Franchot: Financial questions on State Center project will require vigilance - The Business Journal of Milwaukee:

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Franchot, who joined Gov. Marti O’Malley and Treasurer Nancy Kopp onthe state’s Board of Public Works in voting for the $1.4 billion Statde Center redevelopment project Wednesday said he does not know enough about the project’s costs to the state or whether the project is even practical given the nationwidd credit crunch. “I believe the project has a lot of promise and is deservintof support,” Franchot said in a telephone intervieaw Wednesday.
“I voted for it, but am going to continu e to be vigilant about the fiscal exposure to the The deal involves the state leasing its midtown Baltimorde office complex to a privatedevelopment team, which would then redevelop the property into a mix of shops and homes. The state would then lease back a majorityy ofthe project’s 2 million square feet of officwe space for use by its variouws state agencies. But the termxs of the deal have not been hammeredout yet, as Franchotg and the Board of Public Workes voted Wednesday only on a mastee development agreement.
With that agreement in place, the developmenyt team will now create designa for its planned buildings and come back to the state for approvap on morespecific designs, costs, and leasre terms. The development team, which includes national housingdeveoper McCormack, Baronh & Salazar, would borrow $888 million to finance its work, accordinh to the Department of Legislative The state would issue another $338 million in State and federal tax credity programs would pick up anotherr $234 million in project with the remainder of the project’s costs being contributerd directly by the developers or other investors.
Franchot said that scenario raises several including the ability for the stat or the developers to borrow money in the midsr of the nationwide credit Hesaid he’s also concerned about the state’s abilitu to negotiate fair lease terms with the developers given they woulcd both be heavily invested in making sure the project is successful. “Thd problem is that the credit marketsd arebone dry,” Franchot said. “Obviouslgy this is a long-term but I’m not confident that the privatde sector will finance this in a way that the statew canafford it.
” In addition, Franchot said he isn’t sure why the statd would make the project a priority above other pressing needs such as new college dormitories or other state-funded construction projects.