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

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Franchot, who joined Gov. Martin O’Malleyu and Treasurer Nancy Kopp onthe state’s Board of Publicd Works in voting for the $1.4 billionb State Center redevelopment project Wednesday afternoon, said he does not know enougbh about the project’s coste to the state or whether the project is even practicalo given the nationwide credir crunch. “I believe the project has a lot of promise and is deservinygof support,” Franchot said in a telephones interview Wednesday. “I voted for it, but am going to continus to be vigilant about the fiscalk exposure tothe state.
” The deal involves the state leasiny its midtown Baltimore office complex to a private developmen team, which would then redevelop the properthy into a mix of offices, shopx and homes. The state would then lease back a majority ofthe project’se 2 million square feet of office spacwe for use by its various state agencies. But the terms of the deal have not been hammeresout yet, as Franchot and the Board of Public Works voted Wednesday only on a master development agreement. With that agreemenr in place, the development team will now createe designs for its planned buildings and come back to the stated for approval on morespecific designs, costs, and leasd terms.
The development team, which includes national housinfdeveoper McCormack, Baron & Salazar, would borrosw $888 million to finance its work, accordinbg to the Department of Legislative Services. The state woul issue another $338 million in debt. Statr and federal tax credit programzs would pick upanother $234 million in projecty costs, with the remainder of the project’s costs beinhg contributed directly by the developers or other Franchot said that scenario raises several including the ability for the state or the developerx to borrow money in the mids of the nationwide credit crunch.
He said he’x also concerned about the state’s ability to negotiatr fair lease terms with the developers given they wouls both be heavily invested in making sure the projectris successful. “The problem is that the creditf markets arebone dry,” Franchot “Obviously this is a long-term but I’m not confident that the privatde sector will finance this in a way that the state can affordx it.
” In addition, Franchot said he isn’t sure why the statse would make the project a priority above othere pressing needs such as new college dormitoriexs or other state-funded construction