Special financing to rehab Baltimore vacants to be introduced to City Council

Legislation needed to create a first-of-its-kind tax zone aimed at rehabilitating thousands of vacant properties in Baltimore will be introduced to the Baltimore City Council on Monday, a crucial step in executing a $3 billion housing plan proposed by Mayor Brandon Scott.

As proposed, the Tax Increment Financing (TIF) district will include nearly 8,000 city properties targeted for revitalization. Properties will be spread across the city but are concentrated in East and West Baltimore where blighted properties are most common. The council will be asked to consider a bill that would establish the district and a second that would authorize the issuance of TIF bonds to help fund the acquisition, remediation and sale of vacant properties.

TIF districts are not new to Baltimore. In the past, they’ve propelled high-profile developments along the city’s waterfront. For the first time, the newly proposed TIF district would be noncontiguous, surgically targeted for properties in the most need. Baltimore has about 13,100 properties tagged as vacant. In an interview with The Baltimore Sun, top city officials said they believe Baltimore will be the first city to try such a TIF.

Housing Commissioner Alice Kennedy said the funding will be a game changer for the city, allowing it to drastically scale up current efforts to remediate vacant properties.

“This will really allow us to make that jump in a way that we haven’t done,” she said.

Plans for the TIF district were first unveiled by the Scott administration in December as part of a $3 billion plan to remediate more than 35,000 properties over a span of 15 years. That proposal calls for $150 million to be generated in TIF bonds while another $150 million would be borrowed via a revived industrial development authority. The plan calls for an additional $900 million to come from the state. Officials said this week that they have secured commitments for most of the state’s portion, and have “reconstituted” the industrial development authority. A board must still be assembled to lead that group.

The TIF portion of the proposal, which will allow the city to borrow money against new revenue expected to be generated by improved properties, will allow the city to quickly scale up efforts to rehabilitate vacant homes, city officials said. Michael Mocksten, the city’s director of finance, said Baltimore can begin to issue bonds one to two months after the proposal is approved by the Baltimore City Council. The bonds will be issued in tranches (three to seven of them) and will generate up to $65 million under the legislation being proposed this week.

Borrowing beyond $65 million will require additional approval by the council. Officials said city residents should expect to see “significant progress” within a year after bonds are floated.

Proposed TIF parcels include properties the city already owns, some that are already in the pipeline for city acquisition and those eligible for in rem foreclosure , a process that allows the city to foreclose on tax liens and take clear title to a property. Some vacant lots were also included to help with assembling larger sites, Kennedy said.

Council members will have the ability to amend the proposed list of properties included in the TIF district before voting on the legislation, but the district cannot be changed post-approval, Kennedy said.

Council President Nick Mosby is introducing the legislation on behalf of the administration. He could not be reached for comment Friday.

While rates won’t be known until bonds are put on the market, Mocksten said he was optimistic about interest rates for the TIF district.

“There’s a growing interest in the investment field in community investment and the kind of investment that promotes positive social outcomes,” he said. “We think the rates that we’re going to get will be very competitive.”

Funds generated by the TIF bonds can be used for acquisition of properties, but will also be available to homeowners and developers, according to the legislation. Depending on the project, loans will be available to help close the appraisal gap on the properties — the difference between the cost to renovate a home and the price a renovated home can command on the market.

Other work would build upon strategies the city has already employed in impact investment areas. In those zones, the city has offered a holistic redevelopment plan that includes demolition and stabilization of properties, acquisitions, live-work incentives, down payment assistance and home repair grants. The plan also includes funds for infrastructure in the neighborhoods around the properties such as light posts, sidewalks and alleys that have been neglected or fallen apart as blocks were abandoned.

The Baltimore City Council will meet Monday night.