Will Towson Row funding come back to haunt Baltimore Co.?

In December, the Baltimore County Council tried to kickstart the stalled Towson Row development project. The council, by a 4-3 vote, approved a package of financial assistance to the private developers of the project by ratifying a “County Funding Agreement” signed by County Administrative Officer Fred Homan. The package included a $16.5 million grant (styled a “hotel tax advance”) and a $26.5 million loan (styled a “tax credit advance”).

County Executive Kevin Kamenetz pushed the measure through the council in a heated rush. He gave the proposal to the council on December 4th and the council approved it on December 18th. The problem with the package of financial assistance approved by the council is that, in its haste, the county took a shortcut around a provision of the County Code. Whether that will come back to haunt the county – and the developers – remains to be seen.

Brian Gibbons, chairman and CEO of Greenberg Gibbons, one of the developers, told the council that the county financing was necessary to attract investment from a California pension fund and make the project work. Towson Row would remain dormant without the money.

The crater in the heart of Towson where Towson Row is supposed to be became a political crisis for Mr. Kamenetz, a candidate for governor. He had touted the massive 1.2 million square foot development as the centerpiece of his “It’s Towson’s Time” initiative, and representative of his success in redeveloping existing communities.

Mr. Kamenetz scarcely could afford to have a barren construction site become a symbol of his gubernatorial campaign. Time was of the essence; the county needed to move quickly – apparently too quickly to follow the process set forth in county law.

Title 10 of Article 10 of the Baltimore County Code establishes the Economic Development Revolving Financing Fund. The title confers broad authority on the county to promote economic development through grants and loans. The grants and loans may be used to finance the purchase of land and construction of buildings.

The law requires the submission of an application including information on the need for the county assistance, the financial ability of the applicant, proposed costs and expenditure, and, in the case of a loan, sources of repayment and security for the transaction. Under the law, the county’s Director of Economic and Workforce Development “shall review financial assistance applications for need and financial ability of the applicant; and . . . may approve a financial assistance application up to the amount requested, if sufficient monies exist in the fund.”

 

PIA request

In response to my request under the Maryland Public Information Act, Will Anderson, the Director of Economic and Workforce Development, confirmed that no application was submitted under Title 10 by the developers of Towson Row. Mr. Anderson prepared no report on the “need and financial ability of the applicants.” In other words, the request for and approval of the financial assistance took place outside of the legal process enacted for that very purpose.

The legality of the financing package rises or falls on whether the Baltimore County administrative officer has the authority to contractually bind the county to make grants and loans to real estate developers independent of the process set forth in Title 10 of Article 10 of the County Code. If he has such authority, I can’t find it anywhere in state or county law. County Attorney Michael Field has ignored my invitations to point out the authority to me.

The council did not ratify the agreement by enacting a law approving it; the agreement was not approved by either an ordinance or resolution. Instead, the council used an informal administrative procedure that it uses to approve contracts to purchase goods and services. If the execution of the funding agreement by the county administrative officer was ultra vires, the ratification by administrative action of the council cannot save it.

In Tuxedo Cheverly Volunteer Fire Co., Inc. v. Prince George’s County, 39 Md. App. 322 (1978), the Maryland Court of Special Appeals cited “McQuillin on Municipal Corporations” for the following principle:

“The mode of contracting, as prescribed by law, is the measure of the municipality’s power to contract, and is exclusive. A specific designation of the manner in which contracts by municipal corporations shall be made operates as a limitation upon any general contractual power which is conferred.”

The Baltimore County Code prescribes a detailed process for approving grant and loan agreements to assure that the interests of the county and its taxpayers are protected. What made this county executive and county council believe that they could bypass that process?

There was widespread and vehement citizen opposition to the county financing package for Towson Row. Time will tell whether the financing package is challenged by a taxpayer’s suit. If it is, Mr. Kamenetz may come to regret the haste with which he proceeded.

[Published as an op ed by The Daily Record on January 18, 2018 but not posted to my blog until June 1, 2018. The date of posting that appears above was backdated to place all posts in the order in which they were written.]

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