Become a digitalPLUS subscriber. 99¢ for 4 weeks.
Business

Franchot pulls support from $1.5 billion State Center project

Comptroller Peter Franchot has told state officials he will no longer support the proposed $1.5 billion State Center project, arguing that redevelopment of the aging state government complex in midtown Baltimore would plunge Maryland taxpayers into deeper debt and threaten the state's fiscal health.

The ambitious state-backed project, in the works for much of the past decade, has in recent months pitted commercial property owners concerned about high downtown vacancy rates against state and city officials and community leaders who want to create a model for transit-oriented urban renewal.

The state plans to build up to 2 million square feet of office space anchored by state agencies. But opponents have criticized lease agreements that would require the state to pay above-market rents.

"I must respectfully inform you that I cannot and will not support further efforts to complete this project as currently proposed," Franchot wrote last week to the secretaries of the Maryland Department of General Services and the state Department of Transportation. "It is difficult, for example, to justify the willingness of state agencies to rent space at above-market rates at a time when Maryland's structural budget deficit continues to exceed one billion dollars."

As one of three members of the panel that approves state contracts, Franchot has helped push the project forward. Plans call for the demolition of the mid-20th-century office buildings that now accommodate 3,500 workers to make way for a 28-acre mix of offices, housing and shops centered around public transit.

Franchot, who serves on the state Board of Public Works with Gov. Martin O'Malley and Treasurer Nancy K. Kopp, has voted more than a dozen times in support of the project, from the 2007 memorandum of understanding between the state and the original development team through a 2009 master development agreement with a new development team. But in December, Franchot opposed a $33 million state-funded parking garage.

State officials and developers say the project is the most cost-effective way to replace state government offices. Michael A. Gaines, an assistant secretary in the Department of General Services, said that if State Center is not rebuilt and state agencies move elsewhere, the area would be left blighted.

"It's important that the project go now, because it has such a stimulative effect on the state's economy in the creation of jobs [and] new taxes," Gaines said Tuesday.

In the project's $200 million first phase, developers State Center LLC, led by Caroline G. Moore of Baltimore-based Ekistics, would lease the site from the state, then develop and lease back more than half a million square feet to the Department of Health and Mental Hygiene.

The Board of Public Works has approved the first phase. Other phases would require further approvals.

The project, to be built in five phases, would include 6 million square feet of office, retail and residential space, with about 1 million square feet earmarked for the state. The developer can move forward on the elements that are not state offices because the state has approved the concept plan, Gaines said.

The project has been the target of a lawsuit filed by downtown property owners and shopkeepers, as well as criticism from the conservative-leaning Maryland Public Policy Institute, which in a report this month called the project a "$127 million taxpayer handout."

Proponents say the potential benefits of revitalizing midtown outweigh the costs. The lawsuit has delayed construction, which would start with the underground garage to be financed mostly through a $33 million bond sale.

The plaintiffs in the lawsuit applauded Franchot's decision. The Coalition to Save Downtown Baltimore, which includes building owners, small retailers, restaurants and the Little Italy Restaurant Association, contends that more than 2 million square feet of vacant space is available downtown.

"It makes no sense to squander over $1.5 billion taxpayer dollars on this ill-advised project," the group said in a statement Tuesday. "Now is not the time to gamble on speculative and unnecessary ventures that only add more office supply to an already saturated market."

A Baltimore circuit judge cleared the way last week for the legal challenge to proceed. Judge Althea M. Handy denied the state's motion to dismiss the lawsuit against Ekistics and the state general services and transportation agencies overseeing the project. The plaintiffs accuse public officials of failing to comply with procurement laws.

Baltimore Sun reporter Jamie Smith Hopkins contributed to this article.

lorraine.mirabella@baltsun.com

  • Text BUSINESS to 70701 to get Baltimore Sun Business text alerts
  • Copyright © 2014, The Baltimore Sun
    Related Content
    Comments
    Loading