Gov. Larry Hogan says ‘final offer’ made to settle State Center lawsuit, begins process of seeking new developer

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With litigation over a long-stalled development plan for State Center apparently close to wrapping up, Gov. Larry Hogan this morning announced his administration is kicking off the process of finding a new developer to tackle an overhaul of the aged Midtown government complex.

“After more than 15 years of inaction and failure I am pleased to announce that we are finally able to move forward on the redevelopment of State Center,” Hogan said in a pointed statement this morning. “We have been committed to and pushing for this long-awaited and transformative project since day one, and we will not rest until we bring it home for the people of Baltimore.”

Specifically, Hogan’s Department of General Services will issue an “expression of interest” for developers to, well, express interest in the project. Doing so will let the state “survey the market” for developers, a release says, while they wrap up litigation with the original developer, whose lease the state cancelled in late 2016. The cancellation kicked off a testy and enduring legal battle that, according Hogan’s announcement, is close to reaching a settlement.

“We just made our final offer to settle this legal obstacle,” the governor said. The state now plans to “expedite the process” once the lawsuit ends to issue more formal requests for information and proposals from developers.

In response, an attorney representing the original developer, State Center LLC, called the announcement a “grand distraction” from the initial plan for the site.

“Governor Hogan cancelled that plan; Governor Hogan started litigation with the developer who was ready to build it; and it is Governor Hogan who has no desire whatsoever to revitalize Midtown Baltimore, otherwise he would allow the existing plan to proceed,” said Michael Edney, lead counsel for State Center LLC, in a statement.

The 28-acre complex off of Martin Luther King Jr. Boulevard, built in the 1950s, presently houses state agencies, including those of the Comptroller of Maryland, and the Departments of Health and Labor, whose quarters have deteriorated over time.  Comptroller Peter Franchot is considering moving his agency’s offices from State Center, according to the Baltimore Business Journal.

Local developer Ekistics LLC entered into a partnership with the state in 2005 to redevelop the complex, though it wasn’t until 2009 that they signed off on a $1.5 billion plan to transform the area into a mixed-use development with apartments, a grocery store, retail and government and commercial offices.

Work on the project then stalled for years. In December 2016, the state Board of Public Works, helmed by Hogan, Franchot and Treasurer Nancy K. Kopp, cancelled the leases awarded to State Center LLC, which comprises Ekistics and other development partners. Hogan called Ekistics’ plan “totally unworkable,” and said its lease terms were a bad deal for the state. The administration sued State Center LLC to end the leases.

State Center LLC then countersued a month later, saying Hogan had refused to work with them on the project after he took office in 2015, and that he was “turning his back on Baltimore,” particularly the surrounding neighborhoods that had worked closely with Ekistics on the plan.

A release from the governor’s office this morning said the shunned developers have “attempted to force the state to pay more than $100 million” as compensation for the cancelled leases.

As the lawsuit has played out, both sides have sought to prove their points through studies. Last year, the Maryland Stadium Authority paid $79,000 to Florida-based Crossroads Consulting Group to produce a report on the site’s potential. The firm’s findings, published in January, wound up being similar to what Ekistics had already planned for the property, suggesting a mix of mid-rise offices and apartments, ground-floor retail, a “linear park” atop what’s currently a parking lot and a grocery store—albeit a smaller one than Ekistics’ plan called for—among other options.

The study did determine that a sports arena, an idea suggested by Hogan and Franchot, is a “low”-potential option.

At a Maryland House of Delegates committee hearing about the report, Ekistics CEO Caroline Moore slammed the state for even pursuing the study, and for cancelling their original agreement.

“At the end of the day, what this project was about was delivering a grocery store in a food desert, jobs to communities that have been forgotten—and for a generation that hasn’t been invested in,” she testified.

Ekistics subsequently paid for its own consultant study, which determined the original lease terms were solid and would produce tens of millions in tax revenue for the city and state if the project recommenced.

As Moore noted in her January testimony in Annapolis, lost in this legal controversy has been the neighborhoods that would be most affected by a grand renovation of State Center. Nearby locales include Upton, the McCulloh Homes, Madison Park and Bolton Hill, to name just a few. Collectively, they’re known as the State Center Neighborhood Alliance.

Legislators this spring successfully fought to give them a seat at the negotiating table between any developer and the state on the future of State Center. A bill sponsored by Del. Cheryl Glenn (D-Baltimore), and backed by Baltimore City Council members, promised to preclude any deal not meet the criteria of the alliance’s 2016 community benefits agreement and create enforceable plans for local hiring and economic improvement to help minority- and women-owned enterprise in the area, among other stipulations.

The General Assembly passed the legislation in April, and it became law late last month without a veto or signature from Hogan. It takes effect Oct. 1.

In a phone interview, State Center Neighborhood Alliance president John Kyle was dismissive of Hogan’s announcement, given that the case isn’t yet officially settled. “This is nothing new from yesterday or last month or four months ago,” he said. “What we’ve known for months and months is that the parties are in litigation.”

If a settlement is in fact near, Kyle said, he hopes the deal is “beneficial to the residents and neighborhoods that surround State Center. They need to be working with the community and do the kind of development that we’ve always been working for for 15 years.”

Kyle added that he hopes the Hogan administration is not trying to “squeeze it under the deadline” of Oct. 1, a move that would dodge the requirement for the developer to gather input from neighborhood groups.

Moore deferred to Edney, State Center LLC’s lead attorney.

The governor’s office said the Maryland Stadium Authority will plan to issue an expression of interest from developers, “and ultimately plan to issue the RFP” once the lawsuit is settled. Responses from developers should be available in September, Hogan’s office said.

“We’re still committed to seeing this redevelopment occur,” Kyle added. “It’s going to be great for the west side when it occurs. We need it.”

This story has been updated.

Ethan McLeod
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Ethan McLeod

Associate Editor at Baltimore Fishbowl
Ethan is Baltimore Fishbowl's associate editor. He previously covered Baltimore-area news as a web producer for Fox45/WBFF-TV. Before arriving in Baltimore, he worked as an assistant editor for CQ Researcher in Washington D.C., and a reporter for Connection Newspapers in Northern Virginia. Look for his freelance bylines in Baltimore City Paper and DCist.
Ethan McLeod
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