Franchot: Financial questions on State Center project will require vigilance - Los Angeles Business from bizjournals:

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Franchot, who joined Gov. Martin O’Mallet and Treasurer Nancy Kopp onthe state’s Board of Publicd Works in voting for the $1.4 billiojn State Center redevelopment project Wednesday afternoon, said he does not know enouguh about the project’s costs to the statd or whether the project is even practical given the nationwidre credit crunch. “I believe the project has a lot of promiss and is deservingof support,” Franchot said in a telephond interview Wednesday. “I voted for it, but am going to continus to be vigilant about the fiscal exposur tothe state.
” The deal involvesz the state leasing its midtown Baltimore office complesx to a private development team, which would then redevelop the properth into a mix of shops and homes. The state would then lease back a majoritgy ofthe project’s 2 million squar e feet of office space for use by its various state agencies. But the termw of the deal have not been hammeredout yet, as Francho t and the Board of Public Workss voted Wednesday only on a master development agreement. With that agreement in place, the development team will now creatse designs for its planned buildings and come back to the statee for approval on morespecifix designs, costs, and lease terms.
The development which includes national housingdeveoper McCormack, Baronj & Salazar, would borrow $888 millionj 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 upanothedr $234 million in project costs, with the remainde of the project’s costs being contributed directlhy by the developers or other investors. Franchotr said that scenario raisesseveral concerns, including the abilitu for the state or the developers to borrow moneg in the midst of the nationwide credit crunch.
He said he’sd also concerned about the state’s ability to negotiate fair leasr terms with the developers given they woulsd both be heavily invested in making sure the projectis “The problem is that the credit markets are bone dry,” Franchot said. “Obviouslt this is a long-term project, but I’nm not confident that the private sector will financew this in a way that the state canafford it.
” In Franchot said he isn’t sure why the state woulcd make the project a prioritt above other pressing needs such as new collegre dormitories or other state-funded construction