State Center project a bad deal for Baltimore

Generously subsidized State Center project skirted bidding rules, would hurt downtown businesses

March 18, 2011|By David E. Johnson

I'm a firm believer in the original vision of James Rouse, William Donald Schaefer and Walter Sondheim of a vibrant downtown Baltimore. Our downtown business district is an integral part of that vision, which began nearly 50 years ago with the Charles Center-Inner Harbor renewal projects.

The success of these projects and others helped transform the attitude of Baltimore's citizens toward their city. What once was a collective inferiority complex became a spirit of pride and accomplishment as Baltimore became a national model for other cities.

Today, the viability and vibrancy of our downtown are at risk.

Downtown retailers, restaurants and commercial property owners — all of whom have invested heavily in their businesses — now face a new threat that could devastate the downtown business district, along with its stakeholders' assets and livelihoods. It comes in the form of a deceptively appealing $1.5 billion development of the nearby State Center complex.

That project, which calls for 1.5 million new square feet of office space, would be built on state land for state purposes and supported by unprecedented taxpayer subsidies.

The entire project is deeply dependent upon unrealistic projections of demand for new office space in the midst of a down economy. It's equally dependent on unsupportable forecasts for a growing state bureaucracy in the midst of government downsizing.

While project proponents display glossy architectural drawings of a new State Center, the facts tell a different story:

•Consultants for the project say State Center will have to "capture" and "divert" a large portion of other state agencies that now occupy 700,000 square feet of office space in the downtown business district. That diversion to new, government-subsidized and ultra-expensive office towers is counterproductive to a vibrant downtown.

•The project is only viable because of massive taxpayer subsidies. The state is guaranteeing developers long-term occupancy leases with rents at almost twice the going rate, costing taxpayers hundreds of millions in excess rent over the next two decades.

•Developers are projected to need, according to documents, a city tax incentive allowing up to $314 million in city property taxes to be diverted for their private financing.

•The hard-strapped state Transportation Department has already assumed the obligation to finance $33 million in costs for a 1,000-car garage that serves as the foundation for the private developers' glitzy office tower.

•Developers were awarded the exclusive rights to develop the entire 21-acre state site for a bargain-basement price. This is land that a state oversight agency said could be used for other purposes, concluding that this project's "benefits may never materialize."

•While the project is billed as a "transit oriented development," we believe it hardly fits that description. Developers are quadrupling available parking spaces at State Center, seemingly at odds with proponents' claims of encouraging public transportation. Further, it was only after notice of our lawsuit that the state belatedly (and, we believe, erroneously) attempted to designate State Center as a TOD.

No wonder the General Assembly's legislative analysts raised concerns in 2009 about the "viability of the project, given high inventory levels of vacant office space" in the city. The analysts' conclusion: This project "is not in the best interest of the state." Despite those strong words of caution, the development of State Center appears to be moving forward.

As we say in our lawsuit, the current developers were handpicked, awarded these valuable rights and accorded major subsidies without complying with the state's competitive bidding laws. Many of them, we believe, lack any large-scale, mixed-use development experience. Some appear to lack any commercial development experience.

Our state's competitive bidding laws were designed to prohibit favoritism and protect the public's interest. How the current developers were selected — and under what circumstances — and what happened to the state's competitive bidding laws are surely questions that everyone should be asking.

The repercussions of going forward with this project will last for generations. We should be more concerned with reinvigorating Baltimore's downtown business district than embarking upon this speculative, subsidized and inherently flawed project. If allowed to proceed, this project will only lead to further downtown blight and decay, devalue existing buildings, increase taxes and compromise the competitive bidding laws forever.

The State Center project also would forever alter the vitality and vision of those trying to sustain Baltimore's renaissance.

That's among the reasons why I have joined many businesses, office owners, retailers, Little Italy restaurateurs and others throughout the downtown business district in challenging this project in the courts.

David E. Johnson is president of Stratford Realty Management Co. and senior vice president of Lexington Charles Limited Partnership. He has leased and managed downtown Baltimore real estate for more than 25 years. His e-mail is djsavedowntown@gmail.com.

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