Another State Center press release and the debut of Baltileaks

I wanted to create the Wikileaks of Baltimore. Another person came up with the same idea and created Baltileaks. It looks like it might turn into a useful tool for change.

The "downtown Baltimore commercial property owners" sent out another State Center press release that I have posted below. I like the idea of a transit oriented residential development.  I have always had concerns about the government offices aspect of the project.  I thought about State Center when I stumbled upon this DC suburb transit oriented residential development story.

State Center press release below:
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General Assembly advisers Question costly State Center Lease fees

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New office space to be “purchased at a premium”

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Adds another $37 million to annual operating budget at a time when MD faces $1 billion structural deficit

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The Maryland General Assembly’s financial advisers are raising new concerns about the extraordinary costs to taxpayers of the $1.5 billion State Center re-development project that would add at least $37 million to the State’s annual operating budget “at a time when the State faces a structural deficit” in excess of $1 billion.

In its most recent budget analysis of public debt, the independent Department of Legislative Services (DLS) notes that “a key component” of the State Center construction project “includes up to 1,000,000 square feet of State office space.” The report maintains this would cost taxpayers an exorbitant amount in annual lease payments—68 percent higher than rental rates available in Baltimore’s nearby Central Business District.

The new offices at State Center are being “purchased at a premium,” DLS warns.

“The project’s average rent costs (which begin at $37 per square foot) are substantially higher than current market rates ($22 per square foot).”

Indeed, comparable modern office space today is available in the CBD—often with water views—for as little as $20 a square foot, which is a substantial savings for State taxpayers.

Equally alarming to DLS is the State’s long-term rental obligations created by this deal with the private developer, which will own the new office space it plans to construct on State-owned land at State Center.

Without competitive bidding, the State Center lease-back deal comes at a steep price to taxpayers. According to DLS, “This shifts the burden of paying for” these new office buildings to the State’s operating budget “at a time when the State faces a structural deficit” currently estimated by DLS at $1.164 billion.

According to the agreement with the developer, the State will initially pay a minimum of $37 per square foot, with an automatic escalation every five years of 15 percent.

Thus, by the end of the 20-year lease agreement, the State will be paying over $56 per square foot for up to 1 million square feet of office space.

“By not competitively bidding the project as required by law, the State has overpaid for the construction and leases, the taxpayers have been saddled with unnecessary costs and debt payments and the State’s operating budget has wasted millions of dollars. The competitive bidding laws exist precisely to prevent that kind of waste,” said Alan M. Rifkin, lead counsel in a lawsuit seeking to overturn the State Center agreement.

Previously DLS has criticized the project, its costs and alleged benefits. As DLS has noted, “The current economic climate raises concerns about the viability of the project given high inventory levels of vacant office space and housing in Baltimore City … and market conditions in 2014, when the project is scheduled to open....”

And, the DLS has written: “The total cost exposure to the State may never be known…. It is also not clear that the proposed benefits will materialize.”

But in the meantime, because of the State’s heavy reliance on selling more bonds to help balance the general fund budget, Maryland is close to exceeding its self-imposed bond ceiling.

DLS points to the State Center development as “one approach to maintaining capital spending within affordability limits” in which projects are redefined “so that they no longer are classified as State debt.”

State Center is a heavily taxpayer-subsidized project first conceived during the Ehrlich Administration. It has evolved into a massive $1.5-billion mixed-use construction and lease-back project less than a mile from the city’s downtown business district where there are over 2 million square feet of vacant office space already available.

A group of prominent downtown Baltimore commercial property owners has filed suit to halt the State Center project on the grounds that competitive bidding laws were ignored or intentionally circumvented.

The plaintiffs maintain that the State has unlawfully awarded exclusive benefits, negotiating rights and development opportunities that heavily and unfairly burden taxpayers and would devastate downtown office buildings.  

“The DLS report implies that the State is engaging in a dangerous sleight-of-hand by defining this capital project as an operational expense,” Rifkin said. “This permits more current capital borrowing on other projects and will impose either an enormous burden on future operating budgets or, as noted in the 2010 debt affordability report, be re-characterized as capital debt in 2014, thus preventing needed bond issues for roads, schools and other capital projects in the future.”

       
For further information, contact Alan Rifkin at 410-269-5066.