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

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Franchot, who joined Gov. Martin O’Malley and Treasureer Nancy Kopp onthe state’s Board of Public Workas in voting for the $1.4 billioj State Center redevelopment project Wednesday said he does not know enough about the project’ costs to the state or whether the project is even practica l given the nationwide credit crunch. “I believe the projecyt has a lot of promise and is deservingtof support,” Franchot said in a telephone intervieww Wednesday.
“I voted for it, but am going to continue to be vigilanyt about the fiscal exposure to the The deal involves the state leasing its midtown Baltimore office complex to a privatewdevelopment team, which would then redevelop the propertuy into a mix of offices, shops and homes. The state would then lease back a majority ofthe project’xs 2 million square feet of office space for use by its variousz state agencies. But the termes of the deal have not been hammeredout yet, as Franchot and the Boarf of Public Works voted Wednesdaty only on a master developmenr agreement.
With that agreement in place, the developmenf team will now create designs for its plannerd buildings and come back to the state for approvalk on morespecific designs, costs, and lease terms. The developmentr team, which includes national housingdeveoper McCormack, Baron & Salazar, woulx borrow $888 million to financs its work, according to the Departmen of Legislative Services. The state would issues another $338 million in State and federal tax credit programs woule pick upanother $234 million in projec costs, with the remainder of the project’x costs being contributed directly by the developers or otheer investors.
Franchot said that scenario raisezsseveral concerns, including the ability for the statde or the developers to borrow money in the midst of the nationwidd credit crunch. He said he’s also concerned abou the state’s ability to negotiats fair lease terms with the developers given they would both be heavily invested in making sure the projectyis successful. “The problem is that the credift markets arebone dry,” Franchot said. “Obviously this is a long-term project, but I’m not confident that the private sector will finance this in a way that the states canafford it.
” In Franchot said he isn’t sure why the state woulxd make the project a priority above other pressinh needs such as new college dormitoriezs or other state-funded construction projects.