Here’s Why The House Tax Bill Is ‘Devastating to Economic Development at the State and Local Levels’

The City of Baltimore signed an agreement in September 2016 to get the wheels turning on a $5.5 billion redevelopment of Port Covington, an old port-to-railroad terminal in the southern part of the city.

Set to be partially paid for with Baltimore-funded tax increment financing and serve the broader metropolitan community, the multi-faceted plan places Under Armour CEO Kevin Plank’s Sagamore Development Company in the driver’s seat with sanctioned blessings from city officials. Redevelopment is projected to create at least 70,000 jobs over four decades, a roadmap that promises to significantly impact Baltimore’s local community.

One thing is clear: The city’s economic future relies on private sector investment in Baltimore’s infrastructure, people and employment to thrive. Any federal tax reform that eliminates private activity bonds, along with one-third to 40 percent of the municipal bond market as this bill effectively will, would be devastating to economic development at the state and local levels.

The resulting higher financial obligations for civic development would discourage private-sector partners from taking up public sector-supportive projects like Port Covington. Private activity bonds, or PABs, have not yet been issued for the project but could be eventually and are the type of public-private-partnership financing tool that makes the participation in the project attractive for additional investors.

America is at a crossroads. We need to strategically invest in our nation’s infrastructure, as well as our nation’s human capital, in order to successfully compete in the global economy. Preserving tax exempt bonds and private activity bonds are crucial for creating an investment in employer-driven, community-based, outcomes-focused workforce solutions. These financial instruments are innovative, agile tools to address the nation’s diverse critical infrastructure and workforce demands.

Port Covington’s redevelopment now serves as an in-progress case study for a public-private partnership approach to revitalizing local infrastructure and catalyzing job creation. The socioeconomic model makes a point to set aside job training and education opportunities for Baltimore’s unemployed and underemployed.

The success of this model and the project as a whole is staked on the interplay between community leaders, business leaders and politicians. Not just Baltimore, but cities around the United States benefit when stakeholders play nice through redevelopment and actually cooperate to implement programs geared toward putting unemployed and underemployed folks back to work.

Port Covington is a campus for Under Armour and 216 acres of “mix-use development including 14,000 residential units,” but it will also serve a larger purpose for the community. Key civil components of negotiated by city officials include:

• a commitment to employing 30 percent Baltimore city residents for 30 percent of the jobs at Port Covington;
• establishing a 16-member Port Covington Local Hiring Advisory Committee that includes members appointed by the mayor, community, Baltimore City Community College, Baltimore City Public Schools, the city comptroller and faith-based leaders;
• $25 million allocated over a 15-year period to build and operate a Workforce Development Training Center;
• a regular reporting function on local minority- and women-owned business activity resulting from the project;
• developing a commuter transportation system to shuttle Baltimore city employees to and from Port Covington;
• $2 million in scholarships for Baltimore city and community students over a five-year period;
• and $7.6 million for afterschool and summer programs for city youth.

The partnership was also central to a pitch from the the State of Maryland, City of Baltimore and Sagamore Development Company to woo Amazon to use Port Covington as Amazon’s second headquarters campus. Win or lose, the proposal is making national headlines and likely generating additional interest in the site.

This hyperlocal effort is still in its early days, but its long-term impact is possible if funding, public- and private-sector cooperation and a shared commitment to community transparency remain intact. A recent vote of confidence from Goldman Sachs in the form of a $233 million urban equity investment will undoubtedly help launch, and sustain, redevelopment over the next few years.

Port Covington’s redevelopment roadmap serves as an effective model for local government, industry and community stakeholders on how to work side-by-side to tackle universal civic issues. Policymakers should take notice of its potential and realize this is not the time to take financing options off the table.

It would be shortsighted for the U.S. to cut off access to an affordable means of low-cost financing for thousands of privately-funded civic projects nationwide. Indeed, without private funding, state and local governments would not be able to undertake community initiatives aimed at sustainable job creation, expanded health care services, education improvement and vital infrastructure development.