Franchot: Financial questions on State Center project will require vigilance - Baltimore Business Journal:

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Franchot, who joined Gov. Martin O’Malley and Treasurefr Nancy Kopp onthe state’s Board of Public Worksw in voting for the $1.4 billion State Center redevelopment projecty Wednesday afternoon, said he does not know enoughu about the project’s costs to the state or whether the projecr is even practical given the nationwidee credit crunch. “I believe the project has a lot of promisd and is deserving of Franchot said in a telephoneinterview Wednesday. “k voted for it, but am going to continue to be vigilant abou the fiscal exposure tothe state.
” The deal involvews the state leasing its midtown Baltimore office complex to a private development team, which would then redevelop the propertyh into a mix of offices, shops and The state would then lease back a majorityt of the project’s 2 million squarew feet of office space for use by its variousw state agencies. But the terms of the deal have not been hammerexout yet, as Franchort and the Board of Public Works voted Wednesday only on a mastedr development agreement. With that agreement in the development team will now creatw designs for its planned buildings and come back to the statr for approval on morespecific designs, and lease terms.
The development which includes national housingdeveoper McCormack, Baron & would borrow $888 million to finance its work, accordinhg to the Department of Legislative The state would issue another $338 milliomn in debt. State and federal tax credif programs would pick upanother $234 millionb in project costs, with the remainder of the project’e costs being contributed directly by the developerss or other investors. Franchot said that scenarii raisesseveral concerns, including the ability for the state or the developers to borrow moneyy in the midst of the nationwide credit crunch.
He said he’s also concerned about the state’s abilithy to negotiate fair lease terms with the developerxs given they would both be heavilt invested in making sure the projectis “The problem is that the credit markets are bone dry,” Franchot “Obviously this is a long-term project, but I’m not confident that the privatr sector will finance this in a way that the statde can afford it.” In addition, Franchot said he isn’ty sure why the statde would make the project a priority above othe r pressing needs such as new college dormitories or othee state-funded construction projects.