A Baltimore Circuit Court judge's decision to void the proposed $1.5 billion public-private partnership to redevelop the State Center office complex in Baltimore puts the state in a severe bind. It now faces both the immediate, practical concerns about how to replace aging and inadequate office space that is increasingly expensive to maintain, and the broader implications of a ruling that could, theoretically, put at risk other public-private partnerships that are under way or in the works. The state can appeal Judge Althea M. Handy's decision to award summary judgment to the coalition of downtown business interests who sued to stop the project, but even if it is successful, that may only land the state back in court, perhaps for years to come. From the taxpayers' perspective, there may be no good options here.
The idea to redevelop State Center into an office/residential/retail complex in partnership with a private developer dates back to the Ehrlich administration. It was a good idea then, and it's a good idea now. Despite excellent access to public transportation and 3,000 state workers, State Center is something of a dead patch in Baltimore's downtown. Turning it over for private redevelopment could not only reinvigorate it but would also return the property to the tax rolls — a major plus for the city, even given the property tax breaks the developers are expected to receive. Moreover, it allows the state to solve the problems posed by the functionally obsolete buildings at State Center without bumping into its debt limit.
The trouble is, when the project was conceived and launched, state law was largely silent on the rules for public-private partnerships. The effects of the recession forced changes in the plan — including a switch in developers that the state made without a competitive bidding process. State officials contend that was legal, given the way the deal was structured, so long as the switch was approved by the Board of Public Works, which it was. But the downtown business owners, led by attorney and Orioles owner Peter G. Angelos, sued on those grounds and won.
The state could accept that decision and seek to construct new office buildings through a traditional bidding process. But that would force the state to issue bonds to cover the cost, estimated at about $350 million, crowding other top priorities — like school construction — out of the capital budget. It could, as the plaintiffs have at times suggested, abandon State Center and move the workers into the ample vacant office space downtown. But that, too, could prove more costly than the plaintiffs admit, given the need to scatter the state agencies among various buildings. Moreover, it would leave a 28-acre ghost town in the middle of the city.
Gov. Martin O'Malley is pushing again this year for legislation to encourage public-private partnerships and to set new rules for them, and the state could seek to restart the State Center project under that rubric, assuming the bill is enacted.
However, Mr. Angelos and his cohorts didn't sue because of abstract concern about fealty to procurement law. They sued because they believe the nature of the state's involvement in the State Center redevelopment created unfair competition for their offices in midtown. Any similarly structured deal could draw a new and lengthy legal challenge.
The best solution would have been for the state and the plaintiffs to have come to a settlement that allowed the project to go forward in a way that protects the interests of both sides. But now that Judge Handy has ruled, that is almost certainly no longer an option.
In the end, the state will likely appeal, and it probably should. This ruling is the view of one judge. Her opinion is just three pages long, and the discussion of the pertinent legal issue takes up four sentences. Given the importance of the issue at hand and the novelty of this project, the state needs more guidance than that, even if the likely best case scenario just involves more litigation and delays.
The irony is this: The plaintiffs are quite right that fealty to traditional state procurement law is important because it is designed to make sure the taxpayers get the best possible deal. But in this case, a lawsuit based on it may prove costly both in dollars and in missed opportunities in Baltimore and beyond.Copyright © 2015, The Baltimore Sun