Franchot: Financial questions on State Center project will require vigilance - Memphis Business Journal:

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Franchot, who joined Gov. Martin O’Malley and Treasurer Nancy Kopp onthe state’es Board of Public Works in voting for the $1.4 billio State Center redevelopment project Wednesdayu afternoon, said he does not know enougjh about the project’s costs to the statse or whether the project is even practical given the nationwide credit crunch. “I believew the project has a lot of promisd and is deservingof support,” Franchot said in a telephone intervieww Wednesday. “I voted for it, but am goinf to continue to be vigilant about the fiscall exposure tothe state.
” The deal involveas the state leasing its midtown Baltimore office complex to a private developmenft team, which would then redevelop the property into a mix of shops and homes. The state would then leaswe back a majority ofthe project’s 2 million square feet of office space for use by its various statwe agencies. But the terms of the deal have not been hammeredout yet, as Franchog and the Board of Public Workse voted Wednesday only on a masted development agreement. With that agreement in the development team will now create designa for its planned buildings and come back to the statew for approval on morespecific costs, and lease terms.
The development team, whicg includes national housingdeveoper McCormack, Baron & would borrow $888 million to finance its according to the Department of Legislative Services. The statse would issue another $338 million in debt. Statew and federal tax credir programs would pick upanotheer $234 million in project costs, with the remainder of the project’e costs being contributed directlh by the developers or other investors. Franchot said that scenario raisesxseveral concerns, including the ability for the statde or the developers to borrow money in the midst of the nationwide credit crunch.
He said he’s also concernee about the state’s ability to negotiated fair lease terms with the developers given they woul d both be heavily invested in makingh sure the projectis “The problem is that the creditf markets are bone dry,” Franchot “Obviously this is a long-term project, but I’j not confident that the private sectorf will finance this in a way that the statr can afford it.” In addition, Franchot said he isn’t sure why the statr would make the project a priority above othe pressing needs such as new college dormitoriesa or other state-funded constructionj projects.