Steven B. Fader does not seem like the type of guy who needs a tax break.
The founding partner of developer Caves Valley Partners, and CEO of Mile One and Atlantic Automotive Corporation, lives in a $2.1 million mansion overlooking an invitation-only Owings Mills golf club.
Having purchased a lot from the club’s subdivision and sale 18 years before, it’s a short walk for the executive to the $10 million clubhouse where he oversees Caves Valley Golf Club as its chairman.
Yet Fader, along with other members of the exclusive club, such as Cal Ripken Jr., Michael Bloomberg, Michael Jordan, and multi-billionaire Steve Bisciotti, enjoy a tax reduction on the exclusive, member-owned property where hobnobbing is reserved solely for those who are invited, including then President Barack Obama.
It is a Maryland law that allows for a reduction in tax for country clubs – both public and private venues. But the question is: does the public benefit from the law’s massive tax breaks given to the wealthy of the private Caves Valley Golf Club?
Maryland tax law says that private country clubs across Maryland can make an agreement with the State promising not to subdivide the property in exchange for a reduced tax assessment of $1,000 on each acre of land. Thus, a club that would normally have to pay tax on ten acres of land valued at $300,000, now pays tax on the same ten acres set at an artificial price of $10,000.
In return for the tax break, these private clubs have to agree not to discriminate on the basis of sex, race, creed, color or national origin. Nor can they subdivide the property without facing significant tax penalties.
But Caves Valley Golf Club put a new spin on the tax break. After they bought the land, they subdivided part of it and sold it as homesites — homesites that have now become the mansions surrounding the golf course. With the money from these sales, the club then financed the construction of the course itself. And once construction was completed, they applied for the tax break promising not to subdivide any further. Today the market value of the golf course land is, according to state officials, $35,689.39 per acre. But for tax purposes, it is valued at only $1,000.
The elite golf retreat, operating since 1991, has been home to some serious business. With nearly 600 invitation-only members, reports show that Caves Valley charges most members a hefty $100,000 initiation fee, as well as yearly dues of $20,000.
In the early nineties, and as if sparing no expense on the $40 million lavish project, the chief architect charged with creating what has been called the region’s ‘crown jewel,’ sculpted what those in the industry call a masterpiece.
In fact, it has been host to some of the sport’s most renowned worldwide events: the U.S. Senior Open, NCAA Division I Men’s Golf Championship, and this summer’s prestigious Constellation Senior Players Championship.
Despite the course’s appeal, the club likes to indulge in a bit of public relations puffery. It claims the golf course covers a massive 960 acres, a number the local media has never disputed. In fact, the Maryland Department of Taxation and Assessments says the club has approximately 800 acres of which 384.4 are the actual golf course. The rest was either donated to a land trust or sold off.
It took six years for developers, Les Disaroon and Andre Brewster, to find the property fit for presidents, sports legends and members of high society. It took 21 investors and a master architect to carefully sculpt visions, chiseling ideas from the surrounding perfection that would become Caves Valley Golf Club.
Upon its grand opening, a Baltimore Sun reporter gushed “Caves Valley, dressed in natural beauty and with a radiance of a new bride, was showered with praise for what it is – an unforgettable golfing experience amid enthralling surroundings and an ambiance that is lavish but not garish.”
Unfortunately for the club, however, the honeymoon was over within its first year. Not immune to the recession impacting the country, Caves Valley Club had to refinance when unable to sell off 115 acres as quickly as it had hoped.
In 1992, The Baltimore Sun reported that “back in 1989, the original assumption was that most of the club’s debts would be paid by the sale of 34 exclusive home sites dotting the course’s perimeter. The club had hoped it would be left with a manageable $3 million debt after it finished selling the lots in 1998. But after three years, only one site had been sold.”
Research by The Baltimore Post has found that between 1991 and 1992, seven lots were sold by Caves Valley Club, totaling $3,585,000. All of the lots sold to various development firms.
On January 24, 1995, the Club entered into the Country Club Agreement with the State of Maryland, pledging not to subdivide the 384.4 acres of property designated for the course and club. Yet the same year – on May 23, 1995 – the Club resumed selling off its previously subdivided parcels that adjoin the golf club property, selling six lots totaling $2,070,000. And between 1997 and 2001, the club’s remaining 21 lots were sold to the tune of $6,122,000.
Meanwhile, the 384.4 acre golf course enjoyed its tax break.
And it is that state law that gives the tax break to country clubs which has created some startling inequities.
Seton Hill is one of the poorest neighborhoods in Baltimore. It is so poor that one study found that the average life expectancy there was lower than that of North Korea. Yet the people living in just a few square blocks of Seton Hill pay more in property taxes than the wealthy membership of the country club who play on 384.4 acres.
The city tax rolls show that the two blocks bordered by Orchard St., St Mary St., Druid Hill Ave. and Pennsylvania Ave. paid $155,561 this year. By contrast, the well-to-do who leisurely play golf on the manicured fairways at Caves Valley or sip scotch on the veranda of the $10 million club house, paid $143,475.
And the value of the private land surrounding the golf course is set much higher. Pinewood Farms is a sub-development of 21 lots directly adjacent to the Caves Valley Golf Club. Most of the homes sit on roughly one acre of land. The assessed value of the land alone ranges from $118,000 to $143,300. If the families along Pinewood Farms Road could get the same deal as the Golf Club, it would slash their property tax by at least 30 percent.
In 2010, political consultant, Adam Pagnucco, said this of the country club tax law, that it “is both expensive and totally unnecessary. All county governments have subdivision rules that limit development. The point is that other land management tools can be used to preserve open space – which is not truly ‘open’ when it lies behind country club gates – without giving away millions of dollars to the super-rich.”
Steven Fader could not be reached for comment. A spokesperson for the executive said that he does not speak with the press.