Monthly Archives: March 2016

Will O’Malley’s Folly Become Hogan’s?

By Barry Rascovar

March 28, 2016—The State Center boondoggle is back on the table.

This controversial deal, involving state buildings on 28 acres in midtown Baltimore, was tailored for developer-allies of former Gov. Martin O’Malley. It ended up on the back burner in December 2014 when the extent of the giveaway persuaded Comptroller Peter Franchot and Treasurer Nancy Kopp to put a hold on the last approval necessary.

Since then, Gov. Larry Hogan, Jr. has kept the project on the shelf – where it belongs.

Will O'Malley's Folly Become Hogan's?State Center vision

Developers’ $1.5 billion State Center vision in midtown Baltimore

But in the last few weeks, Hogan’s economic development chief, Mike Gill, said the administration was reviewing the $1.5 billion project anew. A decision on what to do at the Baltimore workplace for thousands of state employees could come before January.

There’s no question government workers deserve better quarters. The 60-year-old State Center complex is badly out of date. New accommodations need to be pursued. The worst course of action, though, would be to proceed with O’Malley’s white elephant.

Outsized Rents

Under the deal worked out by the former governor, the state, which now pays no rent at State Center, would be charged sky-high monthly rates for occupying space in a new, privately owned structure. The lease payments of $18.5 million a year would escalate every five years over the next two decades.

Such high rental rates are comparable to Inner Harbor, water-view office space.

The state also would be responsible for maintenance and security expenses, bringing payments to $30 million annually just in the first five years.

Additionally, the state would lease the entire 28-acre State Center property to the developer for a ridiculously low ground rent. A prime parcel near downtown would be virtually gifted to the development team.

The developers also want the state to pay for a costly underground garage in the first new office building. This $28.5 million expense would deplete the Transportation Trust Fund just when demand for road and bridge improvements is in high demand.

In another twist, state workers who receive free surface parking at State Center, would have to pay to use those underground spaces.

Bond Rating in Peril?

The most troubling aspect for Hogan is that the State Center plan could cost Maryland its coveted triple-A bond rating.

Because the developers want to use the state’s locked-in rent payments – nearly $500 million over the next 20 years – to obtain private financing for the massive project, the payments qualify as a capital project.

As such, the State Center development would blow the lid off Maryland’s debt ceiling. It would mean cutting other projects from Hogan’s construction plans and could lead to higher interest rates when Maryland goes to the bond market.

It’s a bad deal for taxpayers, and for Hogan, who inherited this mess from O’Malley (and from Republican Gov. Bob Ehrlich, who announced the heavily subsidized state-private sector project prior to the Great Recession).

Joe Getty, Hogan’s chief legislative officer, was in the state Senate when his budget committee reviewed the State Center project in late 2014. He concluded that the excessive rent charged the state “sets us up to cut [other] projects that have strong commitments in other areas,” such as money for Baltimore City school construction and bond money for a new Prince George’s County hospital.

The Department of Legislative Services noted at the time that the State Center undertaking “will require a significant amount of annual general fund appropriations that could be avoided if the State instead constructed new or renovated space to replace the aging State Center infrastructure.”

Moving Downtown

Another promising avenue for Hogan: Move State Center workers into modern, renovated office space in Baltimore’s Central Business District.

Huge vacancies exist there – upwards of 30 percent and growing – which translates into deeply discounted rents. The state could lock in long-term leases at excellent prices and avoid paying future maintenance costs.

At the same time, DLS suggested the state could sell State Center’s buildings and 28 acres to the highest bidder. This would partly offset the cost of renting new office space downtown and avoid costly repairs at the current buildings.

That seems to make more sense than going forward with a sweetheart arrangement concocted by Hogan’s predecessor.

Here’s another oddity: The Ehrlich administration never bothered to seek competitive bids for the State Center project. After the initial development group dissolved during the Great Recession, O’Malley renegotiated the same deal with a slightly different group of developers.

Now may be the time to see what State Center’s 28 acres bring on the open market and what imaginative uses other developers suggest for the site – using their money, not the state’s.

No Termination Clause

That likely would require a payment to the current developers to terminate their contract with the state.

Here’s why: O’Malley’s State Center deal lacked a “termination for convenience clause.” This is routinely inserted into every state contract – but curiously not this one. Thus, the state is locked into 20 years’ worth of lease payments – pure gold for the builders – unless the developers are bought out.

For Hogan to endorse the current project makes little logic. It would saddle the state with unnecessary additional debt and exorbitant annual lease payments for two decades, endanger Maryland’s bond rating and squeeze other state construction priorities.

It also would amount to an endorsement of a questionable state subsidy pushed through by his Democratic predecessor.

Proceeding in a new direction might be Hogan’s best option.

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Baltimore: Opportunity Knocks

By Barry Rascovar

March 21, 2016 –Nearly a year after violence, arson and widespread looting tore apart impoverished portions of Baltimore there still is no comprehensive, long-term plan for reviving and improving Baltimore from the governor’s office.

Nor is there an all-inclusive recovery plan from the mayor’s office.

Leadership is lacking.

Mayor Stephanie Rawlings-Blake at least has the excuse that she’s stepping down as Baltimore’s leader in December. A detailed, long-range recovery program will have to be devised and implemented by her successor.

Her silence, though, is deafening.

Gov. Larry Hogan, Jr. has no such excuse. He’s had a long time to figure out how the state can step in with both feet and assist Baltimore rebound from a devastating blow.

He also had a golden opportunity to lay out his full range of ideas for a Baltimore renaissance in his State of the State Address in January.

It didn’t happen.

Vacant Housing Initiative

To his credit, Hogan announced a large, multi-year plan to demolish and replace blocks and blocks of vacant housing. Yet when his budget was released, not one penny had been allocated for this effort.

Pressed by the legislative black caucus, Hogan included a portion of the demolition funds in a supplemental budget, but not before he generated a good deal of ill will among legislators.

He also agreed to legislative demands to add $12.7 million to help Baltimore schools compensate for declining enrollment.

It was left, though to Senate President Mike Miller and House Speaker Mike Busch to cobble together a multi-pronged package of economic and social initiatives to help Baltimore in its hour of need.

Such a move is not ordinarily the province of the Maryland General Assembly. Large bail-out and economic rebound efforts normally come out of the governor’s office.

But since Republican Hogan failed to formulate a Baltimore recovery agenda (other than the vacant housing plan), state legislators stepped into the void.

Legislative Plan

Their $290 million proposal, spread over five years (thus limiting the fiscal impact on the state) helps not only Baltimore but other parts of the state.

  • It offers Baltimore assurance that Hogan’s housing-demolition and replacement plans will be mandatory in future years, not voluntary.
  • It expands existing scholarship programs for disadvantaged kids throughout Maryland.
  • It adds mentoring and other support for middle-school kids in Baltimore and promises them scholarships if they stay out of trouble and get good grades.
  • It adds money to keep city libraries open longer.
  • It allocates funds for after-school and summer programs for children.
  • It provides grants for community groups to develop blighted city areas.
  • It gives Towson University funds to train Baltimore residents as construction workers.
  • And it provides $16.5 million to improve the city’s important system of public parks.

The Miller-Busch package roared through the House last week. The same thing is likely to occur in the Senate.

Hogan hasn’t said much about this important package of bills. His spokesman supported the good intentions of the legislative initiative but worried about the fiscal impact – even though state funding is limited to five years.

Now is the time for the governor to get off the fence and involve himself in shaping a significant Baltimore recovery effort coming from Annapolis.

The legislative package aims at improving depressed neighborhoods. It focuses on giving youngsters better schooling, more positive activities away from school, involving universities and non-profit groups in reviving communities and making Baltimore a more inviting city for those living there.

Time to Act

This is the moment for both Baltimore and the governor to join hands with the legislature in this ambitious undertaking.

With assistance from the governor’s office, objectionable elements of the bills can be modified, new ideas can be added and city officials can come together with the two branches of government in forming a triad of commitments for making Baltimore better.

Hogan brings to the table a businessman’s eye for how to help Baltimore. Even better, he is a businessman with expertise in private-sector land development. He needs to be involved.

Creating the environment for a phoenix-like bounce-back by Baltimore is important for Maryland. The city remains the state’s economic center as well as its regional population, cultural and education center. Tackling the city’s worst problems and overcoming them will pay handsome dividends for the governor in the long run – and for Maryland.

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Good Larry, Bad Larry

By Barry Rascovar

  March 14, 2016–From day to day, lawmakers in Annapolis don’t know what to expect from Gov. Larry Hogan, Jr.
  Will it be “Good Larry” who moderates his comments, works to find middle ground and comes out making everyone happy?
  Or will it be “Bad Larry” who uses heated political rhetoric; sounds false warnings of doom to energize his conservative base, and alienates the very legislators he needs to accomplish things?
Good Larry, Bad Larry

Gov. Larry Hogan, Jr., with Lt. Gov. Boyd Rutherford, at press conference denouncing spending mandates.

   Perhaps someday Gov. Larry Hogan Jr. will learn how to govern and deal with Maryland’s co-equal branch, the General Assembly. So far, though, it hasn’t happened.
  Most of the time Hogan stays in partisan campaign mode, pretending he can have what he wants simply by reminding legislators of his popularity in polls.

Two to Tango

  Then he bumps up against the hard reality of American politics: Without support from the legislative branch, no state’s chief executive can make headway toward his goals.
  The “Good Larry/Bad Larry” dichotomy was on full display last week in the State House.
On Tuesday, “Bad Larry” went ballistic because Democratic lawmakers aren’t about to gift-wrap for him new budget powers so he can make deeper cuts in spending.
  Yet on Thursday, “Good Larry” mollified those same legislators by adding construction dollars for historically black colleges, by accelerating construction of a biomedical sciences building on the University System of Maryland’s Shady Grove campus, and by giving Baltimore City schools funds to partially offset falling student enrollment.
  It was a bravura Thursday performance after an embarrassing Tuesday display of staged anger.

Hogan’s Dilemma

  The Republican governor can’t decide whether he wants to govern or campaign.
  Governing requires that he be practical and pragmatic, compromising with Democrats so he can achieve partial victories.
  Campaigning requires that he abandon any chance of winning over lawmakers and instead launch a continuous barrage of verbal assaults on Democratic legislators in preparation for the 2018 elections – still two-and-a-half years away.
  Usually, Hogan has chosen to stay in campaign mode.

Distorting the Facts

  On Tuesday, he condemned Democrats for not taking seriously his bill to eliminate many of the spending mandates established by legislators over the years. Asking any legislature to cede budget power to the governor is a non-starter – unless the governor can provide some persuasive reasons.
  Hogan failed to do so.
  Instead, he blamed it on “eight years of financial mismanagement” under the prior (Democratic) governor and Maryland’s current “precarious fiscal situation” on the (Democratic-dominated) legislature.
  Neither statement is true.
  The state’s past fiscal woes stemmed mainly from the deep and long Great Recession. As for that “precarious fiscal situation,” it doesn’t exist at the moment – not when Hogan is sitting on a $300 million budget surplus and $1 billion in a “rainy day” account.

Powerful Governor

  It’s campaign hyperbole, as was the chart Hogan continually pointed to at his Wednesday press conference, the one claiming Democrats seek to impose on Marylanders $3.7 billion in spending mandates this session.
  Hogan already has more budget power than any other governor in the country. He doesn’t need extra authority to short-circuit spending mandates in troubled economic times.
  Why? Because he already can make drastic cuts in two different ways – with approval from the Board of Public Works, or with the cooperation of state lawmakers through a budget reconciliation bill.
  Thus, Hogan’s “mandates reform” is a bogus issue put forward mainly for partisan political purposes.

‘Power Grab’ or Transparency?

  The same is true of his earlier wailing over Democratic bills forcing Hogan to explain the rationale for building roads and bridges that appear to be low-priority items.
  Hogan claimed in almost hysterical terms how this was a “reckless power grab” and a “thinly veiled power grab.”
  It is neither.
  The package of bills doesn’t stop Hogan for doing whatever he wants in selecting the state’s transportation projects. The bills simply force him to explain why he’s picked road project F over road project A on the state’s priority list.
  Senate President Mike Miller clearly explained that these bills remove “the mystery of how, why and where roads get built.” The measures encourage government transparency while leaving intact the governor’s road-selection powers.
  What’s wrong with that?

Good Republicans, Evil Democrats

  Hogan and his second-floor Republican ideologues are good at promoting phantom crises they blame on Democrats. They’re applying national GOP tactics to Maryland: Make this a fight between good Republicans and evil Democrats and point an accusing finger at the party of evil.
  No wonder Hogan has won few legislative victories in a Democratic-dominated General Assembly. At the moment, it looks like he’s headed for a large basketful of defeats this session, too.
  That’s why Thursday’s supplemental budget from Hogan is so intriguing. The governor negotiated deals with Democrats on a host of issues and wound up getting praised by his opponents for working out win-win compromises.
  That victory could set the stage for more moments of Hogan playing the role of Great Conciliator as the General Assembly moves rapidly toward its conclusion.
  But he won’t get very far in that direction if he continues to alienate and infuriate key lawmakers with his “Good Larry/Bad Larry” routine.
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Wolf in the Hen House

By Barry Rascovar

March 7, 2016 – Putting a wolf in charge of the hen house would be terribly irresponsible. Yet that’s what trustees at Mount St. Mary’s University in rural Emmitsburg did – with horrific results.

After an earlier, failed search to find a replacement for President Thomas Powell, trustees of the Mount – a 200-year-old, highly respected Catholic school – surprisingly named Simon Newman as the university’s leader last year.

Wolf in the Hen House

Mount St. Mary’s University in Emmitsburg, MD

Newman’s experience in higher education? None.

He was a wolf of Wall Street, a venture capitalist and hard-nosed business turnaround specialist.

The notion that Newman would re-direct the Mount’s successful education formula in an effort to boost donations, rankings and student enrollment turned out to be specious and destructive.

Newman resigned last month after humiliating the deeply Catholic school with his tough corporate mindset and disregard for the Mount’s cherished culture of “liberal learning in the pursuit of truth.”

Trustees Blunder

It’s a classic case of poor judgment by college trustees and a lesson for other Maryland higher education institutions eager to run their campuses more like a business and less like an academic citadel.

The General Assembly is grappling partially with this issue in considering a consolidation of the University of Maryland’s College Park and Baltimore campuses. Supporters seek to accelerate discoveries and business spin-offs in Baltimore through joint research projects.

It’s all about turning UMCP and UMB into potent economic development engines. There’s less emphasis on preserving and enriching the traditional learning experience.

A two-campus solution may work exceptionally well for an enlarged UM in its quest to spur university-generated innovations and job-creating companies in today’s knowledge-based economy. These are research-rich institutions seeking promising synergies — more joint professorships, enhanced funding and spin-off commercial ventures.

But what about other colleges and universities in Maryland that are not nationally ranked research campuses?

Should those institutions be run more like businesses, cut corners to improve rankings and think more in terms of the bottom line than “learning in the pursuit of truth”?

Mount St. Mary’s train-wreck experience should serve as a warning.

Corporate Takeover Culture

Simon Newman was a bull in a china shop. He tried to bring the rough-and-tumble culture of business takeover artists to the Mount.

He bullied faculty and administrators, demanded absolute obeisance and embarked on a campaign to artificially inflate the Mount’s rankings by “culling” at-risk students even before they had been on campus six weeks.

Appalled faculty and administrators rebelled at what was called an “unethical” attempt to sacrifice students on the altar of enhanced rankings. One termed Newman’s actions “a heartless application of business procedures.”

The school’s provost was forced to resign. Two professors (one tenured) were fired for disloyalty.

On Wall Street, Newman’s stern leadership wouldn’t seem unusual. You take over a company, you “cull” less productive employees, you fire anyone voicing concerns about your new corporate direction, you eliminate low-profit divisions – and you do it all in a cold, cost-efficient manner.

Yet on a college campus, where shared governance with faculty reigns supreme and arguments over a school’s vision and actions are part of the landscape, such behavior is unacceptable. Newman’s corporate-style presidency left the Mount in shambles.

National education groups loudly condemned Newman. Finding a first-rate replacement could prove exceedingly difficulty. Recruiting quality faculty and students could be even more challenging.

Non-Traditional College Presidents

A few other Maryland colleges and universities have chosen non-traditional presidents, but they have avoided the Mount’s horror story.

In 2002, the University of Baltimore hired a pharmaceutical executive, Robert Bogomolny, as president. But Bogmolny also had been a law professor. It turned out to be an inspired choice (through he stoked tensions with the law school’s dean over a diversion of tuition money).

Under Bogomolny, UB was transformed into a more traditional college campus with a student union building, residential housing and an eye-catching law school building. Bogomolny’s corporate background took a back seat to his respect for academic traditions.

His successor, Kurt Schmoke, also had a non-traditional background – a lawyer turned mayor turned law school dean. His selection proved quite popular.

In 1995, Hood College had great success hiring a former Internal Revenue Service Commissioner and Justice Department lawyer, Shirley Peterson, as its president.

Goucher College turned to a former director of the Voice of America and a respected journalist, Sanford Ungar, as its president – but he also had been dean of the School of Communications at American University.

Washington College last year chose a former chair of the Federal Deposit Insurance Corporation, Sheila Bair, as its new president. An expert on financial regulatory reforms, she had taught that subject at the University of Massachusetts Amherst.

The Chestertown school previously was led by Mitchell Reiss, a veteran State Department diplomat who had cut his teeth in academia as a government and law professor and vice provost at William and Mary’s law school.

Soul-Searching

In none of these instances did university trustees select a president ignorant of the unique culture of academia. And in no other instance did the trustees seek to bring more of the corporate culture to campus.

There’s certain to be plenty of soul-searching at the Mount over what went wrong and how to return the institution to its historic mission of providing students with a warm and welcoming learning environment steeped in Catholic values.

Using rough-hewn business tactics on college campuses doesn’t work. Trustees with years of experience as corporate executives need to keep that in mind before they make the same mistake as the Mount.

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