Originally published in Slate on June 20th, 2016.
It’s been a lucrative couple of years for Kevin Plank, CEO of Under Armour, the country’s second-largest maker of sports apparel. His company’s revenue has grown by more than 20 percent for 24 consecutive quarters, and its savvy sponsorship deals—with NBA MVP Steph Curry, pro golfer Jordan Spieth, and ballet dancer Misty Copeland—have turned the brand into a powerhouse that now can plausibly be mentioned in the same breath as Nike and Adidas. Under Armour’s expansion into health and fitness technology has even placed it in competition with the likes of Apple and Google.
Just as ambitious are Plank’s efforts in Baltimore, where Under Armour’s headquarters have been stationed since 1998. As part of an effort to grow the company’s HQ staff—from its current headcount of about 2,000 employees to 10,000—Plank is seeking to redevelop some 260 acres of mostly empty industrial land on the south Baltimore peninsula. In addition to a new Under Armour headquarters, Plank hopes to create what would amount to an entire new waterfront neighborhood, complete with shopping, dining, office space, parks, and nearly 14,000 residential units. It’s a real estate development project that could transform the city.
The area Plank has his eyes on, known as Port Covington, has been an underused eyesore for decades. But while many in Baltimore’s political class are cheering the project’s potential to create new jobs and stimulate the local economy, there’s good reason to worry that if the plan goes forward, it could end up leaving the city’s most vulnerable residents worse off than they already are, all while saddling the city with risk it can’t afford.
The problem is that Plank, despite being a self-made billionaire, wants a lot of help to make his vision for Port Covington a reality. To that end, his real estate firm, Sagamore, has asked the city of Baltimore for a record-breaking $535 million in so-called tax increment financing. TIFs, as these types of loans are known, are used to fund infrastructure by selling municipal bonds to private investors, and then property taxes generated by the new development are used to pay them back. Though beloved by titans of commercial real estate, TIFs tend to draw scrutiny because they divert so much money away from a city’s general fund. MuniCap, a consulting firm that Sagamore hired to analyze its TIF application, projects that Plank’s development would not yield property tax revenue for Baltimore’s coffers until about 2040, even as the site would require substantial city resources in the interim.
At a time when Baltimore is still reeling from the mass unrest that followed the death of Freddie Gray in police custody last year, the deal—as it’s currently structured—strikes many locals as a handout to the well-heeled. They have a point.
“[We are] outraged that, one year after the world bore witness to the decades of disinvestment in poor neighborhoods and communities of color, city leaders would respond by bending over backwards to back a $535 million playground for the rich,” Charly Carter, the executive director of Maryland Working Families, a progressive political advocacy group, says. “This is the new Jim Crow—black and brown families subsidizing wealthy developers while our own neighborhoods crumble.”
Baltimore has a long record of inequitable public investment, with political leaders financing flashy projects in mostly white areas and profits rarely trickling back into the poor, black communities that need funding most. The fear now being expressed by local progressive organizations, housing activists, and labor unions is that, for all the prosperity it will bring Kevin Plank and Under Armour, Sagamore’s TIF plan may turn out to be just another chapter in Baltimore’s history of bad development deals.
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The campaign to remake Port Covington has been aggressive and well-funded. Sagamore has already spent hundreds of thousands of dollars on marketing the development to the public, and its forceful slogan—“#WeWill build it”—suggests that the project is a fait accompli.
Which isn’t far off the mark. The Baltimore Development Corp., a public-private agency, approved Plank’s $535 million TIF request in March, and the city’s Board of Finance backed it in April. Now all it needs is the Baltimore City Council’s final approval, which could come as early as August. Activists have urged the council to postpone its vote to give the public more time to comb through the 545-page proposal. But according to Councilman Carl Stokes, who heads the body’s economic development committee, Sagamore wants the deal approved by the end of the summer.
That’s semantics. There’s little question that Sagamore would benefit from the deal—MuniCap reported that Plank and his investors would earn $400 million more on the development with TIF financing than they would without. On top of the TIF money, the Port Covington project would be eligible for more than $760 million in additional tax breaks. As Barbara Samuels, a fair housing lawyer with the Maryland American Civil Liberties Union, has said, the idea that Sagamore is asking for anything but a subsidy is an insult to the public’s intelligence. “They claim it’s not a tax break, but it most assuredly is a tax break,” says Stokes.
Subsidies are meant to generate benefits for cities and are usually reserved for projects that would be too difficult to fund absent government financing. But right now, it’s not at all clear that Baltimore would benefit enough from the Port Covington deal to warrant such a massive public investment.
There’s no doubt the city needs more jobs. Nearly 7 percent of Baltimoreans are unemployed, and for young black men, that figure is 37 percent. The city certainly feels indebted to Kevin Plank and Under Armour, too—few other esteemed companies offer comparable employment opportunities for locals. Yet according to Sagamore’s own TIF application, after it’s built, Baltimore residents are expected to fill just a third of the nearly 35,000 permanent full- and part-time jobs projected for Port Covington; the rest of the new employees would live outside the city. And there’s no guarantee, under Plank’s current terms, that they would even earn a living wage. Baltimore’s minimum wage is currently $8.25 per hour and is supposed to hit $10.10 by 2018. A living wage in the city for a childless adult is $12.42 per hour.
If Sagamore gets its way, its nearly 600-page TIF application would be approved in just a few weeks—well before the next round of political leadership takes office in January. But local activists and labor unions want to see the plan slowed down, to ensure their concerns about quality jobs, affordable housing, and public education are properly addressed.
If local officials insist on moving forward, says Maryland Working Families director Charly Carter, advocates will demand a transparent process; a plan to help struggling neighborhoods near the development; and a “good jobs guarantee” with local hiring, full benefits, and living wages. “Most importantly,” she adds, advocates want a “clawback provision”—a contractual agreement with Sagamore—ensuring that “if the development falls through, our poorest residents aren’t left holding the bag.” (For example, if the expected jobs don’t pan out, or the property tax generated is lower than anticipated, or the developer walks away—local governments would still have to ensure that they don’t default on their bond payments and that Sagamore retains some responsibility.)
When I ask why the project is barreling forward so quickly, Sagamore’s president, Marc Weller, says that if Sagamore’s TIF is not approved as soon as possible, the city “may miss out on hundreds of millions of federal dollars that require TIF approval.” Specifically, he cites federal grant programs, like the Department of Transportation’s FASTLANE grant, which require cities to make local matching contributions in order to access funds.
But Weller made clear that government subsidies aren’t the only reason for the rush and that Under Armour’s growth is of pressing concern. The company, he says, “has simply outgrown its space” and therefore needs to “aggressively move forward with the construction of a new campus.”
Asked if the company will leave the city if the TIF deal falls though, Geddes answered, “the primary purpose of the Port Covington redevelopment is to allow Under Armour to grow in Baltimore City, and to keep the many direct and related jobs in Baltimore.” #WeWill see.