Maryland's treasurer warned Friday that a planned $1.4 billion development anchored by the state office complex in Midtown Baltimore may count toward the state's debt limit, raising questions about the state's ability to afford the huge undertaking.
State officials also announced separately Friday a new lead developer to replace Struever Bros. Eccles & Rouse, which has struggled with mounting debt, and reiterated a goal to break ground on the State Center in 2010.
The development has become a politically charged topic in Annapolis, where lawmakers are seeking more information about the state's financial obligations, while Baltimore politicians and community members say the project would revitalize the area. The state's budget has been hit hard by the recession, and Treasurer Nancy K. Kopp's report indicated that the project could cause the state to exceed its debt limit within 10 years.
Lawmakers on budget committees have until the end of the month to weigh in before the project planners seek approval of the master development agreement from the state Board of Public Works, which has purview over state contracts and includes Kopp, Gov. Martin O'Malley and Comptroller Peter Franchot.
"Lawmakers have a lot of questions about the structure of this, how it would work and what the risk to the state is versus what the rewards would be," said Del. Murray D. Levy, a Charles County Democrat on the House Appropriations Committee. "We don't have any money right now. The timing of this is difficult."
The mixed-used development around the state's 28-acre office complex, which holds the largest concentration of state workers in Maryland, has been hailed as a model for urban renewal that would include commercial and residential space near a number of major public transit hubs. The project also could create 8,000 jobs and generate nearly $60 million in annual tax revenue for city and state coffers.
"We see this whole project as an economic stimulus when this economy really needs this kind of private investment," said Michael A. Gaines, a project manager at the Maryland Department of General Services, which is working closely with the Department of Transportation to push ahead with the State Center plan.
Gaines said more than 60 percent of the project's capital costs would be borne by private developers, and that the state has time to back out of the deal. But several lawmakers question if it's a good deal.
"If we think we're going to go into a long depression, it would be kind of stupid to do such a development," said Sen. David R. Brinkley, a Frederick County Republican.
Kopp's office was careful not to judge the merits of the project and instead addressed the narrow issue of whether the state's occupancy leases should be considered "capital leases," and thus count toward the limit on how much can be borrowed for schools, prisons and other projects. The report said it would be "prudent" to consider them capital leases.
Struever Bros. will remain as a consultant on the project. The new developers, PS Partners LLC, include Linden Associates, headed by Baltimore developer Christopher Kurz, and Ekistics Capital Partners LLC, founded by Caroline Moore, who recently left Struever, where she had been project manager for the State Center.
The project's original minority partner, Doracon Development, withdrew earlier this year to focus on internal issues, Moore said. Its owner, Ronald H. Lipscomb, was indicted in January on charges related to an alleged bribery scheme involving City Councilwoman Helen L. Holton.
