July 8, 2011

Study calls State Center project a $127 million taxpayer handout

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By Megan Poinski
Megan@MarylandReporter.com

The first part of the public-private partnership State Center project in Baltimore represents a $127 million giveaway of taxpayer dollars with more on the way, according to a new report from the Maryland Public Policy Institute and the Maryland Tax Education Foundation.

Aerial view of the blocks slated for State Center development.

Aerial view of the blocks slated for State Center development.

The massive $1.5 billion project, which will occupy more than eight city blocks, is planned to provide more than 1 million square feet of office space – much of it for state agencies – a parking garage, retail stores, and a grocery store.

After the Board of Public Works approved financing for the first phase of the project, a group of downtown Baltimore property owners filed a lawsuit to stop it. The property owners claimed that procurement laws were ignored, and questioned the cost to the public. The project is currently on hold as the legal process goes on.

The study released on Thursday concentrates on the project’s cost to taxpayers. The massive project is planned in five phases. For the first phase,  the study states that taxpayers are subsidizing $127 million in development costs.

The study arrives at its figure by looking at rent that state offices will pay the developers, the bonds for the parking garage, the lost rent on the land where the complex is located, federal tax credits, and tax-increment financing bonds. It is broken down like this:
·      Rent of the office space will cost about $38 a square foot — $10 more per square foot than the state pays now. Annual increases of 3%, which is standard for Baltimore, are figured in. The total cost of this is $66 million.
·      The Board of Public Works approved $33 million in bonds to pay for the 928-space parking garage.
·      If the state charged $500,000 rent for each acre, it could bring in $11 million in rent for the State Center parcel.
·      A $2 million federal tax credit for constructing low-income housing.
·      A total of $15 million in tax-increment financing. Basically, this is an agreement to use projected future increases on property taxes to pay for current improvements. Because the State Center project is on state property, the study states that the tax burden will be on the state’s taxpayers.

While the second phase is still years, the study estimates the cost to taxpayers for that part of the project to be $273 million.

A statement from the Coalition to Save Downtown Baltimore, which is bringing the lawsuit to stop the State Center project, agrees with the numbers in the study.

“When the state’s competitive bidding laws are skirted, taxpayers pay more and get less,” the statement said. “That lesson is driven home by the MPPI assessment. This is particularly troublesome when over 2 million square feet of vacant office space is already available in the downtown business district at considerably lower cost. It’s hard to understand this project from any perspective. “