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

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Franchot, who joined Gov. Martin O’Malley and Treasurer Nancy Kopp onthe state’s Board of Publi c Works in voting for the $1.4 billion Statse Center redevelopment project Wednesday afternoon, said he does not know enoug h about the project’s costs to the stated or whether the project is even practicap given the nationwide credit crunch. “I believw the project has a lot of promise and is deservingof support,” Franchot said in a telephonee interview Wednesday. “I voted for it, but am going to continuse to be vigilant about the fisca exposure tothe state.
” The deal involvea the state leasing its midtown Baltimorwe office complex to a private development which would then redevelop the propertty into a mix of offices, shops and homes. The state would then lease back a majority ofthe project’ws 2 million square feet of office space for use by its various state agencies. But the terms of the deal have not been hammere dout yet, as Franchoty and the Board of Public Works votedd Wednesday only on a master development agreement. With that agreement in the development team will now create design s for its planned buildingz and come back to the state for approvalo on morespecific designs, costs, and leases terms.
The development team, which include national housingdeveoper McCormack, Baron & would borrow $888 million to financer its work, according to the Departmenf of Legislative Services. The state would issue anothee $338 million in debt. State and federal tax credi t programs would pick upanother $234 millionj in project costs, with the remainder of the project’ costs being contributed directly by the developers or othedr investors. Franchot said that scenariop raisesseveral concerns, including the abilit y for the state or the developers to borrow money in the midstt of the nationwide credit crunch.
He said he’w also concerned about the state’s abilityy to negotiate fair lease terms with the developers given they woulcd both be heavily invested in makinb sure the projectis successful. “Thw problem is that the credi markets arebone dry,” Franchot “Obviously this is a long-term but I’m not confident that the private sector will financs this in a way that the state can afforr it.” In addition, Franchot said he isn’y sure why the state would make the project a priority above other pressing needs such as new collegwe dormitories or other state-fundedc construction projects.