The online sales pitch for the condominiums atop The Four Seasons Hotel in Baltimore’s swanky Harbor East development touts a plethora of amenities: a private sauna, rooftop pool, and balconies with panoramic views of the city. But one particularly pricey perk is overlooked: a lucrative five-year property tax break that has saved the project millions of dollars in payments.
To procure the abatement, the project developers made use of an incentive program that seems far removed from the condos perched high above the city’s Inner Harbor. The tax break in question was designed to incentivize the reclamation of land contaminated by the vestiges of the city’s industrial past; however, in an internal memorandum obtained by TRNN, finance officials argued it has strayed far from its intended purpose.
Known as the Brownfields Revitalization Incentive, the program was authorized by the Maryland state legislature in 1997 to encourage developers to remediate property that was contaminated by past industrial use. It grants a 50% tax break for five years for certified properties, and ten years if the project is located in an Enterprise Zone.
The tax break in question was designed to incentivize the reclamation of land contaminated by the vestiges of the city’s industrial past; however, in an internal memorandum obtained by TRNN, finance officials argued it has strayed far from its intended purpose.
Records show that, for more than two decades, the program in Baltimore was used sporadically, but recently the cost of Brownfields credits awarded to developers in Baltimore has exploded, rising roughly 154% over the past five years. The total cost to the city’s budget has more than doubled from $8 million annually in 2016 to $20 million in 2020, according to a report commissioned by the city to study tax breaks.
For The Four Seasons, making use of this program has proven to be particularly lucrative.
Since 2016, the credit has saved the project, consisting of 60 luxury condos, a total $6.8 million in property taxes. The hotel, which charges more than $600 per night for a room, also received a break worth roughly $3.4 million, thanks to a Brownfields Tax Credit. In total, both the condos and hotel have received $10.5 million in property tax abatements.
In fact, the Brownfields Tax Credit awarded to The Four Seasons was considered so lucrative city officials cited it by name in the internal memo obtained by TRNN. Circulated among senior staff of Mayor Brandon Scott’s administration in 2021, the document urged top officials to address the rising cost of the Brownfields program. In it, finance officials described a scenario that has provided fodder for ongoing criticisms of the city’s Byzantine process for awarding tax abatements—an uneven and often complicated tax system that favors developers over residents.
“The Four Seasons Hotel at 200 International Drive was granted a Brownfield Tax Credit, but later 60 additional private residential condominium units were built on top of the hotel and were also granted the credit,” the memo states.
“In effect, the owners’ of those condominiums are paying an effective property tax rate of 0.51% compared to the City’s base rate of 2.24%.”
The Four Seasons is not the only property included on the Brownfields application filed in 2011. The Legg Mason building next door was also named in the application, utilizing the same consultant’s report that justified The Four Seasons incentive. But, city officials say, the Legg Mason building did not ultimately receive a credit.
The Legg Mason building received a different kind of tax break: The building and the garage were awarded a PILOT (payment in lieu of tax agreement) in 2009. A report filed with the state said the PILOT saved at least $4.4 million in property taxes in 2021. Since tax records do not divulge incentives granted to a specific property, it is difficult to determine how much of the $4.4 million referenced in that report is due to a PILOT or Enterprise Zone tax credit, or if the total amount excludes either.
This lack of transparency is another example of how the intricacies of the city’s system of awarding incentives is difficult to unpack and even harder to audit and assess. In fact, the Legg Mason property was the subject of a public records lawsuit filed by the Abell Foundation seeking the details of a profit-sharing agreement the city abandoned when majority interest in the building was sold for a record $165 million ($481 per square foot) in 2018.
The hotel, which charges more than $600 per night for a room, also received a break worth roughly $3.4 million, thanks to a Brownfields Tax Credit. In total, both the condos and hotel have received $10.5 million in property tax abatements.
Last November, Baltimore City Circuit court Judge Lawrence Fletcher-Hill denied Abell’s request to make details of the deal public. Instead, the court allowed just two documents related to the sale to be viewed “in camera,” or in the presence of the judge.
In the case of the Brownfields Tax Credit, city finance officials privately discussed how the incentives were not producing the desired effect.
“According to conversations with BDC, most of the City can technically qualify as a brownfield due to small traces of toxic material that can be found in soils from prior industrial uses. As such, the State does not designate individual parcels as brownfields before development begins,” the report outlines.
“Instead, builders eye land that is ripe for development, and then get the parcel certified as a brownfield site through MDE. This turns the intent of the program on its head. Instead of compensating builders for performing clean ups of known contaminated sites, it allows developers to purchase land and then perform the minimum cleanup effort in order to qualify for a generous credit.”
The 2011 application for the Brownfields credit filed by the owners of The Four Seasons, obtained by TRNN through a Public Information request, raises questions about the process for obtaining a credit.
The documents reveal a series of environmental studies of the site that have been conducted over the past two decades, including a 1989 analysis that indicated the presence of chromium and lead contamination in the groundwater, likely due to known contamination of bay waters adjacent to the Allied Chemical Plant. But that study determined the contamination did not warrant further analysis.
“Considering the groundwater of the site was not planned to be used, ATEC [the consultant] did not recommend further environmental study,” the report said.
Portions of the site were tested again in 2003. Those tests determined the soil and groundwater were “not significantly impacted by chromium.”
In fact, the developer’s lawyer told state officials in 2007 there was no contamination. “Prior environmental evaluations, several rounds of sampling and analysis, and environmental monitoring during construction through late 2007, did not indicate environmental contamination within the site boundary,” the lawyer wrote in an affidavit.
The law itself says a site qualifies for a Brownfields Tax Credit if it “is property that is contaminated or perceived to be contaminated.” It also stipulates that the current owner is “non-culpable,” or not responsible, for said contamination. How, given these stipulations prescribed in the statute, The Four Seasons condominium complex qualified to be designated a Brownfields site remains unclear.
Maryland Department of Commerce Senior Director Andy Fish said his agency relies upon the Maryland Department of the Environment (MDE) to evaluate the eligibility of property. “We are reviewers for the process, not the facilitator,” he said. “Our role is to make sure all the letters are in place—and if this is all in place, they accept the property into the Brownfield property tax program and the letter of acceptance goes to the community and the state Department of Assessments and Taxation.”
“Instead of compensating builders for performing clean ups of known contaminated sites, it allows developers to purchase land and then perform the minimum cleanup effort in order to qualify for a generous credit.”
internal memo, obtained by TRNN, Circulated among senior staff of Mayor Brandon Scott’s administration in 2021
The MDE did not respond to emails seeking comment on how The Four Seasons qualified for the incentive. Similarly, a lawyer for Harbor East developers did not respond to an email sent for comment.
The rising use of Brownfields Tax Credits, along with other tax breaks doled out to developers by the city, is the focus of an ongoing TRNN investigation into the city’s expansive system of tax incentives called “Tax Broke.” The project includes a documentary exploring the history behind the continuing policy of using tax credits to spur development in Baltimore, and how that policy has led to hundreds of millions in tax breaks for wealthy developers. We also found that key reports evaluating the effectiveness of several such programs had not been filed, as is required by law.
The documentary examines how this lack of oversight has led to a sprawling system that enables properties to qualify for multiple incentives, often relying on tax breaks that are granted “by right” or without approval of the city council.
The film also documents the council’s reluctance to assess the impact of tax incentives specifically designed to entice developers. For instance, a council bill that would have authorized a modest $30,000 study of property tax abatements was voted down by a council committee by a 4-3 vote. The proposed analysis was designed to look at both PILOTS and TIFs (Tax Increment Financing).
TIFs allow developers to invest future property taxes into a project. The incentive is calculated by estimating future property taxes for the development and then selling bonds to refund decades worth of payments.
But how and if these incentives are a cost-effective means of reversing the city’s long decline remains an unanswered question. Part of the problem, as noted in the same internal memorandum obtained by TRNN, is the council’s reluctance to reassess subsidies, even when concerns were raised in the past.
“Finance and BDC [Baltimore Development Corporation] were able to locate internal documents that show concerns were raised about this credit all the way back in 2005. However, these concerns were never translated into an executive or legislative action,” the memorandum outlines, adding that “The City Council has taken no legislative action on this credit at any time since its inception 22 years ago.”
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