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Comptroller Franchot urges reconsideration of Maryland Insurance Administration lease after board rulings

The Montgomery Park office complex in Southwest Baltimore is shown in this file photo.
The Montgomery Park office complex in Southwest Baltimore is shown in this file photo.(Jed Kirschbaum / The Baltimore Sun)

Maryland Comptroller Peter Franchot wants a key state board he serves on to reexamine its approval of a lease extension for the Maryland Insurance Administration, citing “misinformation” presented to the board and a new ruling that the agency’s lease award violated procurement laws.

Franchot, who sits on the Board of Public Works along with Gov. Larry Hogan and state Treasurer Nancy Kopp, raised concerns Wednesday about information given the board in January before it approved the state agency’s lease in downtown Baltimore. Franchot had voted against the renewal at St. Paul Plaza Office Tower, while the governor and Kopp had voted in favor.

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The issue resurfaced Wednesday during the public works board’s meeting, just days after an appeals board ruled the state Department of General Services violated procurement laws when it allowed the insurance regulator to back out of plans to move its headquarters from St. Paul Plaza to the Montgomery Park office complex in Southwest Baltimore.

“What I’m suggesting is we need to take another look and do the right thing here,” Franchot told fellow board members, adding that he would like to see the lease renewal back on the agenda for discussion. “The lack of data and the misinformation that we apparently made the decision on is going to be a ... flaw on the state’s economic and business reputation.”

The state selected Montgomery Park, a redeveloped former Montgomery Ward Catalog House next to Carroll Park off Interstate 95, for the agency in 2018 after receiving a dozen bids. Montgomery Park’s owners appealed to the Maryland State Board of Contract Appeals after the state then decided not to move the 250-person agency there.

The appeals board agreed with Montgomery Park LLC, ruling Friday that a procurement officer failed to justify a “sole source” lease to St. Paul Plaza.

The ruling came nearly two months after the public works board voted to extend the insurance agency’s lease for 10 years at St. Paul Plaza. That lease expired in May and a six-month extension ran out in November. The public works board voted for the lease renewal, despite Montgomery Park’s pending appeals.

The governor on Wednesday criticized the appeals board for taking four months to make a decision and for issuing a ruling after the public works board voted.

“It wasn’t a priority for them,” Hogan said.

The lease dispute should be settled by the courts, not returned to the public works board for reconsideration, Hogan said. And Kopp agreed.

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Representatives of the Department of General Services, which handles leasing for the state, told the public works board during a January hearing that officials never finalized a lease with Montgomery Park before the nsurance agency’s needs changed, requiring the department to rebid the contract or extend with the current landlord.

Maryland Insurance Commissioner Al Redmer Jr. said the insurance regulator decided to stay put after hearing objections from insurance providers and determining a move out of downtown would make it harder to retain employees.

Montgomery Park’s owners, Sam Himmelrich and David Tufaro, say they believe the latest rulings from the contract appeals board void the lease with St. Paul Plaza.

“We believe the BPW should now cancel that lease and award it to Montgomery Park under the original procurement,” Himmelrich said. "We believe Montgomery Park is a great place for MIA to operate and it will also save the state many millions of dollars in rent and parking costs.”

He has said the state would pay nearly double in rent and other costs over 10 years at 200 St. Paul Place, including $16.8 million in rent plus $2.4 million for parking, compared with $10.7 million in rent with free parking at Montgomery Park.

The general services department, along with the state Attorney General’s office, is reviewing the appeals board ruling, general services spokesman Nick Cavey said Tuesday.

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In its ruling Friday, the appeals board said the Montgomery Park owners had been “undeniably ‘aggrieved by the ... award of a contract’" because the sole-source process shut it out of vying for or being awarded the lease.

In an earlier, separate decision, the appeals board had ruled that the state also violated procurement law by making an “unreasonable, arbitrary and capricious" decision when it canceled the award of the lease to Montgomery Park.

At Wednesday’s public works meeting, Franchot said “misinformation” given to the board included an assertion that the St. Paul Plaza landlord, The Kornblatt Co., had the right as part of the lease to charge double rent after a lease extension ran out in November.

“While Kornblatt has not invoked this provision to date, it will charge MIA double rent if a new lease is not fully executed and approved by Jan. 8, 2020," the general services department said in its January request to the public works board. “Funding the double rent payment will require a special assessment on the insurance industry."

Franchot previously accused the landlord of “strong-arming the state,” by threatening to double rent if the contract was not signed by a deadline.

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