Gov. Robert L. Ehrlich Jr. personally endorsed a secret land deal creatinga tax break worth almost $7 million for a politically connected builder, a topadministration official said yesterday.
State Department of General Services Secretary Boyd K. Rutherford told apanel of lawmakers questioning the deal that an individual he would identifyyesterday only as an unnamed "benefactor" approached him in spring or summer2003, asking whether the state had preservation land to sell.
"The benefactor came to the Department of General Services, saying, `Arethere properties out there?'" Rutherford said. "I made the introduction to theDepartment of Natural Resources, as well as the Nature Conservancy."
Rutherford said he took the transaction to Ehrlich once the deal began totake shape: The state would buy 836 acres of forest in St. Mary's County withthe intention of immediately selling it to the benefactor at the same price.In exchange, the individual would promise to donate development rights in thefuture and give some land to the county for schools.
The governor was briefed on the deal in 2003 and "said it was worthpursuing," Rutherford testified before the Senate Budget and TaxationCommittee in Annapolis yesterday.
The Sun has identified the benefactor as Willard J. Hackerman, presidentand CEO of Whiting-Turner Contracting Co., the country's 14th-largest builder,which has projects such as Harborplace and the National Aquarium in Baltimoreto its credit.
Hackerman has not returned repeated calls for comment, including atelephone message left yesterday.
The sale to Hackerman is under discussion but not yet approved by the stateBoard of Public Works. Ehrlich and Schaefer are two of three board members.
Brokering the St. Mary's County land to create a tax break for Hackermanwas envisioned before the land was purchased, Rutherford said.
If Hackerman had not come forward proposing the transaction, the statewould not have bought the property, Rutherford said, even though the initialidea for preserving the forest dated to the administration of former Gov.Parris N. Glendening.
Schaefer was a vocal critic of Glendening's land-buying programs. Thepurchase was delayed for several months because of fiscal concerns.
"I was not going to put it on the [Board of Public Works] agenda unless thegovernor told me to," Rutherford said in an interview after his Senatetestimony. "It was with the governor's blessing. He voted for the landpurchase."
Ehrlich is traveling in Asia this week. Spokesmen for him did notimmediately return calls for comment last night.
"It stinks," said Sen. Patrick J. Hogan, a Montgomery County Democrat andvice chairman of the Budget and Taxation Committee. "This deal is clearly inthe lap of the governor."
Others said it might be part of a pattern of the state getting rid ofvaluable assets without calculating their true worth.
"I'm told by sources inside the department that there is a long list ofenvironmentally sensitive properties that are being considered for sale. Thisis just the tip of the iceberg," said Del. Peter Franchot, a Montgomery CountyDemocrat who attended the hearing. "It's Program Open Space in reverse."
Rutherford testified that the state Department of Natural Resources showedHackerman "a number of different properties" and allowed him to select the onehe wanted.
"To have the governor approve a sale to an `anonymous benefactor' whoreally is a politically connected land developer is just an incredible errorin judgment," Franchot said. "Even the Republicans were unable to defend it.The perception is terrible for the state and for the governor."
Ehrlich has been criticized by environmentalists for undermining the SmartGrowth programs of Glendening.
Natural Resources Secretary C. Ronald Franks has not answered questionsabout the deal; he sent an assistant secretary to yesterday's hearing whowould not respond to specific queries about how the land came to be declaredsurplus.
Yesterday's Senate hearing was scheduled amid mounting concern over thetransaction from lawmakers and environmentalists. Lawmakers say they aretroubled that the deal was negotiated in secret and that land would go to adeveloper with no immediate guarantee that it would be preserved.
Sen. Edward J. Kasemeyer, a Howard-Baltimore County Democrat, said thestate should have sought public bids from other purchasers instead of enteringinto undisclosed negotiations with one developer. "It was a grave mistake onyour part, the administration, to do the deal this way," Kasemeyer said.
Rutherford said lawmakers' concerns would not halt the sale. Once Hackermanbuys the property, there is no guarantee that he would not develop it,Rutherford and other officials conceded in response to questions fromlawmakers.
State officials say Hackerman intends to donate the development rights onthe property, but he must hold it for at least a year to take full advantageof tax breaks. Conservation restrictions at the time of the purchase wouldlimit the value of the tax write-off, they say.
An analysis by the state Department of Legislative Services releasedyesterday showed just how lucrative the break - based on the differencebetween the land's value for development and its value as a preservation area- could be.
The break could be worth as little as $730,000 if the property is worth$3,000 an acre to developers, which is about the purchase price. If it isworth $20,000 an acre - an estimate that one Southern Maryland lawmaker hassaid is the going rate for buildable lots - the tax break is worth $6.8million to Hackerman, the legislative services analysis shows.
"A lot hinges on what the property is valued at," said Warren G.Deschenaux, head of the legislative services Office of Policy Analysis.
The state plans to sell Hackerman the forest at the same $2.5 million pricethat taxpayers paid for it, according to documents. General services officialsdid not initially plan to get new appraisals, meaning the purchase price wouldnot reflect fast-rising land values in Southern Maryland.
Rutherford said yesterday that in the wake of criticism about the deal, thestate would now obtain an appraisal from a private company, in addition to thein-house appraisal announced last week.
The St. Mary's County land is zoned for one home per 5 acres, stateofficials said, but the zoning could be changed once Hackerman purchased it.
Sen. Roy P. Dyson, a Southern Maryland Democrat who is critical of thedeal, said he believes the Republican-controlled Board of County Commissionersin St. Mary's County would approve a zoning change allowing more homes if itwere asked, increasing the land's value.
"It would be so easy," Dyson said, adding that a real estate professionalhas advised him that building sites in the area are worth $70,000 each.
Lawmakers expressed skepticism yesterday that Hackerman was not intendingto either build on some of the land or sell it to another developer, becausenew schools would built there on donated parcels.
"Why else would you need a school in an area where there is not going to bedevelopment?" Hogan said.
A headline accompanying a front-page article in Oct. 20 editions of TheSun, "Ehrlich OK'd deal for land," may have left readers with the impressionthat Gov. Robert L. Ehrlich Jr. had given final approval to a plan for sale ofpublic lands. The article reported on testimony by Maryland Department ofGeneral Services Secretary Boyd K. Rutherford, in which Rutherford saidEhrlich was briefed in 2003 and "said it was worth pursuing." Only the Boardof Public Works, on which the governor serves, can authorize final approval ofany public land sale.