State Center redevelopment saga could end with a settlement check

The Board of Public Works is expected to approve a $58.5 million settlement with a developer that ends a failed 20-year effort to redevelop the decrepit State Center complex in Midtown Baltimore. File photo by Bruce DePuyt.

A decades-old effort to redevelop an aging, decrepit state office complex could end Wednesday with a $58.5 million state settlement payment to a developer once charged with the revitalization project.

If the three-member Board of Public Works approves the payment to State Center LLC, it will be the end of a nearly 20-year failed effort to redevelop the 25-acre property in midtown Baltimore known as State Center. The proposal calls on the state to make a $40 million payment on or before Dec. 9 and the final $18.5 million on July 1.

The payment would settle all claims stemming from a 2016 lawsuit filed by State Center LLC against the board, the Maryland Stadium Authority, the Maryland Transit Administration, and seven state departments: Transportation, General Services, Health, Planning, Information Technology, Military and Labor.

That lawsuit began when then-Gov. Larry Hogan in 2016 announced the state would go to court to terminate the $1.5 billion redevelopment project. State Center LLC filed a countersuit with 35 claims.

Michael Edney, an attorney representing State Center LLC, was not immediately available for comment.

But a former spokesperson for former Gov. Martin O'Malley, Hogan's immediate predecessor, called the legal fight and settlement "an absolute waste of taxpayer dollars" caused by Hogan's "frivolous lawsuit and detrimental policies towards the City of Baltimore."

"What should be a fully redeveloped, transit-oriented development project contributing to Baltimore and Maryland is today costing taxpayers millions because of former Governor Hogan's misguided lawsuit and unwillingness to compromise," said said Rick Abbruzzese, the O'Malley spokesperson who became to be a public affairs consultant for project developers during the Hogan era.

But Sen. Antonio Hayes (D-Baltimore), whose district includes State Center, welcomed the fact that the legal wrangling has been brought to a close.

"After nearly two decades of delays, we are finally in a position to advance a transformative redevelopment plan for State Center that will deliver good-paying jobs, community amenities, and increased quality of life for neighboring communities and the City of Baltimore," Hayes said in a text late Tuesday night.

State Center – described in a 2023 Supreme Court of Maryland opinion as "consisting of five Soviet-block [sic] style buildings" — included more than 1,300 parking spaces and housed numerous state agencies. The complex, adjacent to the 5th Regiment Armory, was built in the 195os and '60s. It has not aged well.

In 2005, state officials began the search for a developer to raze the facility and erect a modern transit-oriented development making use of its proximity to transportation hubs including the light rail and subway station. The vision called for a mix of office, retail, and residential uses.

The state entered into a complicated agreement with State Center LLC that hinged on approval of a concept plan. The state would lease the ground to the developer that would own the new buildings it put up, then lease back space in the building to state agencies and others.

In 2010, a group of downtown property owners sued to stop the deal and void some of the agreements. That year, O'Malley described the center as "a concrete wasteland."

The 201o lawsuit stalled the project for three years. The project also languished amid changes in the development team, lawsuits, state finances, the Great Recession and the election of Hogan.

The delays increased the costs of a proposed 928-car garage. The state agreed to contribute $28 million for that part of the project. Developers were left holding the bag for the extra costs.

By 2015, Hogan had stopped all action on the project. The developer, in court filings, said Hogan and his team "found Baltimore an unworthy candidate for State investment." By 2016, a Hogan-led Board of Public Works voted to rescind previous approval of the ground and occupancy leases, the same day that his administration filed suit in Baltimore City Circuit Court, seeking to declare the deal invalid and unenforceable.

The developer, in a counterclaim, sought more than $500 million in damages and lost rental payments.

Meanwhile, Hogan announced in 2021 that he was moving 3,300 state employees, most of whom were working in the aging State Center complex, into Baltimore's Downtown business district.

Similarly, then-Comptroller Peter Franchot moved hundreds of employees in his agency from State Center to downtown. The agency's State Center offices had been plagued with complaints of vermin, and was once closed for a week after employees reported bed bugs in their offices.

The circuit court ruled in 2022 that the leases were not in force, but had yet to rule on damages available to State Center LLC. That same year, then-Lt. Gov. Boyd Rutherford, speaking at a Board of Public Works meeting where the relocation of State Center employees was approved, said the complex would ultimately be turned over to Baltimore City.

Rutherford said in August 2022 that handing the facility off to the city would "allow its citizens and city leadership to determine the best use for the property in their own right and create opportunities for those in Baltimore to determine what is the best use for that property."

"I'm quite sure there are some things that they have to think about with that," Rutherford said at that meeting. "But we really feel that the best decisions with regard to the future use of that property should come from the city and its residents, and not necessarily from Annapolis."