EBDI Promises More Openness in $1.8B Baltimore Project

Critics of the $1.8 billion biotech project near Johns Hopkins Hospital in East Baltimore demanded Wednesday night more scrutiny of the nonprofit developer of the partially taxpayer-financed project, which has been mired in delays.

At a four-hour hearing, convened by Councilman Carl Stokes, representatives of the nonprofit East Baltimore Development Inc. pledged more openness and promised lawmakers more details about finances and jobs created by the project. EBDI officials said they would produce documents for a second hearing that Stokes announced last night.

At Wednesday’s City Hall hearing before the council’s Taxation, Finance and Economic Development Committee, Stokes and others expressed frustration with EBDI, which was created by city government and Johns Hopkins in 2002 to lead “The New East Side" project. The public-private venture promised gleaming new biotech lab buildings as engines to transform the blighted area around the hospital.

But EBDI has yet to provide detailed information that the council committee requested before the meeting.

EBDI opened the hearing with an elaborate slide show touting a vast urban transformation that would supplant rampant poverty, despair and decades of lost opportunities with thousands of new or rehabbed homes for different income ranges and thousands of new jobs in the Middle East neighborhood.

Stokes, the committee’s chairman, however, singled out for criticism the company's chief executive for not producing the requested information as promised.

“The transparency issue is what we have a problem with", Stokes told EBDI CEO Christopher Shea. “You’ve got to tell us the truth. You only get one shot at it. We have to drill down if there’s a problem.”

In a statement just before the hearing, Stokes said the findings reported by "The Daily Record" after the newspaper’s five-month investigation “raised serious questions about the spending practices, oversight, use of public dollars and outcomes to date of the mission of EBDI.”

In the first of five parts in its series, which ended in early February, the Daily Record concluded: “The nation’s largest urban redevelopment project, stalled without a major biotech component, is struggling to regain momentum and develop a new focus."

Emotional tales of dreams deferred, and, by now, all but abandoned in many cases, punctuated the hearing.

Former Middle East resident Ava Warren, a Johns Hopkins Hospital employee, said she had been promised $150,000 to relocate after she failed to persuade EBDI to let her stay in her home near her job.

“It took me over five years to get my house” outside Middle East, against her wishes, Warren testified, before turning to speak directly to EBDI officials: “You gave me nothing but heartache.”

She called EBDI’s broken promises a “disgrace,” adding she must borrow money to cover the cost of repairs at her home and cover essentials.

“By the grace of God, I am OK,” Warren said. “By the grace of God, I will be OK.”

Donald Gresham, a community activist moving to a new house in Middle East, likened EBDI’s treatment of residents to that of servants on a plantation and complained that Hopkins’ priorities took precedence over poor residents’ needs.

“Everything the residents were given, we fought for,” Gresham said.

The council had voted to schedule the hearing, and request EBDI representatives testify and present financial and other documents, as part of an investigation into the biotech project and, more broadly, into other publicly financed projects in Baltimore.

The council's response to criticism over such projects could have implications far beyond Middle East, the impoverished, African-American neighborhood just two miles northeast of the Inner Harbor.

Indeed, requiring greater transparency from developers of projects receiving millions in public aid in the form of tax breaks and subsidies could have a major impact on the fate of existing and potential projects throughout the city.

In December, Stokes, a District 12 Democrat, unveiled a city task force to scrutinize tax-increment financing awarded to developers of big-ticket projects. The strategy essentially defers taxes on the basis of promised return on public investment and improvement in the quality of city life.

Stokes had told Baltimore news website Investigative Voice at the time that the task force would undertake a thorough cost-benefit analysis of many of the more recent deals. Stokes told IV that he pushed for the task force because of his consternation over a request from the BDC to grant millions in tax subsidies to lure a developer to build on one of the Inner Harbor’s last undeveloped parcels.

As a City Council member from 1987 to 1995, Stokes had earned a reputation for his knowledge of budget matters and education during one of the city school system’s lowest points, in the early- to mid-1990s. After leaving the council, Stokes served on the city school board and lost his bid to become Baltimore mayor in 1999 to now-Gov. Martin O’Malley.

Stokes returned to the council last year when council members unanimously elected him to fill a seat left vacant when Bernard C. “Jack” Young became City Council president.

Now, Stokes said he’s considering a possible bid to unseat Mayor Stephanie Rawlings-Blake.

Such widespread support for more legislative oversight of publicly financed projects reflects a growing disenchantment with the longstanding practice of relying on tax breaks to foster development.

The tax-increment financing tool has been used in Baltimore since well before the famous “dollar houses” of Federal Hill, touted by Time magazine and urban planners, as well as more recent projects completed before the recession.

Among them: construction of two publicly financed stadiums downtown, including the most-emulated baseball park of the late 20th century; a $151 million Baltimore Convention Center expansion, which has produced dubious results; a $305 million convention center Hilton hotel at Camden Yards, bankrolled entirely with public financing. The upscale Hilton Baltimore has instead incurred $31 million in losses in two years and a series of budget deficits, Investigative Voice reported.  

The Daily Record investigation that prompted Wednesday night’s hearing was by far the most ambitious and comprehensive reporting to date on the EBDI project. The five-day series, called “A Dream Derailed,” was based on a five-month investigation by Melody Simmons and Joan Jacobson.

Among the key findings in the series, published Jan. 31-Feb. 4, were:

▪ In the 88-acre footprint of the biotech project, which the business/legal newspaper calls the nation’s biggest urban redevelopment effort, much of the Middle East neighborhood is languishing: boarded, vacant houses, poverty, despair, violence. This, a decade after the start of the project amid great fanfare and then-Mayor Martin O’Malley’s promise of thousands of new jobs and a walkable, safe Middle East community where residents of varying income levels would live in new homes.

▪ The biotech project—beset by the nation’s economic downturn, unanticipated difficulty luring the biotech industry and, critics would suggest, red tape, inertia, lack of government oversight and indifference—is far behind schedule. Only one of five planned biotech buildings, seen as anchors critical to economic development, has been built, and the project has fallen well short of the promised creation of jobs or new housing, though it has done more perhaps than any other effort in decades to provide both. “But,” the newspaper concluded in the series: “The dream of a biotech park has been abandoned, putting the promise of thousands of new jobs in limbo. Public and private sector leaders are scrambling for a new focus for the project, saying it’s too big to fail.”

▪ About $564 million has been committed to the biotech project, with the publicly financed tab totaling $212.6 million, more than a third from loans it’ll take Baltimore City three decades to pay off with diverted property taxes.

▪ Lax government oversight has often hampered the project, leading to little accountability or transparency. Example: Former Mayor Sheila Dixon told The Daily Record during its investigation that she didn’t know the city had sold $78 million in bonds to support the biotech project when she was mayor. The Tax Increment Financing bonds, sold in 2008 and 2009, finance the purchase and demolition of houses and relocation of longtime residents. The TIF tab, when the city repays the bonds with interest in 2039: $199 million in transferred city property tax revenue, financial records showed. (Construction of East Baltimore Community School, a planned $50 million public school scheduled to open in 2014 in East Baltimore, may be financed in part by TIF bonds that had been slated to pay for demolition of vacant row houses in Middle East, The Daily Record reported March 10.)

▪ More than 600 Middle East residents have been displaced, and many of them say EBDI forced them out and misled them about compensation, forcing some to take loans to survive.

Simmons and Jacobson, the two Daily Record reporters, said at City Hall Wednesday night that they stood by their series and numerous EBDI follow-up articles. They said they had spent five months reporting and writing the series, conducting more than 50 interviews and scrutinizing voluminous city, state and federal records.

EBDI responded to the series with a lengthy Feb. 11 letter to Daily Record Editor Tom Linthicum. The letter called the series unbalanced and misleading and charged it was based on preconceived notions reflecting a lack of understanding of the project, its financing or its goals.

“The series demonstrated an unfortunate lack of understanding of the facts and a lack of openness to information–provided by some of us and by others you interviewed–that contradicted an apparently preconceived conclusion,” the letter stated.

Shea reiterated that reasoning Wednesday night: "Public money for this project is raised by and spent by the City of Baltimore. When somebody comes to us and says we want to see your books, the answer is: We don't spend public money. ... Public funds are not used to pay EBDI's expenses.

“We've raised $133 million to support a city effort to revitalize this neighborhood,” Shea added.

In the EBDI letter, EDBI executives and board members asserted that the series gave short shrift to significant, tangible measures of progress, including:

▪ A $60 million, 572-bed graduate student housing project in the heart of the New East Side project was the largest privately funded construction project to break ground in Baltimore last year.

▪ Construction is to begin this year on the 230,000-square-foot Maryland Public Health Laboratory and a $30 million, 1,500-space parking garage with street-level retail.

▪ A former 11,000-square-foot historic eastside police station will soon become the Berman Institute of Bioethics at Johns Hopkins.

▪ EBDI’s workforce development program and other efforts have placed more than 2,700 people, including 738 East Baltimore residents, in jobs paying just under $11 an hour.

▪ The first 39 homeowners in the community, which has more than 200 new affordable rental units, will be returning former Middle East residents who received money to move into newly renovated row houses or to renovate their own.

In the crowded City Council chambers Wednesday night, EBDI Chairman Douglas W. Nelson expressed heartfelt support for the stalled New East Side project and took on a conciliatory tone.

"Nothing I have ever been involved in has been more important than EBDI,” Nelson said. “The City of Baltimore did too little to address that neighborhood's [Middle East’s] problems. ... We can and we will do better.

“We encourage former residents to return and new residents to join this community,” he continued. “Those that did not feel fairly treated are the ones that need to make their voices heard."

If the first hearing’s any indication – Stokes says he hasn’t scheduled the date for a second–their voices will indeed be heard, in City Hall and beyond.

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EDITOR'S NOTE: An earlier version of this article was revoked because it was accidentally posted before it was edited.