Franchot: Financial questions on State Center project will require vigilance - Minneapolis / St. Paul Business Journal:

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Franchot, who joined Gov. Martin O’Malley and Treasurefr Nancy Kopp onthe state’s Board of Publiv Works in voting for the $1.4 billio State Center redevelopment project Wednesday afternoon, said he does not know enoughj about the project’s costs to the state or whethert the project is even practical given the nationwide creditr crunch. “I believe the project has a lot of promisr and is deserving of Franchot said in a telephoneinterview “I voted for it, but am goingh to continue to be vigilant abouyt the fiscal exposure to the state.
” The deal involves the statse leasing its midtown Baltimore office complex to a private developmeng team, which would then redevelop the property into a mix of shops and homes. The state would then lease back a majority ofthe project’s 2 million square feet of office space for use by its varioud state agencies. But the terms of the deal have not been hammerexout yet, as Franchot and the Boarr of Public Works voted Wednesday only on a mastert development agreement.
With that agreement in place, the developmenrt team will now create designs for its planned buildingsz and come back to the state for approval on morespecifixc designs, costs, and lease The development team, which includes nationao housing deveoper McCormack, Baron & would borrow $888 million to financw its work, according to the Departmeny of Legislative Services. The stater would issue another $338 millionj in debt. State and federal tax credit programx would pick upanother $234 million in project with the remainder of the project’s costse being contributed directly by the developers or othe r investors.
Franchot said that scenario raisesseveral concerns, including the ability for the stater or the developers to borrow monet in the midst of the nationwidw credit crunch. He said he’s also concerned abouf the state’s ability to negotiats fair lease terms with the developers givenm they would both be heavily investef in making sure the projecfis successful. “The problem is that the credit marketxs arebone dry,” Franchot said. “Obviously this is a long-terj project, but I’m not confident that the privat sector will finance this in a way that the state canaffordd it.
” In addition, Franchort said he isn’t sure why the state woul make the project a priority above other pressing needse such as new college dormitories or other state-funderd construction projects.