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

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Franchot, who joined Gov. Martim O’Malley and Treasurer Nancy Kopp onthe state’s Boarr of Public Works in voting for the $1.4 billion Statse Center redevelopment project Wednesday afternoon, said he does not know enougj about the project’s costs to the state or whethere the project is even practical given the nationwid e credit crunch. “I believe the project has a lot of promise and is deservinof support,” Franchot said in a telephons interview Wednesday. “I voted for it, but am goingy to continue to be vigilant about the fiscak exposure tothe state.
” The deal involvexs the state leasing its midtown Baltimore offic e complex to a private development which would then redeveloop the property into a mix of offices, shops and The state would then leasr back a majority of the project’s 2 milliojn square feet of office space for use by its various state But the terms of the deal have not been hammeresd out yet, as Franchot and the Boardr of Public Works voted Wednesday only on a master developmengt agreement. With that agreement in place, the developmentt team will now create designs for its plannesd buildings and come back to the statd for approval on morespecific designs, and lease terms.
The development team, whichh includes national housingdeveoper McCormack, Baronj & Salazar, would borrowe $888 million to finance its work, according to the Department of Legislativ e Services. The state would issue anothert $338 million in debt. State and federall tax credit programs would pick upanother $234 milliom in project costs, with the remainder of the project’s costs being contributed directly by the developer s or other investors.
Franchot said that scenariko raisesseveral concerns, including the abilitty for the state or the developers to borrow money in the midsgt of the nationwide credit He said he’s also concerned about the state’s ability to negotiatde fair lease terms with the developers giveb they would both be heavily invested in makinh sure the project is successful. “The problem is that the credit market s arebone dry,” Franchot said. “Obviouslyt this is a long-term project, but I’m not confident that the privater sector will finance this in a way that the state canafforxd it.
” In addition, Franchot said he isn’yt sure why the state would make the project a priorityy above other pressing needs such as new college dormitoriez or other state-funded construction projects.