The article below is very boring and not for beginners in tax public policy but these are the words we hear in media all the time. All kinds of financial instruments have been created----the rich have had some versions of this throughout history but now they are super-sized and doing great harm to all nations' economies especially in the US. What we have seen during CLINTON/BUSH/OBAMA are COMPLEX FINANCIAL INSTRUMENTS. For the most part they are saying-----
WE ARE COMMITTING FRAUD OR DOING THINGS THAT MOVE ALL WEALTH TO THE TOP AND WE DON'T WANT 99% OF PEOPLE TO KNOW THIS.
Create a very complicated network of financial deals that make oversight and accountability too expensive to occur---and then do what you want to do. meanwhile, the Congressional pols and CLINTON/BUSH/OBAMA who pass these laws allowing complex financial instruments tell their voters----IT COSTS TOO MUCH TO FIND THE FRAUD! IT'S NOT OUR FAULT.
When I posted the GOOD JOBS article describing all the corporate tax credits geared towards labor and justice----credits for job creation---credits for infrastructure development---credits for environmental green projects---all of those are laced with loopholes and with no oversight and accountability almost none of what they are supposed to do actually happens.
THE EASIEST EXAMPLE IS TAX CREDITS FOR HIRING FROM A COMMUNITY ACTUALLY NEVER HAPPENS OR IF IT DOES THE WAGES NEVER MEET THE TERMS OF THE TAX CREDIT.
The amount of money given as corporate tax credit for these purposes never met IS HUGE.
From Wikipedia, the free encyclopedia
Financial instruments are tradable assets of any kind. They can be cash, evidence of an ownership interest in an entity, or a contractual right to receive or deliver cash or another financial instrument.
International Accounting Standards IAS 32 and 39 define a financial instrument as "any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity".
Financial instruments can be either cash instruments or derivative instruments:
- Cash instruments —instruments whose value is determined directly by the markets. They can be securities, which are readily transferable, and instruments such as loans and deposits, where both borrower and lender have to agree on a transfer.
- Derivative instruments —instruments which derive their value from the value and characteristics of one or more underlying entities such as an asset, index, or interest rate. They can be exchange-traded derivatives and over-the-counter (OTC) derivatives.
Global Wall Street now has overseas nations doing to their citizens what is happening here in the US with all the complex financial fraud and splitting the profits. These financial categories are what protects the investments of the rich while the 95% of people lose all their wealth. It is as well how they shelter all their income from taxation while you and I cannot hide if we wanted to.
Financial Analytics & Derivatives
Financial uncertainty can’t be avoided. But uncertainty from fluctuations in the value of complex financial instruments can be measured, managed, and leveraged to your company’s advantage.
PwC’s Financial Analytics & Derivatives professionals use sophisticated models and analytical skills to value complex financial instruments and design strategies to reduce risk and maximize opportunities. Situations where your company could benefit from our Financial Analytics & Derivatives Services include:
- You own or are considering issuing financial instruments or contracts that include contingent payments, convertible features and other embedded derivatives, and need assistance determining fair market value for financial reporting purposes, tax planning or investment decision making.
- You are looking to hedge the risks of assets or liabilities that are subject to fluctuations in value.
- You are considering a business venture where you want to maximize the up-side potential while managing your exposure.
- You are structuring sophisticated compensation arrangements for executives that will help you attract top talent and need help understanding how these contracts will affect your balance sheet and income statement.
Financial Analytics & Derivatives:
Overview of areas served
Asset classes Specialized asset characteristics Services Business needs
- Convertible securities
- Embedded derivatives
- Structured notes
- Loan guarantees
- Conventional or unconventional payouts
- Contingent considerations
- Illiquid, non-tradable
- Hybrid securities
- Model analysis
- Strategic assessment/advisory
- Bifurcation of derivatives
- Financial reporting
- Tax planning
- Investment decisions
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- Compensation agreements
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How PwC can help
The Financial Analytics & Derivatives professionals at PwC can help your company with financial reporting and tax compliance or help your company manage financial uncertainty related to:
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A high-tech electronics manufacturer divested a foreign subsidiary using an investment agreement that contained complex put and call options requiring bifurcation for financial reporting purposes. We helped the company and its board to understand the fair value components of the investment agreement and potential future earnings-per-share impact due to quarterly mark-to-market. To fully capture the intricacies and inter-relationships among the put and call options, our valuation analysis combined a binomial model and Monte-Carlo simulation. Our methodology produced defensible results while saving cost and time for our client.
Obama ran for office in 2008 with the talking point----WE ARE GOING TO HOLD WALL STREET ACCOUNTABLE WITH POLICY CALLED 'PLAIN VANILLA' FINANCE along with all the other things he said regarding Wall Street banks as he installed all of Wall Street's 2% in all agencies that would have held Wall Street accountable. This term PLAIN VANILLA is that policy of reversing these decades of growing COMPLEX FINANCIAL INSTRUMENTS---- returning to finance and tax policy that was open and clean. We know Obama never meant it by looking at all the people he appointed.
Regarding corporate taxation-----this would have shined a light on much of corporate tax evasion and their ability to hide wealth from taxation.
One corporate tax hidden in all this tax mess is our city corporate property taxes. If Baltimore collected all the property taxes owed by corporations in the city we could rebuild each community with a small business economy with that tax income coming to our coffers----we would be flush with city revenue.
We discussed in detail the corporate property tax evasion policy REIT----it allows a corporation to SELL ITS PROPERTY TAX DEBT ON WALL STREET----and the shareholders tied to that FINANCIAL INSTRUMENT were supposed to pay that corporation's taxes. Well, know who were the major shareholders for that corporate property tax debt? PENSION FUNDS AND 401Ks tied to the 99%. Those rich/corporate shareholders tied to REIT deals simply did not pay that shareholder debt tied to REIT and VOILA----CORPORATIONS HAVE NOT PAID PROPERTY TAXES FOR DECADES. No oversight and acccountability by the IRS or our state comptroller means all that corporate tax debt is left unpaid.
THIS IS WHAT CREATED HUGE LOSSES IN REVENUE IN US CITIES AS OUR COMMUNITIES DECAYED.
NO-----the current policies with a new CONSUMER FINANCIAL PROTECTION BUREAU IS DOING NOTHING----
What is 'Plain Vanilla
'Plain vanilla signifies the most basic or standard version of a financial instrument, usually options, bonds, futures and swaps. Plain vanilla is the opposite of an exotic instrument, which alters the components of a traditional financial instrument, resulting in a more complex security.
BREAKING DOWN 'Plain Vanilla'
For example, a plain vanilla option is the standard type of option, one with a simple expiration date and strike price and no additional features. With an exotic option, such as a knock-in option, an additional contingency is added so that the option only becomes active once the underlying stock hits a set price point.
Plain Vanilla Basics
Plain vanilla is a term to describe any tradable asset, or financial instrument, in the financial world that is the simplest, most standard version of that asset. It can be applied to specific categories of financial instruments such as options or bonds, but can also be applied to trading strategies or modes of thinking in economics.
For example, an option is a “contract that gives the buyer of that option the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.” A vanilla option is a regular call or put option but with standardized terms and no unusual or complicated features. Because, for instance, put options give the option to sell at a predetermined price (within a given timeframe), they protect against a stock going below a certain price threshold within that timeframe. The more specific rules regarding options, like most financial instruments, may have different styles associated with regions, such as a European-style option vs. an American-style option, but the term ‘vanilla’ or ‘plain vanilla’ can be used to describe any option that is of a standard, clear-cut variety.
In contrast, an exotic option is just the opposite, and involves much more complicated features or special circumstances that separate such options from the more common American or European options. Exotic options are associated with more risk as they require advanced understanding of financial markets in order to execute them correctly or successfully, and as such they trade over the counter. Examples of exotic options include binary or digital options, in which the payout methods differ in that they offer a final lump sum payout, under certain terms, rather than a payout that increases incrementally as the underlying asset’s price rises. Other exotic options include Bermuda options and Quantity-Adjusting options.To point to another example of the use of plain vanilla, there are also plain vanilla swaps. Swaps are essentially an agreement between two parties to exchange sequences of cash flows for a predetermined period of time under terms such as an interest rate payment or foreign exchange rate payment. The swaps market is not traded on common exchanges but is rather an over-the-counter market. Because of this and the nature of swaps, large firms and financial institutions dominate the market with individual investors rarely opting to trade in swaps.
A plain vanilla swap can include a plain vanilla interest rate swap in which two parties enter into an agreement where one party agrees to pay a fixed rate of interest on a certain dollar amount on specified dates and for a specified time period. The counter-party makes payments on a floating interest rate to the first party for the same period of time. This is an exchange of interest rates on certain cash flows, and is used to speculate on changes in interest rates. There are also plain vanilla commodity swaps and plain vanilla foreign currency swaps.
Plain Vanilla in Context
Plain vanilla is also used to describe more generalized financial concepts. A plain vanilla card is a clear-cut credit card with simply defined terms. A plain-vanilla approach to financing is called a ‘vanilla strategy.’ Such a plain-vanilla approach was called for by many in the political and academic finance world after the 2007 economic recession due in part to risky mortgages that contributed to a tanked housing market. During the Obama administration, certain politicians, economists, and others pushed for a regulatory agency that would incentivize a plain-vanilla approach to financing mortgages, stipulating – amongst other tenets – that lenders would have to offer standardized, low-risk mortgages to customers.
Overall, in the wake of the 2007 global financial crisis, there has been a push to make the financial system safer and fairer. This mode of thinking is reflected in the passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, which also enabled the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB enforces consumer risk protection in part through regulating financing options that call for a plain-vanilla approach.
Then CLINTON/BUSH/OBAMA sold the idea of special economic zones that were tax free for corporations as job creators and economic growth. This was when Congress passed that FOREIGN ECONOMIC ZONE policy and said it was all about growing global trade. This was always only a tax break for global corporations but it was LOCAL CHAMBER OF COMMERCE that promoted these tax policies PRETENDING it would favor small businesses. Well, if the MASTER PLAN of US cities as International Economic Zones are to have global corporate campuses controlling all business----pushing more and more small businesses out of business---there was and will be little tax savings for small businesses---it was simply installing the GLOBAL TAX POLICY SEEN IN ALL INTERNATIONAL ECONOMIC ZONES OVERSEAS.
You see below in India---same corporate tax incentives and know what? They have eliminated every corporate tax category we have here in the US. Congress these several years eliminated DUTY taxes on imported equipment because all equipment is manufactured overseas. It eliminated CAPITAL TAXES paid for structures like warehouses, depreciation taxes, income taxes for those corporations inside International Economic Zones. That is basically all corporate taxation in the US. While we listen to Congress PRETEND it is arguing over CORPORATE TAX REFORM-----with Clinton/Obama Wall Street global corporate neo-liberals PRETENDING to want some corporate tax responsibility-----they have already created a global corporate tax structure that all International Economic Zones will have under TRANS PACIFIC TRADE PACT.
THIS IS WHY WE ARE SEEING ALL THESE CORPORATE TAX BREAKS IN OUR US CITIES IN ALL KINDS OF FORMS.....GEARING UP FOR INSTALLING TRANS PACIFIC TRADE PACT. City/national governments will supposedly have no ability to change those global tax policies.
WE THE PEOPLE WILL NO LONGER DECIDE HOW OUR CITY GETS ITS TAX REVENUE.
'Tax Incentives for Investors
Incentives and facilities offered to units located within an SEZ can include:
- Duty free importation of required machinery, production lines and related equipment
- Duty free import and domestic procurement of component parts as required for the final product
- 100% VAT rebates on exported India sourced components;
- Income tax breaks – depending on the scope of business and where the business is located'
India’s Special Economic Zones & Tax Incentives
Posted on August 5, 2013 by India Briefing[Editor’s note: this article was originally published on Aug. 5, 2013, but has been since updated to reflect recently passed amendments]
Aug. 15 – Foreign investors wishing to take advantage of development zones for export-related manufacturing and assembly, and obtaining tax incentives when doing so, may consider establishing a presence in one of India’s special economic zones (SEZs).
India first allowed SEZs after its passage of the Special Economic Zones Act, 2005 on 23 June 2005. The Act provides for the establishment, development and management of SEZs for the promotion of exports and related activities.
Basically, a SEZ is a geographical region designed to export goods and provide employment opportunities that is exempt from certain federal laws regarding taxes, quotas, FDI-bans and labor laws in order to competitively price goods made there. SEZs also include free trade zones, export processing zones, free zones, industrial parks or industrial estates, free economic zones and urban enterprise zones
Indian SEZs closely follow the successful Chinese SEZ model and, like China, foreign-invested businesses may be established in SEZs for the manufacturing of goods, the provisioning of services, and other activities including processing, assembling, trading, repairing and reconditioning.
India’s SEZ sectors are classified into four types:
- Special Economic Zones for Multiple Sectors
- Special Economic Zones for Specific Sectors
- Special Economic Zones for Free Trade and Warehousing
- Special Economic Zones for IT/ITES/Handicraft and Other Industries
Tax Incentives for Investors
Incentives and facilities offered to units located within an SEZ can include:
- Duty free importation of required machinery, production lines and related equipment
- Duty free import and domestic procurement of component parts as required for the final product
- 100% VAT rebates on exported India sourced components;
- Income tax breaks – depending on the scope of business and where the business is located
Further, the Indian government just recently updated its SEZ rules by way of the Special Economic Zones (Amendment) Rules, 2013, this week. Specifically, the key changes are:
- It now permits the sectoral broad banding guidelines as approved by the Board of Approvals (i.e., an SEZ may now house various types of business activities within a single sector if they are of similar products or services);
- The minimum area requirements for multi-product SEZs is now reduced from 1000 hectares to 500 hectares, or from 100 hectares to 50 hectares for sector-specific SEZs and SEZs with one or more services;
- The minimum area requirement for setting up an IT or ITes SEZ is now subject to the minimum built up processing area conditions of its respective state/city;
- There is now a minimum area requirement of 10 hectares for SEZs proposed to be set up exclusively for electronic hardware and software (including ITeS), bio-technology, handicrafts, gems and jewelry, non-conventional energy and agro-based food processing;
- Benefits (fiscal incentives) are now available for additions/inclusions to pre-existing structures; and
- A Unit may now opt out of a SEZ by transferring its assets & liabilities to another person by way of transfer of ownership, including a sale of the SEZ Unit.
1000 hectares above is 3 miles------that is the size of an average global corporate campus. We see India reducing this size AFTER having had SEZs for decades. We can expect these 3 miles campuses because the intent is to kill all other small and regional businesses with these monopolies.
What does a mayor of a city do when he/she is losing corporate tax revenue? Rebuild each community with a local economy filled with small businesses paying taxes. 1% Wall Street global pols did the opposite---they allowed all local economies and communities die.
If the MASTER PLAN is to fill US cities like Baltimore with global corporate campuses and global factories all tax free----who will support all of the cities infrastructure, city vital services like police, fire, public works----who will support the schools, public parks with the revenue needed? The answer is THE 99%. What they cannot extract from citizens will not exist----as our public schools and public parks. This is how we know all this talk of global corporate campuses with public parks and open access to these campuses IS NOT TRUE.
American people saw what having no corporate tax base did to our rural and urban governance----it created decay of infrastructure and services so totally eliminating corporate taxes in what they think is a PERMANENT GLOBAL TAX TREATY----will leave all ability to have communities outside of these global corporate campuses IMPOSSIBLE.
So, who will live on Baltimore's global corporate campuses? The global 1% and their 2% with global labor pool tied to global factories. Where does that leave the citizens of Baltimore? Well, they will either be in those global corporate factories or sent overseas to be in that global labor pool.
THIS IS WHAT ELIMINATING ALL CORPORATE TAXES DOES. TAKES ALL POWER OF PUBLIC POLICY AWAY FROM CITIZENS -----BECAUSE WE HAVE NO REVENUE IN OUR LOCAL OR FEDERAL COFFERS TO PAY FOR WHAT WE WANT.
Baltimore citizens are shouting for recreation centers, public parks, repairs of streets and water pipeline and they won't get it ----all tax revenue goes to only global corporate campus construction. Who supports all this global corporate campus construction? Wall Street Baltimore Development Corporation 'labor and justice organizations' who push all that policy under the guise of helping the poor.
JOBS, JOBS, JOBS, AFFORDABLE HOUSING, AFFORDABLE HOUSING, AFFORDABLE HOUSING-----WHEN THERE IS NO INTENTIONS OF CREATING EITHER.
Here you see the transition from Baltimore City receiving corporate taxes and moving towards more and more citizen taxation, fees, and fines. This is Clinton era with all those complex financial instruments allowing the rich and corporations to evade taxation----it had to come somewhere and Schmoke---as O'Malley, Dixon, now Rawlings-Blake works to make that from WE THE PEOPLE.
Schmoke's case for tax rise
April 28, 1996|By Kurt L. Schmoke
The following is an open letter to the citizens of Baltimore from Mayor Kurt L. Schmoke. No one likes to pay taxes. And no one likes to raise them. Those are givens. But in the words of a great jurist from the past, "Taxes are what we pay for a civilized society."
SEEMS SCHMOKE DID NOT SEE THIS STATEMENT ABOVE APPLYING TO CORPORATIONS AND THE RICH.
Those words have relevance to Baltimore City today as we find ourselves facing two basic choices if we are to maintain a balanced budget, which I am obligated to do, and maintain our quality of life, which I am committed to do.
We must find new revenue sources, or we must reduce the government services that are so essential to preserving the city's quality of life.
The correct choice is clear: We must find new revenue sources, and we must do so now. That is why I recently proposed that we raise the city's piggyback income tax -- which is a percentage of the state income tax -- from 50 percent to 55 percent.
Given the financial conditions of Baltimore City, I see no other alternative. We face a revenue shortfall of about $8 million to fund basic city services for the 1997 fiscal year. This shortfall results from such realities as a stagnant property tax base, cutbacks in state and federal funding, and flat growth in other revenue sources.
We cannot count on potential revenues, such as those that would come from putting slot machines at race tracks. We should not raise the property tax rate, already the highest of any jurisdiction in the state. An important part of our strategy to attract more businesses and residents to the city is to lower the property tax rate, which I have done three times since I came into office. Nor can we expect additional cuts in expenditures alone to do the job.
Under my administration, the city has been both diligent and vigilant about controlling expenditures. We have reduced the number of city employees from 30,000 when I first became mayor (nine years ago) to 26,400 today, and we are instituting early retirement incentives to reduce the city work force even further.
We have also cut expenditures by increasing efficiency in our delivery of services and by eliminating duplication. For example, we merged the Department of Transportation into the Department of Public Works and the Urban Services Agency into the Department of Housing and Community Development.
NOTICE THESE ARE THE AGENCIES NOW FALLING UNDER QUASI-GOVERNMENTAL CONTROL?
We also consolidated the printing and graphics arts shops of several city agencies into one unit.
Moreover, we have privatized some city services, initiated a program to reduce energy consumption in city buildings, and set up a new unit to study city operations and make recommendations for improvements. We will continue with these efforts, and others, as part of our ongoing drive to increase productivity and reduce costs.
But the fact remains that without an infusion of new revenue, we will still be forced to cut essential services.
This means the city would have to close library branches, recreation centers and neighborhood swimming pools. We would also have to curtail some operations of the Baltimore Museum of Art and reduce the staff of the States Attorney's office at a time when the office is overburdened with cases. And more.
I don't believe the citizens of Baltimore will support such harsh measures to balance the budget. A factory in economic distress can cut out a product line. But when a city, trying to avoid economic distress, does that -- cuts off services -- people are hurt and the quality of life is diminished for all.
We can avoid this alternative by raising the piggyback income tax, as other jurisdictions have done. Raising it to 55 percent in the calendar year beginning Jan. 1, 1997, would bring in about $4.9 million in additional revenue in fiscal year 1997. That will not solve all our budget woes, but it will lessen the need for drastic cuts in services.
A 55 percent rate would mean that a person having an adjusted gross income of $20,269 a year would pay only $34 a year more in taxes. That amounts to 65 cents a week, the cost of a small bag of potato chips. Surely, that is a small price to pay for making it possible for a child to continue to go to his neighborhood library after school to read a book, browse the Web, or do his homework in a quiet, nurturing place.
And surely, that is a small price to pay to enable children to continue to enjoy the kind of recreational activities and benefit from the kind of positive mentoring that are available through the city's recreation centers.
A 55 percent piggyback rate would also bring Baltimore City in line with other major jurisdictions in Maryland that have raised their rates above the 50 percent level. Baltimore County has implemented a 55 percent rate, while both Prince Georges and Montgomery have set their rates at 60 percent.
So even though I know it is never popular to call for an increase in taxes, I am confident that you will understand why we must do so at this time. Government must serve the people; and it must have the resources to do so. That's the bottom line.
Pub Date: 4/28/96
Now, let's come back locally to this UnderArmour/Sagamore global corporate campus. We explain to those labor and justice organizations shouting against TIFs rather than against the global corporate campus for these reasons.....global tax policy has all this tax free and installing it will bring that to Baltimore. This is why as well PLANK feels ENTITLED to ask for what will be $1 billion in city and state tax relief and this is just the footprint of a headquarters. The tax costs will be huge and it will come from WE THE PEOPLE --whether Federal, state, or local taxes.
I repeat often to citizens in Baltimore we must move away from this idea that it is black or poor communities being killed. These policies kill all communities as even today's white communities will become filled with a global 1% and their 2%----Roland Park does not have UBER RICH. So these corporate tax policies will assure there is no tax revenue available for any communities OUTSIDE OF GLOBAL CORPORATE CAMPUSES.
'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'.
Under Armour’s Slam-Dunk Deal
The apparel company’s owner is pursuing a real estate deal that will expand its footprint and help transform Baltimore. Is he asking too much of the city to do so?
By Rachel M. Cohen
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
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.
Despite being a self-made billionaire, Plank wants a lot of help to make his vision for Port Covington a reality.
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.
The size of the TIF that Plank has requested is unprecedented for Baltimore. At more than half a billion dollars, it would be the third-largest TIF deal for a private company in U.S. history. And though the money it would raise would go toward funding improvements like parks, roadways, and bike paths, rather than Under Armour’s new headquarters, Sagamore’s project in Baltimore must also be understood as a tool that would help fuel Under Armour’s continued growth.
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.
* * *
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.
Tom Geddes, the CEO of Plank Industries, which serves as Plank’s private-investment vehicle, denies that Sagamore’s TIF request is anything more than a loan from outside investors to fund public infrastructure. “Some have mischaracterized the TIF as a ‘subsidy’ or a tax break. It is anything but,” he tells me. “There are no tax breaks for developers involved. There are no subsidies. There are no handouts.”
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.
Community activists also worry that the proposed Port Covington plan would exacerbate racial segregation and do nothing to address Baltimore’s affordable-housing crisis. While Sagamore has touted its (nonbinding) goal of making 10 percent of its residential units affordable, the company defines its market for affordable housing as families earning 80 percent of the area median income of $86,700 per year. Baltimore City’s median income, though, is $42,000. Carol Ott, the director of the Baltimore-based Housing Policy Watch, says if Sagamore is serious about making its units affordable, it needs to use numbers that actually reflect the city’s population.
There’s also the matter of how the TIF deal could impact state funding for city schools. The Baltimore Sun reported that the city’s rapid economic growth spurred by local tax breaks and smaller-scale TIFs led to an automatic $24 million cut in state aid to public schools over the past year. This happened because the state assumes Baltimore’s wealth has gone up—based on property values and resident income—but because many of these valuable buildings pay no property tax, little new revenue actually goes into the city’s coffers. Since the Port Covington TIF is far larger than any other project Baltimore has undertaken before, the risk of severe fiscal drain looms large. For now, the state has agreed to not reduce education funding for three years as the Maryland State Department of Education reviews its school funding formula.
“The problem is, in three years the state could very well say, ‘Hey local jurisdictions, this is on you. You get no break.’ Or, ‘You get only a partial break, since you decided this TIF project was in your interest,’ ” says Melissa Schober, whose daughter attends an elementary school in the city. “As a parent, I don’t know what we would do except move, the cut would be so severe and substantial.”
There’s another reason to be skeptical. Port Covington would be Sagamore’s first major undertaking in the world of commercial real estate. Besides the ongoing construction of a new hotel and the transformation of an old garage into office space, Plank’s real estate firm lacks a track record in development. “This is a brand new developer, we don’t know what they’re capable of,” says Lawrence Brown, an assistant professor at Morgan State University. “I don’t know why the city would feel comfortable giving so much of its development future to one entity like this.”
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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.)
City leaders are discussing clawback provisions and other safeguards to protect Baltimore taxpayers if Port Covington goes belly up or underperforms, but at this point it’s not really clear what teeth these protections would have. In other municipalities, TIFs have left taxpayers with unanticipated shortfalls or have been used fraudulently by politicians with little oversight. In Chicago, nearly half of the $1.3 billion in TIF funds spent by the Rahm Emanuel administration between 2011 and 2014 went toward downtown gentrifying neighborhoods while blighted communities received little to no investment and saw decreased tax revenue for schools and public services. While those specific TIF funds may never have gone toward needy neighborhoods, these acts of financial engineering, which can place extra burdens on cities and on strained budgets, tend to only benefit the kinds of projects that make developers very rich.
“I think it’s being fast-tracked, it’s unfair to the taxpayer, and proper due diligence cannot be made so quickly on such a complex piece of legislation,” says Councilman Stokes. “It’s quite frankly unethical and doesn’t allow us to do any independent market analysis. We’re not facing a legal deadline, but we’re under a lot of pressure from the developer.”
CARL STOKES WAS THAT ESTABLISHMENT CANDIDATE WHO SHOUTED THROUGHOUT THE PRIMARY AGAINST THIS TIF AND THEN IN APRIL THE FINANCE COMMITTEE HE LEADS DOES JUST THAT---FAST-TRACKS APPROVAL.
Sagamore, which recently started a Change.org petition in support of its project, obviously doesn’t see it that way. “We have received tremendous and enthusiastic support from stakeholders across the city,” says Geddes, the Plank Industries CEO. “We’re excited to be a part of building something great in this city and proud that Baltimore is home to one of the largest urban renewal projects in America right now, a redevelopment that will bring tens of thousands of jobs at a time when the city needs a major economic boost.”
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.