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Putting the Private in Public Private

March 27, 2012

Rendering of the State Center--This Would Be The Retail Part

Opponents of the $1.5 billion State Center project suffered a setback Monday night when the House of Delegates passed a bill to “better define” public-private partnerships. The bill, backed by Gov. Martin O’Malley, carried an amendment seemingly aimed at scuttling a lawsuit against the State Center project.

The bill, and the floor amendment introduced in a work group composed of members from the Environmental Matters, Appropriations and Health and Government Operations committees, caused a stir all weekend. Opponents, including Del. Luiz R.S. Simmons (D-Montgomery), on Saturday said the amendment made the bill a “Trojan horse for the worst kind of special interest.”

The amendment retroactively allows the defendants in cases involving public-private partnerships (triple p’s, in the jargon) to remove the case directly to the state’s highest court—the Court of Appeals.

A coalition of downtown office building owners and Little Italy restaurateurs has sued the state over the State Center project, claiming the developers were chosen without proper bidding and that the cost to state agencies—$33 per square foot—is a bad deal for taxpayers. The state has dragged its feet in providing the documents the plaintiffs have demanded. The judge has sided with the plaintiffs on that point—called discovery. The house bill, if passed by the Senate, could short-circuit the discovery process, according to Ramsey Flynn, who has spoken for the plaintiffs in the case. He blasted out an e-mail quoting the plaintiffs’ lawyer, Alan Rifkin:

“The amendment is a transparent attempt to end-run a pending case and divest the court of jurisdiction in the midst of discovery and before a trial on the merits. It undermines the integrity of the judicial process and is improper from every perspective.”

Flynn has been working his e-mail list all weekend, and the story made headlines around the state. Maryland Reporter and Fox 45 drew a direct line to State Center from the bill.

Proponents said the retroactive provision was not nefarious or unusual, and that it is in the public interest to expedite the slow-moving court process because, well, time is money.

Here’s a link to a video of the House debate from Saturday.

While the amendment caused a ruckus, the main bill has been less controversial. The Washinton Post has the broadest take on the bill on Saturday, linking the effort to a little-noticed, O’Malley Administration trend toward more PPPs:

Under current regulations, only Maryland’s Transportation Department has the authority to pursue public-private partnerships. The measure would expand that power to the state’s Department of General Services — the umbrella agency responsible for nearly all procurement, buildings and construction.

It would allow the state to lease public assets for up to 50 years and would set up a process for companies to make unsolicited proposals to take over management of state facilities.

In exchange for constructing roads or buildings or upgrading existing ones, the state would guarantee investors a stable return or free them to operate the facilities as for-profit businesses if they share with the state a percentage of earnings.

PPPs and long-term leases have been a trend in government for several years. The deals are often used to get politicians out of a short-term fiscal jam when facing re-election or a jump to higher office, but they are not always great for taxpayers.