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MIA staying downtown after lease agreement

Another landlord appeared to have won competitive bid, but heavy lobbying campaign helped reverse that decision

Comptroller Peter Franchot. (File)

Comptroller Peter Franchot. (File)

ANNAPOLIS — Maryland’s spending board voted 2-1 on Wednesday to approve a 10-year lease costing $1.68 million annually to keep the Maryland Insurance Administration in downtown Baltimore.

Gov. Larry Hogan and Treasurer Nancy Kopp voted in favor of the new lease despite protests from the ownership of Montgomery Park, which currently has protests before the state Board of Contract Appeals. Hogan and Kopp expressed misgivings about the process of choosing a lease but ultimately voted for the deal because of concerns about the potential for MIA to be “homeless.”

“I think people screwed up all over,” Hogan said.

Comptroller Peter Franchot voted against the lease because he said the way Maryland treated Montgomery Park hurt the state’s reputation. He offered an unsuccessful motion that the panel hold off on approving a lease until after the Board of Contract Appeals rules on Montgomery Park’s protests.

“Is it fair? No. Obviously it isn’t,” Franchot said.

Montgomery Park, a former Montgomery Ward catalogue complex, initially won the competitive bid process to provide office space for the Maryland Insurance Administration.

Moving the agency to Montgomery Park, according to calculations provided by the property’s owner Himmelrich Associates, could produce net savings as high as $15.8 million after the cost of moving the administration.

The state’s competitive bid process, however, was abandoned after Maryland Insurance Administration Secretary Al Redmer raised concerns about the move. Skilled agency employees, he said, objected to the relocation, in large part because of the lack of mass transit access.

There was also a problem, Redmer said, in determining the cost of the moving to Montgomery Park in Baltimore’s Pigtown neighborhood. Department of General Services estimates for the cost of moving the agency range from $71,729 to $1.23 million. Insurance agencies that fund the administration, he said, also balked at paying a special excise fee to pay for the move.

Business leaders with a stake in downtown Baltimore lobbied state leaders to keep the administration at 200 St. Paul Place. Franchot said he’d received numerous text messages from business leaders in the city urging him to vote to keep the administration downtown.

The area of downtown where the Maryland Insurance Administration is now located, particularly north of Lombard Street, has struggled with high vacancy rates. The neighborhood’s retail sector has also scuffled, and area business owners and advocacy groups feared the administration moving would hurt those businesses.

The Department of General Services also expressed concern that St. Paul Plaza’s owner Kornblatt Co. may lose control of the building, which is also home to other state agencies, including the Attorney General’s office, to its bank if the Maryland Insurance Administration left. Kornblatt Cos. lobbyist Carville Collins, of DLA Piper, told the panel he didn’t know what would happen if a new lease was not approved on Wednesday.

“If we pass that deadline we do not know what our financial institution will do,” Collins told the board.

Franchot and Montgomery Park’s representatives argued Kornblatt’s financial woes were not part of the consideration. They argued the lease deal offered by Montgomery Park cost far less over the long run, and that was what should matter.

“I’m sensitive to Kornblatt’s situation, but that’s their problem,” Franchot.

The Maryland Insurance Administration’s lease at St. Paul Plaza expired on May 2, 2019, and a six-month holdover period ended on Nov. 2, 2019.

Under the terms of the lease, according to the state, Kornblatt Co. had the right to charge double the rent following the end of the holdover period, a claim that Montgomery Park’s ownership disputed and argued was not included in the lease.

While Kornblatt had not enacted that provision previously, the company told the Maryland Insurance Administration that its lender insisted they do so if a new lease was not executed and approved Wednesday.

Hogan called the process of finding new office space for the Maryland Insurance Administration the worst of these exercises undertaken during his five-year tenure. Ultimately he and Kopp decided that approving the lease was in the best interest of the state.

“I think (not approving the lease) puts the state at great risk of being homeless,” Hogan said.

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