HOME arrow NEWS & EVENTS arrow CMTA Briefing - SB 1066 and State Center T.O.D. Project

CMTA Briefing - SB 1066 and State Center T.O.D. Project PDF Print E-mail

March 20, 2009

The Issues:
1.
 The Department of Legislative Services opposes the State Center master development agreement. They have expressed this in several dangerous ways:
 
a.
 Language in the Budget report stating that State Center MDA cannot be approved by the Board of Public Works;
b.
 Language in SB 1066 (sponsored by Sen. DeGrange) stating that State Center MDA cannot be approved by BPW;
c.
 A letter from the Joint Budget Chairs to the BPW stating that the State Center MDA should not be approved.
2.
 SB 1066 includes an overly onerous TOD oversight regime that would make the projects very difficult. MDOT has already negotiated a TOD oversight agreement with DLS that went into effect in September 2008, and we should stick with that.
   
Positions:
1.
 Oppose the language in 1066 and the budget report that bar BPW consideration of the MDA.
2.
 Oppose language in SB 1066 that would make it more difficult to do TOD.
 
  
On the first issue of State Center:
1.
 Introduction
  CMTA agrees with DLS that the current state facilities must be replaced or renovated and that legislative oversight is essential. The only question is how best to do that:
 
(1)
 DLS proposes using state debt to rebuild the equivalent of what is there today which is not TOD and not financially feasible;
(2)
 CMTA supports Transit Oriented Development and using a public private partnership and private debt/equity to create mixed-use, mixed income communities.
 
a.
 Benefits of State Center as a public private partnership:
 
i.
 A green, sustainable, mixed-use, mixed-income TOD, including 1,400 new housing units (400 affordable and workforce units), new retail, a supermarket, and private office space, increased transit ridership and leveraging of the state’s investment in its transit system;
ii.
 Reconnection of the street grid and reestablishment of the site as a community and meeting place rather than a barrier and dividing line;$60 million in ANNUAL direct and indirect state taxes at build-out and growing each year thereafter;
iii.
 $35 million in ANNUAL direct and indirect local taxes;
iv.
 8,000 permanent new jobs and 12,000 construction jobs during build-out;
v.
 A $500 million MBE opportunity;
vi.
 Ground lease payments that repay all state predevelopment costs, the land value, and a steady return thereafter in the form of an equity-like return on top of a small base rent.
2.
 Legislative Oversight:
 
»
 CMTA and the Administration agree that legislative oversight is essential for TODs and P3s.
»
 MDOT entered into a TOD oversight agreement with DLS in September 2008.
»
 DGS/MDOT thoroughly briefed DLS on all key issues throughout 2008;
»
 DGS/MDOT briefed the General Assembly with reports in November 2008, February 2009 and March 2009 that comprehensively respond to DLS issues.
»
 The way that the language currently reads, CMTA believes it moves beyond oversight and into asking the legislature to participate in the negotiations and execution of real estate deals.
3.
 The Development Team
 
»
 Selected through a national solicitation that included community representatives in the process.
»
 The team was selected because they are national leaders in their areas of specialization.
»
 The development team is strengthening itself financially, and the Administration has agreed that the MDA will not move forward until that process is complete to everyone’s satisfaction.
4.
 Cost Comparison
 
»
 The public private partnership results in an overall better cost benefit analysis for the state.
5.
 Operating Lease/Capital Lease
 
»
 DLS argues without legal support that the state office space leases would be considered capital leases and thus would go toward the state debt affordability;
»
 DGS/MDOT Assistant Attorneys general have concluded to the extent possible that the leases would be operating leases.
»
 This issue is being fully vetted.
6.
 Risk to the state
 
»
 The risk to the state is lower under the Administration proposal than the DLS suggested option.
»
 Under the DLS model, all the risks are on the state. The state must pay for, own and operate the buildings which represent at least a $500 million capital expense and then ongoing annual operating costs for the life of the buildings, with all likelihood that this huge investment will be required again in 50 years.
»
 Under the Administration proposal, there is almost no risk to the state. The risk is on the private developer and investors to finance the construction and operation of the complex.
»
 The MDA provides risk mitigation at every phase:
 
•
 It requires a financial guarantee to the State of Phase I and performance bonds for the investors to ensure that each building is completed regardless of the financial condition of the developer or investors.
•
 It calls for a building by building development process that limits any risks to one building at a time;
•
 It provides for BPW approval of each phase (building) and each space lease;
•
 It allows the state to remain in its existing buildings or renovate them on its own if it does not want to rent space in the new privately owned and operated buildings;
•
 It allows the state to buy out the developer for cost if the state does not want to proceed at any time up to the state’s approval of the second building in the project;
•
 It allows the state to replace members of the development team who are not financially capable of financing or constructing the project;
 
< Prev   Next >