——-By: Ann Costantino——
Without opposition or fanfare, the Baltimore County Council voted unanimously last month to sell up to $600 million in bonds to aid a county government one council member characterized as headed for “hard times.”
“I worry that there is a misconception among many of our constituents that Baltimore County is in great financial shape,” said District Two Councilwoman Vicki Almond at the November 20th legislative council meeting.
The vote took place during Thanksgiving week, two weeks before The Baltimore Sun reported the county executive was proposing forward funding $43 million to a controversial development project known as Towson Row.
Baltimore County residents have questioned the county’s priorities in recent months, while a mixed message is now coming from the administration and council that the county’s financial health is apparently at stake.
In an exchange with Keith Dorsey, the county’s director of budget and finance, Almond, who is running for county executive, spoke of her concerns regarding the state of county finances, “moving forward I think there needs to be some transparency … to let people know that, ‘Hey, we are coming upon some hard times and this isn’t going to be a walk in the park.’”
At the meeting, the council voted to issue up to $600 million in General Obligation Bonds. Also approved was a motion to raise the county’s debt ceiling from $500 million to $600 million on the county’s Bond Anticipation Notes (BANs).
The United States Securities and Exchange Commission describes these bonds – termed municipal bonds – as “debt securities issued by states, cities, counties and other governmental entities to fund day-to-day obligations and to finance capital projects such as building schools, highways or sewer systems.”
By issuing municipal bonds, Baltimore County (the bond issuer) is in effect borrowing money from the bond purchasers. The county then promises to make regular interest payments to the purchasers until the bond matures on a predetermined date — at which time the bond’s value is to be paid in full.
BANs are a short term loan which uses the future selling of bonds as a type of collateral. It is a way to borrow money quickly, while waiting for the bonds to sell.
To the layman, issuing bonds is the equivalent of borrowing money. Such bonds are often used to fund long-term projects, allowing the government to pay for them while improving and meeting the needs of a municipality over expanses of time.
In November, the county council gave the county the permission to borrow $100 million more than it previously had at its disposal, by increasing its limit on BANs to $600 million. It was not clear, however, for what purpose the extra $100 million would be earmarked.
The move preceded the county council’s $43 million Towson Row project grant discussion by three weeks. On Monday, the county council will vote on the Towson Row development grant.
William Cooper, president of Cockeysville-based Generation Investment Group, says that the timing of the two events has “the appearance of favoring developers at the expense of taxpayers. The process seems convoluted and non-transparent,” he said.
Out of the up to $600 million in bonds the county council approved to sell, specific details concerning Consolidated Public Improvement bonds – which were approved by voters on the prior-year’s referenda – were also detailed in a county document. Some of the amounts are specified for schools, bridges, parks, land preservation and other needs.
Consolidated Public Improvement (CPI) Bonds:
Schools: $ 153,000,000
Public Works (roads, bridges, sidewalks, storm drains) $60,000,000
Community and Economic Improvement: $10,000,000
Community College: $7,000,000
Operational Buildings $7,000,000
Refuse Disposal: $6,000,000
Agricultural Land Preservation: $5,000,000
Parks, Preservation, Greenways: $2,000,000
Total: $ 250,000,000
The rest of the $600 million ($350 million) went to Metropolitan District Bonds, which go to finance the construction of improvements to the Metropolitan District sewer and water system and does not require voter approval.
Yet those bonds, as Cooper notes, could also be part of the Towson Row development project. “A Metro-District Bond could be used for water and sewer. For this thing to be there – a hotel and housing – it’s going to require huge adjustments to infrastructure, electricity, water, gas and a big deal – sewer. You must build that to accommodate this development. Now, the degree that the developer pays for all of that is always the question.”
On Tuesday, groups mobilized and showed up at a county council work session to oppose the $43 million in grants the county is looking to give developers, Greenberg Gibbons and TR Development (Caves Valley Partners).
Opponents to the grants emphasized dire funding needs for the county’s schools, as well as frustration that two developers would receive taxpayer-funded financial assistance for a project they chose to start.
A press release sent to The Baltimore Post by a group opposing the development, stated: “The community sees this as a red flag. If two experienced developers cannot provide all the financing needed to develop Towson Row, then the project must not meet underwriting standards designed to assure that a project is not too risky for a partner or lender to finance. Taxpayers are questioning why tax credits, instead of upfront cash, are not being offered since the County has repeatedly told taxpayers there is not enough money for basic services and replacing aging infrastructure.”
Under the proposal, the county would be giving upfront payments to the developer – totaling $43 million: $26.6 million in payments in lieu of revitalization tax credits and a grant for $16.4 million for future hotel taxes the county expects to eventually collect from hotel guests, once the hotel portion of the project is up and running.
During Tuesday’s meeting, District One Councilman Tom Quirk asked County Administrator Fred Homan if part of the fund advances will be coming from “an appropriated surplus.” Homan said they will come from a “combination of projected revenue and/or surplus. The source (is) to be decided as we move into the budget process,” Homan said.
Quirk then asked Anirban Basu of Sage Policy Group, a financial consultant the county hired to assess the project, what he would say to “free market capitalists” who think that “if it can’t be built with private investment, maybe it shouldn’t be built.” Quirk asked, “What should be said to a free market capitalist saying this should be private?”
Referencing a controversial downtown Frederick Marriott Hotel development project the consultant was also hired to assess, Basu said “That’s the nature of competition. The second thing is, public participation provides the public sector the opportunity, as representatives of the people, to participate in the project and help shape the project.”
Local investment expert, Cooper told The Baltimore Post “in a sense it is true that the county is giving money to the developer, but they are doing it to help get the project underway and completed, because the county then knows that they’re going to get hotel taxes… hospitality taxes… sales taxes and they get the grounds improved, up to something modern.”
Still, Cooper adder, “the bottom line is, developer contributions to a county executive for projects – when the county executive has future political aspirations – tend to look bad. They tend to smell a bit. And that part of this whole bit is what I think is objectionable.”
[Caves Valley, its affiliate companies and principals have donated at least $130,000 to the county executive, all seven council members and a slate campaign. Greenberg Gibbons is also a large donor to the campaign coffers of Kamenetz and several council members, records show.]
The site for Towson Row, a proposed mixed-use development project which has been stalled for over two years, currently brings in $145,000 in tax revenue, annually. The county says the projected annual tax revenue by the year 2040 would be $4.7 million if the project is successful.
“It is ordinary and usual that the county would pony up funds in anticipation of future revenue,” Cooper continued, but “when you climb in bed with one person, often you wind up with their entire family. One project leads to another and you start to connect the dots. And I think what is going on now is the dots are being connected between Towson Gateway and Towson Row. Because you have the same player and there are plenty of players in the market.”
“How come the same player keeps popping up for essentially partnering with the county? I would say that the dots connect and that causes people to look at it askance,” he said. “They look at it with a modicum of doubt.”