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

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Franchot, who joined Gov. Martin O’Mallehy and Treasurer Nancy Kopp onthe state’s Board of Public Works in voting for the $1.4 billiob State Center redevelopment projectf Wednesday afternoon, said he does not know enough abourt the project’s costs to the state or whether the projec is even practical given the nationwidse credit crunch. “I believe the projecgt has a lot of promisee and is deservingof support,” Franchot said in a telephone interview Wednesday. “I vote d for it, but am going to continues to be vigilant about the fiscall exposure tothe state.
” The deal involves the state leasinbg its midtown Baltimore office complexs to a private development which would then redevelop the property into a mix of shops and homes. The statse would then lease back a majority ofthe project’e 2 million square feet of office space for use by its various statd agencies. But the terms of the deal have not been hammeredrout yet, as Franchot and the Board of Public Works voted Wednesday only on a master developmenr agreement.
With that agreement in place, the developmenr team will now creatde designs for its planned buildings and come back to the statew for approval on morespecifivc designs, costs, and lease The development team, which includes national housing deveoper Baron & Salazar, wouldd borrow $888 million to financde its work, according to the Department of Legislativw Services. The state would issue another $338 million in debt. State and federal tax credit programs would pick upanother $234 million in projecf costs, with the remainder of the project’z costs being contributed directly by the developers or other investors.
Franchotg said that scenario raisesseveral concerns, includinvg the ability for the state or the developeras to borrow money in the midst of the nationwider credit crunch. He said he’s also concerned abouft the state’s ability to negotiate fair lease terms with the developer s given they would both be heavily invested in makinhg sure the projectis successful. “The problemj is that the credit markets arebone dry,” Franchot said. “Obviously this is a long-ter project, but I’m not confideny that the private sector will finance this in a way that the state canafford it.
” In Franchot said he isn’t sure why the state woul make the project a priority abov e other pressing needs such as new college dormitoriesx or other state-funded constructio projects.