Downtown property owners sue over State Center project

December 17, 2010|By Edward Gunts, The Baltimore Sun

A group of commercial property owners in downtown Baltimore filed suit Friday against two state agencies and others, alleging that public officials did not follow Maryland procurement laws and seeking to stop work on the $1.5 billion State Center redevelopment project.

The Baltimore Circuit Court lawsuit contends that state officials never sought competitive bids from downtown property owners and others before deciding to lease office space for three public agencies in the redeveloped State Center. The suit also alleges that two key members of the original development team, Struever Bros. Eccles & Rouse and Doracon, were replaced without competitive bidding.

State Center is a mixed-use, transit-oriented development planned to contain up to 1.5 million square feet of office space plus residences, retail space and other facilities in and around the current State Center office complex at Howard and Preston streets.

Construction of the first phase, a $33 million underground garage, is expected to begin early next year. The entire development is expected to take more than a decade to complete.

The lawsuit was brought by a group led by Commercial Rental Property Owners. The plaintiffs include the owners of a dozen large office buildings and other properties downtown, some with high vacancy rates.

They say they would be happy to lease office space to state agencies at rates considerably lower than they will be paying at State Center but never got a chance. They contend that the average rate for downtown office space is about $20 per square foot and that agencies at State Center will be paying at least $36 per square foot.

Defendants named in the lawsuit are the Maryland Department of General Services, the Department of Transportation and State Center LLC, the private development group working on the project.

Caroline Moore, chief executive of Ekistics, the Baltimore-based company serving as master developer of the project, said she believes that all state laws have been followed and that the redeveloped State Center will help strengthen downtown, not hurt it.

"We are confident that the selection process was completely appropriate and will be validated by the courts," Moore said. "Unnecessary delays will only postpone the arrival of important jobs and investment."

Raquel Guillory, a spokeswoman for the Maryland attorney general's office, said state attorneys will review the lawsuit carefully but it won't have any effect on plans to move ahead with the project. Guillory declined to address the allegations point by point but said state officials feel strongly that the case has no merit.

"We're very confident that the process was followed according to state law," she said.

Alan Rifkin, lead counsel for the plaintiffs, said his group wants a judge to declare the entire bid process invalid and issue an injunction blocking the state and its private development partners from proceeding with construction. He said state taxpayers suffer when the state doesn't follow procurement laws.

"The state's procurement laws are intended to protect taxpayers by ensuring that government projects are competitively bid," he said. "That's especially important when taxpayer funds are used to lease and construct state facilities. … Compliance with the competitive bidding laws is not optional or discretionary."

Speaking at a news briefing — held on an empty floor of a downtown office building to show both the space already available and the plight of property owners — Rifkin contended that state officials broke the law several years ago when they chose a development team for State Center without going through a "closed, sealed, competitive" bid process. He said they "compounded the error" by taking other actions, again without competitive bidding.

Rifkin said one of the last straws that caused the group to file suit came Wednesday, when the state's Board of Public Works approved a request to spend $33 million in public funds to build an underground garage as the project's first phase, when earlier plans called for the garage to be funded privately.

Jamie Smith Hopkins contributed to this article.

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