Md. weighs loan of $169 million for office space

September 12, 1990|By John W. Frece Annapolis Bureau of The Sun

ANNAPOLIS -- The Schaefer administration is considering borrowing $62 million to buy four Baltimore office buildings currently rented by state agencies, and another $16.5 million to build District Court facilities in Pikesville and Towson, according to a new report on state debt released this week.

The spending would be in addition to possible construction of a 10-to 15-story, 270,000-square-foot office building adjacent to the state office complex at 301 W. Preston St. and purchase of the nearby NCR building at a combined estimated cost of $90.9 million.

Current leases for office space for the Departments of the Environment and Public Safety and Correctional Services would be continued because they are considered favorable to the state.

The plan to acquire and build office space in the Baltimore area would be financed by a "one-time-only" borrowing of an estimated $169 million, under a proposal outlined in the fiscal year 1992 report of the state's Capital Debt Affordability Committee.

That special borrowing for the Baltimore office space program would be in addition to $330 million in general obligation bonds that top state officials say Maryland can afford to sell to finance scores of other capital projects -- from prisons to sewage treatment plants -- in the coming budget year.

Space tentatively identified for possible acquisition includes the six floors of new offices recently leased by the attorney general at St. Paul Plaza; the health department's Division of Vital Records at 4201 Patterson Ave.; the North Avenue Multi-Service Center; and some or all of the Department of Economic and Employment Development headquarters in Redwood Towers.

The combined $499 million proposal, if authorized by the General Assembly, would constitute the largest sale of general obligation bonds in a single year in the state's history. The previous record was set in 1972, when nearly $471 million in bonds was authorized, primarily to finance the school construction program the state assumed in the early 1970s under Gov. Marvin Mandel.

The proposal is described in the committee's report on the state's overall capital debt, which was formally delivered to Gov. William Donald Schaefer and legislative leaders Monday. The report was embargoed for public release until today, after this year's primary elections.

By the state removing commercial real estate properties from the Baltimore property tax rolls, the city could lose an estimated $890,000 in revenue a year, the report concluded, adding: "Given the city's financial condition, this revenue loss may need to be addressed."

News that the administration was considering construction of a major new office building in Baltimore leaked out two weeks ago, but the full extent of the plan was not then known.

Schaefer administration officials insisted the proposal is in the discussion phase only, and that no final decision has been made on whether to include any or all of the plan in the fiscal year 1992 budget that will be presented to the General Assembly in January.

One ranking administration source, who asked not to be identified, said he doubted the plan would fly politically, especially in a year when the governor has already imposed a hiring freeze and other belt- tightening measures to cover an anticipated $150 million deficit in the operating side of the budget. "It's a good idea [but] the likelihood of doing this now that times are tough are not very good," the official said.

The report itself acknowledges the political difficulty administrations have historically faced in convincing legislators to authorize borrowing to build office space for bureaucrats, citing that difficulty as one justification for the special "one-time-only" borrowing.

"Headquarters office space is rarely used by the general public and, therefore, does not have the same constituent appeal as park improvements, upgrades to state treatment centers, improved security at state prisons and juvenile facilities, community facilities, or new local elementary schools," the report states. "Consequently, when general obligation bond authorizations are limited, headquarters office projects tend not to be included in the state's bond program."

Legislators familiar with the report said they generally agreed it is better financially for the state to own its office buildings than to rent them. But several said if such a large borrowing in a single year could jeopardize the state's coveted triple-A bond rating, they would oppose it.

"I think most people probably feel it makes sense to do it, as long as we make sure it is not a means of expanding [the bureaucracy], and make sure it has no effect on the bond rating," said Sen. Laurence Levitan, D-Montgomery, chairman of the Budget and Taxation Committee.

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