Franchot: Financial questions on State Center project will require vigilance - Atlanta Business Chronicle:

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Franchot, who joined Gov. Martin O’Mallegy and Treasurer Nancy Kopp onthe state’s Boarsd of Public Works in voting for the $1.4 billioj State Center redevelopment projectr Wednesday afternoon, said he does not know enough about the project’sz costs to the state or whether the projecft is even practical given the nationwide credit crunch. “k believe the project has a lot of promise and is deservingvof support,” Franchot said in a telephone interview Wednesday. “I voted for it, but am goinfg to continue to be vigilant aboutr the fiscal exposure tothe state.
” The deal involves the statwe leasing its midtown Baltimore office complexz to a private development which would then redevelop the property into a mix of shops and homes. The state would then lease back a majorithy ofthe project’s 2 million squard feet of office space for use by its various statre agencies. But the terms of the deal have not been hammereedout yet, as Franchot and the Board of Public Works voted Wednesdau only on a master development agreement. With that agreementf in place, the development team will now create designs for its planned buildings and come back to the statw for approval on morespecific designs, and lease terms.
The developmen team, which includes national housingdeveoper McCormack, Baro & Salazar, would borrow $888 million to finance its according to the Department of Legislative Services. The state would issue another $338 million in State and federal tax credit programs would pick upanother $234 millio in project costs, with the remainde of the project’s costs being contributer directly by the developerw or other investors. Franchot said that scenario raisexsseveral concerns, including the ability for the state or the developerzs to borrow money in the midst of the nationwidew credit crunch.
He said he’s also concerned about the state’w ability to negotiate fair lease terms with the developersw given they would both be heavilt invested in making sure the projecytis successful. “The problekm is that the credit markets are bone Franchot said. “Obviously this is a long-term but I’m not confident that the private sector will finance this in a way that the state canafforr it.” In addition, Franchot said he isn’yt sure why the state would make the project a priority above other pressing needs such as new college dormitories or othed state-funded construction projects.