headquarters at the former Port Covington Shopping Ceneter; 1,500,000 sq. ft. of destination, attraction, entertainment and specialty retail; 500,000 sq. ft. of “maker” and industrial/light manufacturing space; 200-plus hotel rooms; 1,500,000 sq. ft. of office space (in addition to the Under Armour Global Headquarters); and civic and cultural uses including 40-plus acres of public parks, a public waterfront, and other public facilities. It also includes more than 7,500 residential units, which could total up to 14,000 units comprised of rental and for-sale properties at various price-points.  The plan also includes potential sites for a post office, school, library, fire station, police paddock, and cultural center.

Sagamore has already spent $140 million at Port Covington on planning and land acquisition of Phase I projects including City Garage, Nick’s Fish House, the under-construction Sagamore Spirit distillery, and a new bike bath connecting the South Baltimore neighborhood to Port Covington through West End. It also recently debuted a new mural on W. Dickman St. and East Waterfront Park is expected to begin construction this year.

Sagamore Development President Marc Weller said he hopes infrastructure improvements start in mid-2017, pad site development begins in mid-2018, and vertical real estate development begins in mid-2019. The next phase of Under Armour’s campus will begin construction next year. Under Armour recently converted the former Sam’s Club into Building 37, a new 170,000 sq. ft. office building.

Statements on the MOU:

Tom Geddes, CEO of Plank Industries (Sagamore’s Parent Company):  “From the very beginning of this process, we have made clear that we want the Port Covington redevelopment to provide the greatest possible benefit to the city and its residents. It is why we are doing this in Baltimore in the first place; we are committing to Baltimore, doubling-down on Baltimore. Our community partners and elected officials have been instrumental in helping us find the balance between unprecedented inclusivity on the one hand and economic viability for the project on the other. The result is a collective vision that we will all be proud of for a very long time and a community benefits commitment unprecedented in scale, timeline and financial impact. This is an extraordinary moment in the history of development in Baltimore, and we are grateful to our partners and proud of this remarkable outcome.”

Baltimore City Council President Bernard C. “Jack” Young:  “Thanks to the historic agreement reached between the City, developer and community members, Baltimore’s workforce is positioned to benefit from employment opportunities that will stretch across a generation,” . “In addition to providing meaningful jobs, the benefits agreement pumps tens of millions of dollars into programs to support workforce development initiatives, education programs, college scholarships and improvements to recreation facilities. Port Covington will serve as a true model for economic development throughout our region and nation.”

Baltimore City Mayor Stephanie Rawlings-Blake: “The City-Wide Community Benefits Commitment sets forth an unprecedented agreement to grow Baltimore, and ensures that Port Covington’s development is a success for surrounding communities and our city at-large. Sagamore is a true partner with Baltimore and today’s agreement solidifies our mutual commitment to accelerating meaningful progress that strengthens our local economy, workforce, affordable housing market and growth as a sustainable city.  I am proud of the cooperation that has shaped this historic agreement and look forward to the tremendous opportunity that will be created for all City residents as we move the Port Covington project forward.”   

Rev. Glenna Huber, BUILD Co Chair : “BUILD is proud to stand with Sagamore Development to announce an historic agreement that will change the paradigm of development in Baltimore that over the years has created two Baltimores,” said .  “Together, we took historic steps to guarantee local hiring, affordable housing and workforce development that will forever alter the way development deals will be made in Baltimore. We moved from goals to mandates, from promises to strict accountability. Never again will there be public financing without corporate responsibility to meet the needs of all Baltimoreans. BUILD is committed to work with Sagamore Development to hold them accountable and for them to hold us accountable to make this vision to build One Baltimore a reality.”

Kevin Plank’s Open to Baltimore regarding Port Covington:

Baltimore,

I have not said much publicly on this subject, because my day job is running Under Armour. I love my company and my city, so let me take a moment now to explain how I believe Port Covington will build on a positive direction for Baltimore. I believe that we have a great opportunity in front of us, and I believe that the redevelopment of Port Covington is the right thing for our city.

The history of Baltimore includes many moments that we can all see in retrospect as forks in the road in economic development and in civic life.

The founding of Morgan State University in 1867 and Johns Hopkins nine years later. Ten years after that, the first Enoch Pratt Free Library. The very next year, a steel mill built in Sparrows Point that would eventually become Baltimore’s economic and employment engine—Bethlehem Steel. The digging of the I-95 tunnel in 1956. The Mayflower moving trucks at the Baltimore Colts facility in the middle of the night. The construction of Camden Yards. The joyful return of NFL football with the Ravens in 1996. William Donald Schaefer turning disused land into the Inner Harbor, creating many new jobs and changing the face of Baltimore.

Big moments that physically shaped our city for better or for worse, and changed both our image and our collective reality.

I believe that we find ourselves at another fork in the road. There are many great large and small businesses in our city, as well as landmark institutions that have a huge impact. It is a fact, however, that today there is no Fortune 500 company that calls Baltimore home…yet. While companies can certainly help cities, having just any large company here would not by itself make a real change for the better.

What will change our city is building on the vision that so many of us have.

My own part of that vision is Port Covington, and it is a vision for investment, opportunity, employment, and a strong inclusive city known globally as a hub of business, trade, entrepreneurship, diversity, arts, culture, and important American history.

A vision of a “front porch” for Baltimore worthy of the greatness of the rest of our city—transforming what is now mostly vacant, unproductive land into a new gateway seen by forty-two million cars a year passing by on I-95, and showing an authentic American city on the rise. Most importantly, this new economic engine will connect into the rest of the city, accessible by Light Rail, bus, car, bike, on foot and even by the recently-acquired Water Taxi fleet, which we will be upgrading with a Chesapeake-inspired design to connect Port Covington with the rest of our city, and especially Westport and Cherry Hill. This is what we are trying to achieve with the work of Sagamore Development in Port Covington.

Making it possible to build on this vision will require TIF financing for critical public infrastructure, which the City will facilitate. Let me be clear about the following six important points:

1. Port Covington will bring billions of dollars in private investment and thousands of jobs to Baltimore at a time when this is needed most.

2. This redevelopment is projected to deliver over a billion dollars of net positive tax revenue to the City in the coming years.

3. The TIF is a financing tool. That’s it. It is not paid for by City residents’ taxes outside of Port Covington. Your income and property taxes do not go to the TIF, nor does it take existing money from other neighborhoods or priorities. Simply put, the TIF allows the City to borrow new money to build public infrastructure—streets, sewers, utilities—only because we, the property owners in Port Covington, then pay the money back with new property taxes. We also take on the risk. No TIF money goes to Sagamore, to Under Armour or to me. It only goes to the infrastructure that the City will own and that will make investment and opportunity possible.

4. My real estate company, Sagamore Development, is making unprecedented commitments to local hiring, inclusionary housing, and opportunities for local minority- and women-owned companies. We are not just “developers”—this is our home.

5. Over one hundred million dollars. This is the total value of the contributions to community needs that we are proposing in the coming years as we enter this public-private partnership. One hundred million dollars. The next-largest Community Benefits contribution of this kind in Baltimore’s history was four million dollars. We are making commitments to education, recreation centers, workforce development, prevailing wages, better streets, parks, playgrounds and other priorities identified by the communities most in need. This deal has been fully negotiated through a robust process. It is unparalleled and unprecedented, and we are grateful for the audience we have had with our elected officials and to the dozens of community groups we have met with.

6. We can’t wait.

We can’t wait. I mean this both in the sense that we are incredibly excited to build something special in Baltimore City, and in the sense that we literally can’t wait to do so. Under Armour is out of space. We have 26 offices in the United States and across the world. We will soon have a new presence in Sparrows Point in Baltimore County, a 1.3 million square-foot distribution facility with a thousand great jobs. We need to grow somewhere. We would like most of that growth to be here in Baltimore City.

We are at a decision point. We want to invest in Baltimore, hire in Baltimore, live in Baltimore, and give in Baltimore. I hope that you agree that we have a special opportunity here. I hope that the City Council will review and approve the TIF, to make this all possible for our city.

And I hope that decades from now, our children and their children will look back on this moment and know that we saw one of those great forks in the road, and chose the best course.

It is an honor to do everything in our power to have a positive impact in this city.

Our city.

Sincerely,

Kevin Plank

Financial Commitments in the MOU: