A decade ago, city officials bought into ambitious plans to develop an industrial stretch of South Baltimore into what would become Baltimore Peninsula, granting it the most generous development bonds package in city history: $660 million in tax increment financing, or TIF.

With the project’s visionary, Under Armour founder and CEO Kevin Plank, walking away from future development, what happens to the public money that Baltimore agreed to front?

The TIF for the 235-acre project has generated controversy from the beginning. Here’s what you need to know about where it all stands in light of Plank’s exit.

What was awarded, and why?

The Baltimore City Council approved the $660 million bonds package in 2016 on a 12-to-1 vote after months of intense lobbying by the developers and project supporters and scrutiny from neighborhood advocates and economic watchdogs. (Councilman Warren Branch, who died last year, voted against it.)

It may seem intimidating to understand a TIF, but think of it like a long-term tax exemption.

Maryland’s in-house bond issuer, the Maryland Economic Development Corp., floats bonds to cover infrastructure costs for things like roads, sewers and athletic fields. Those bonds are repaid to bondholders with future property taxes generated by the new development.

Sagamore Development and Goldman Sachs have argued that their real estate concept wouldn’t be financially possible without government subsidies. The developers won over council members and community groups by promising to incorporate diversity in hiring, give money to neighborhood groups and set aside affordably priced residential units for people with low incomes.

Supporters of the TIF package argue that it’s a safer alternative than other types of bonds, which cities and states are on the hook to repay. Under a TIF, Baltimore creates a so-called “special tax district” that requires the owners to pay the debt service in the event the property tax revenue doesn’t cover it.

Who’s at risk?

One of the most controversial aspects of TIF packages? The possibility of failure.

Representatives from Sagamore and Goldman Sachs said Wednesday that they did not default on their $66 million land loan from Bank OZK, and they emphasized that they were not walking away from the developed properties that they own: five mixed-use buildings totaling 1.1 million square feet of space.

In the hypothetical event that property tax revenues couldn’t cover the debt service in a given year, the property owners, Sagamore and Goldman Sachs, would still be on the hook to repay them. Future landowners would also be liable for any property they acquire within the special tax district.

In a nightmare scenario, if property owners don’t pay the difference, Baltimore TIFs are structured so that the city can put the buildings up for tax sale. Only if an investor does not step up at the tax sale auction would bondholders be at risk of not getting their full investment back.

The new owners would be as legally responsible for paying the special tax and covering the bonds, said Baltimore Comptroller Bill Henry.

“That is literally why they get interest,” Henry said, “Because there is risk.”

The Baltimore Peninsula TIF legislation notes that the city has no legal responsibility to repay the debt service on the bonds.

But economic and governance watchdogs such as the nonprofit Good Jobs First have argued that cities and municipalities would likely step up and make necessary payments so that they can maintain their bond ratings. Critics of TIFs have repeatedly argued that TIFs, for this reason, also pose risks to taxpayers.

Otis Rolley, president and CEO of the Baltimore Development Corp., said Plank’s departure does not change the status of the TIF bonds already issued.

“Under Armour remains a key partner and anchor employer, and we are focused on maintaining momentum for the site,” Rolley said in a statement.

How much of the TIF has been used?

Baltimore Peninsula has drawn down about $137 million in TIF bonds. And so far, a little over $2.8 million has been paid off, according to a November TIF report commissioned by the Baltimore Department of Finance. The bonds reach maturity in 2050, at which point the original loan plus interest comes due.

The TIF report noted that Baltimore Peninsula is still in its infancy and is not yet generating “surplus TIF” revenues for the city, or payments to the city on top of the debt service.

The report noted that while the project’s residential spaces are nearly leased up, the office and retail spaces have been slower to fill. This can ultimately affect property tax values and lead to debt service coverage gaps.

Representatives of Sagamore and Goldman Sachs on Wednesday said the next landowner would be able to apply for the remaining $523 million in unused TIF funds.

The city’s Board of Estimates, which is controlled by Mayor Brandon Scott, would need to approve any future bond deployment. Rolley said the Baltimore Development Corp. would also review future requests.

Civic and government leaders in Baltimore said Wednesday’s move by Plank does not necessarily portend trouble for Baltimore Peninsula’s future.

In a statement, Greater Baltimore Committee President and CEO Mark Anthony Thomas said Baltimore Peninsula “was always designed” to be carried out in waves and evolve with market conditions.

The site remains an important part of the city’s economic future, Thomas said.

What’s the status of the community benefits agreement?

The community benefits agreement that Sagamore signed in 2016 is the largest in city history. It commits tens of millions of dollars to scholarships, public art and environmental campaigns as a condition of the TIF bonds.

It also promised money to six South Baltimore neighborhood groups — representing Cherry Hill, Brooklyn, Mount Winans, Lakeland, Westport and Curtis Bay — which formed a coalition in response to skepticism about whether Plank’s project would lift up its neighbors.

Called the SB7 Coalition — a nod to the new Baltimore Peninsula neighborhood joining the six existing communities in the area — the group is set to receive as much as $40 million over a 20-year period to address priorities such as youth services, recreational programming and park maintenance.

And the deal provides $10 million over 20 years for “community and/or faith-based initiatives” for services such as after-school programs, GED classes and affordable housing initiatives.

Groups are supposed to receive the first $20 million from the community benefits agreement by next year. Additionally, the coalition is set to get a cut of every commercial lease signed by a for-profit company, as well as additional revenues from transfer taxes on property sales by Sagamore and Goldman Sachs in the development area.

Future developers who use TIF funds for Baltimore Peninsula would have to fulfill similar obligations to access city money.

The agreement went into effect immediately after the first wave of city bonds was floated in December 2020 and is binding for a 30-year term, according to the memorandum of understanding.

The agreement is enforceable under state law and cannot be altered without a written amendment approved by the city’s mayor-controlled spending board. It indicates that Sagamore’s “legal successors or assignees” can also be held responsible for upholding it.