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State Center project on hold

The $1.5 billion redevelopment of State Center, scheduled to break ground later this month with construction of a parking garage, is indefinitely on hold, a state economic development official said.

Robert C. Brennan, executive director of the Maryland Economic Development Corp., said a $33 million bond sale scheduled for this week to fund most of the construction of a 928-space parking garage at State Center was canceled pending resolution of a lawsuit filed by downtown property owners last month.

“The whole project is on hold,” Brennan said. “It could be two weeks. It could be two years.”

In addition to delays, Brennan said the project may cost more overall because construction prices for the $36.5 million parking garage had been set months ago. The balance of the construction costs, $3.5 million, was to be paid by private sources.

“The developer had obtained bids from a contractor,” he said. “And the bids were conditioned on hard numbers so long as we were able to break ground by the end of the month. Now, the costs will need to be reopened.”

The State Center development is a planned mega-project on the city’s west side, where 1.5 million square feet of office, retail and housing space are to be constructed over the next 15 years, much of it for state office workers.

The project is a public-private venture, with up to $314 million in tax increment financing, or TIF bonds, expected to be sold to help fund construction. Few details have been made available about the private financing for the project.

Caroline Moore, CEO of Ekistics LLC, the master developer for State Center, said at a fundraiser for Mayor Stephanie Rawlings-Blake on Tuesday that the project remains on track, despite the lawsuit and Brennan’s halt of the bond sale.

“We’re very hopeful to have a quick and speedy resolution,” Moore said. “We’re looking to break ground as soon as we can.”

Moore added that the developers “are very confident in the way the project was awarded” and disputed Brennan’s statement that the costs could rise because the groundbreaking was delayed.

Mitchell Brown, a spokesman for Moore, said Wednesday morning that planning and architectural work is continuing on the project, but he declined to reveal how much Ekistics is paying for that work.

Brown said Brennan’s statement that the project is indefinitely delayed “is not accurate because work continues to go forward on the project.”

Chris Patusky, director of the Office of Real Estate for the Maryland Department of Transportation, said in an e-mailed statement Wednesday that the State Center project “continues to move forward.”

“We believe the project is a great benefit to the citizens of the state and the city of Baltimore and that when the litigation is dismissed, the state and the private developer will continue to move forward with their respective parts in the ordinary course of the project,” Patusky wrote.

Alan M. Rifkin, an attorney hired by the downtown property owners, said the project’s indefinite delay was a victory.

“It would have been imprudent and impractical for MEDCO to issue bonds that are essentially encumbered by the litigation,” Rifkin said. “The whole project is a house of cards. Hopefully, this will lead the policy makers to reconsider the entire project, which is clearly not in the best interest of the taxpayers or the city of Baltimore.”

Maryland Comptroller Peter Franchot voted against a lease agreement for the parking garage at the Dec. 16 state Board of Public Works meeting. Franchot said he opposed the agreement because it did not include provisions on labor costs or local hiring, and he questioned the $33 million debt burden on state taxpayers.

The two other members of the board, Gov. Martin O’Malley and Treasurer Nancy K. Kopp, voted for the lease.

The following day, a group of downtown property owners sued the state Department of General Services, claiming the agency did not follow its own rules for procurement in hiring a State Center developer in 2005. The suit was filed in Baltimore City Circuit Court.

The suit contends that State Center will cripple the city’s central business district because the state now leases about 700,000 square feet of office space there.

The central business district is struggling with a vacancy rate of a historic 25 percent — nearly 2 million square feet — due in part to the recession and to the new, upscale office space at Harbor East, which has attracted major tenants such as Legg Mason.

The property owners suing the state include St. Paul Plaza Office Tower LLC; Lexington Charles L.P.; 301 Charles Street LLC; Park Charles Apartments Associates LLC; Park Charles Office Associates LLC; 501 St. Paul Street LLC; St. Paul & Franklin LLC; RoboPark LLC; Charles Plaza LLC; 39 W. Lexington LLC; Baltimore Condo 2-8 LLC; Fayette Garage LLC; Charles Towers LLC; The Marlboro Classic LP; and Redwood Square Apartments LP.

Peter G. Angelos, owner of the Baltimore Orioles and a major property owner in the central business district whose staff has scrutinized the State Center project this past year, is not listed as a plaintiff but is paying for much of the lawsuit, a source close to his office said.

The State Center development will be located where state office buildings currently stand near Preston Street and Martin Luther King Boulevard.

Last month, Moore defended the project. She has made few public comments on the project itself, but said in an e-mailed statement after the lawsuit was filed that the development will add to the city’s tax base. “State Center is an unprecedented economic development opportunity for the city of Baltimore, with the first phase alone projected to create 1,600 jobs, $50 million in new tax revenues and hundreds of millions in economic impact,” the statement said. “All of Baltimore, including downtown, will be strengthened by it. Unnecessary delays will only postpone the arrival of important jobs and investment.”

The project has been controversial since it was unveiled in 2005.

The original developers were Struever Bros. Eccles & Rouse and Doracon Contracting Inc. But both companies have halted work in Maryland for a variety of reasons.

Doracon is headed by Ronald Lipscomb, who was involved romantically with former Mayor Sheila Dixon. Lipscomb was implicated in a City Hall corruption scandal that led to Dixon’s resignation, and has not worked in the state since 2008.

Lipscomb has moved his business out of Maryland and is no longer a registered developer with the state. Struever Bros. Eccles & Rouse withdrew as the master developer in 2008 and today is not operating at full capacity because of the recession. The state has replaced both developers with Ekistics, a newly formed local development firm headed by Moore, a former Struever executive.

3 comments

  1. This project would clearly be good for the city and most importantly create good jobs. This is frustrating.

  2. As much as we’d all like to see State Center developed, now is not the time. The City keeps undermining downtown every chance it gets with office projects elsewhere. Downtown never has the opportunity to develop a critical mass.

    This isn’t really creating jobs, it’s musical chairs. As far as I can tell, it is a patronage scheme at best, a kickback scheme at worst. WHY would anyone add more office space when vacancies are over 20%? It’s tempting to want to “fix” the damage done to Mt. Vernon and Bolton Hill back during the road-building era, but the City/State is doing it wrong again.

  3. I agree with Nate. This appears to be “the influential win” instead of the city. Every jurisdiction has vacancies – I want those vacancies filled before my taxpayer money gets burned on an unneeded project.

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