CASCADE — PenMar Development Corp. and Corporate Office Properties Trust officials have been discussing the possibility of transferring the former Fort Ritchie Army base back to PenMar, according to Washington County Commissioner John Barr.
“The economy and the ongoing pending lawsuits that have literally stopped everything at the former Fort Ritchie base has just made it very difficult to get anything accomplished up there,” Barr said.
Barr said he was aware there had been conversations and correspondence between Columbia, Md.-based Corporate Office Properties Trust, or COPT, and PenMar’s board regarding their options with the land, but that he didn’t know the current status of the situation.
COPT transferring the land back to PenMar was one of the options, said Barr, who used to be the commissioner’s liaison on the PenMar board.
COPT officials, including Chuck Fiala, the company’s senior vice president of government services, would not comment on whether there have been discussions between COPT and PenMar about transferring the land back to PenMar. Fiala said that as a public company, COPT must follow rules and regulations.
Asked Tuesday about the issue, PenMar Board President Sam Cool said: “We’re working with COPT to develop the property.”
He emphasized repeatedly that COPT owns the land and referred questions to them.
Cool said no final decision had been made about the land being transferred.
The former Army base, near Cascade, was closed in 1998. PenMar transferred the land to COPT in 2006 immediately after the Army transferred the land to PenMar, said Dori Nipps, executive director of PenMar Development Corp.
COPT planned a development to include 1.7 million square feet of office space, and 673 homes and apartments. But COPT has not been allowed to develop the land because of a 2005 lawsuit, which remains unresolved pending an environmental review.
COPT reduced the value of the land on its financial books to zero a year ago due to the inability to recover its $28 million investment in the property.
The company hasn’t been able to recover its investment because of economic times and the lawsuit, Bill Hofmann, COPT’s senior property and environmental services manager for the former Fort Ritchie property, said earlier this month.
At that time, Hofmann said the development was still COPT’s long-term plan for the property.
“There’s no change in what our plans are at this point,” Fiala said Tuesday.
“Our plans are on hold and have been on hold since 2009 with the legal injunction to delay development plans.” Fiala said. “We’re waiting for the Army to correct and revamp their environmental studies that are predicated on our ability to do anything.”
The Army hasn’t designated money for the environmental study, its environmental attorney David Howlett said earlier this month. The earliest the study could begin would be this summer, and that depends on the availability of funds, Howlett said.
What is ‘Plan B?’
Washington County Commissioner Ruth Anne Callaham, who is the commissioners’ liaison to PenMar’s board, said that shortly after she was appointed to the post in December 2010, she suggested PenMar have a “Plan B” in place in case something, such as COPT pulling out of the property, were to occur.
Callaham said Monday she couldn’t say whether anything has happened or whether the talk is just speculative. As a board member for PenMar, Callaham said there are things discussed that she has no authority to “put out publicly.”
Callaham said PenMar board members “couldn’t see the light at the end of the tunnel” last fall in the face of the lawsuit, the recession and news of possible herbicides on the land.
In February 2011, the Army disclosed that tactical herbicides, including Agent Orange, had been tested at Fort Ritchie in 1963. But a May 2011 report on the testing of Agent Orange and other herbicides at Fort Ritchie found it was unlikely any harmful chemicals remain at the site.
Nipps said she couldn’t provide information “one way or the other” on whether PenMar and COPT were discussing transferring the land to PenMar.
Nipps said if a transfer were to occur, it would be a matter on which PenMar’s board, not the Washington County Board of Commissioners, would vote because PenMar is a state agency.
“If we would take the property back or something would happen, actually the liability would lie with the state of Maryland,” Nipps said.
Asked what could happen to the land if it were returned to PenMar, Callaham said: “It is a big tract of land. Everything’s on the table and no decision has been made to my knowledge. We’re all out there trying to stay ahead of the game.
“Whatever Plan B turns out to be, the county stands ready to work with PenMar Development Corp. for the best possible outcome to serve our citizens,” Callaham said.
That would include seeing what the Hagerstown-Washington County Economic Development Commission could do to help increase the tax revenue from the site since its property taxes aren’t “robust” due to the lack of development, said Callaham, who was a Department of Defense project manager at Fort Ritchie in the 1980s and early 1990s.
Jobs up in the air
COPT plans to invest $256 million in the 591-acre property during the first 15 years of development, according to COPT’s website for the property.
The company forecasts it would create more than 4,500 jobs in the community over 20 years, the website said.
A restaurant on the property closed recently, but a few small leases remain, Fiala said.
COPT continues to maintain the property. Occupancy of about 100 old Army housing units on the property fluctuates, but is close to full, he said.
The community center on which COPT and PenMar partnered has been successful, Fiala said.
Under a sales agreement signed in 2004, COPT paid $4 million to PenMar Development Corp. that year for the property and another $1 million a year later, Nipps said.
Under the sales contract, COPT is due to pay another $4 million for the property unless it fulfills incentives to create jobs at the property by 2016, Nipps said.
The incentives range from forgoing the entire $4 million if 1,400 jobs are created by 2016, or reducing the amount due to $3,250,000 if 350 jobs are created by then, Nipps said.
Asked about the final payment due on the property, Fiala said that was subject to discussions with PenMar. Fiala said COPT officials have not discussed the possibility of an extension or revamping the arrangement for the final payment.
If COPT transfers the land back to PenMar, “my best guess is no money would change hands,” Callaham said.
Lawsuit blocks plan
COPT is not allowed to develop the land because a federal judge ordered an environmental review in November 2009 in response to a lawsuit filed in 2005 by area property owners Jim Lemon and Robin Biser.
Lemon and Biser alleged in the lawsuit filed in U.S. District Court that COPT’s redevelopment plan called for a more development than the scenarios the Army evaluated in its 1998 Environmental Impact Statement. They also claimed that the plan introduced historical and water-related impacts not evaluated in the 1998 statement.
Del. Andrew A. Serafini, chairman of Washington County’s delegation to the Maryland General Assembly, said he recognizes the lawsuit has created challenges for PenMar Development and COPT, but he has confidence in Nipps and the PenMar board to do everything they can.
“We have been monitoring some of this situation,” said Serafini, R-Washington, who said he gets copies of PenMar board minutes and talks to PenMar officials.
Citing the sensitivity of the issue, and the fact that he’s a financial planner and COPT is a publicly traded company, Serafini said he couldn’t specifically comment about PenMar.
Serafini is a member of the state legislature’s Joint Committee of the Management of Public Funds, which has been investigating what could happen if a municipality files for bankruptcy, he said.
Although the committee has not talked about the former Fort Ritchie site, he wondered if a venture such as the former Army base would revert back to the state.
“Hopefully, it doesn’t come to that,” Serafini said.