A new legislative audit is casting doubts on hundreds of millions of dollars in savings claimed earlier this year by Gov. Wes Moore.
In June, the Democratic chief executive and his staff announced budget cuts of $400 million — exceeding a goal of $50 million promised by Moore. On Thursday, the office of Legislative Audits released a report casting doubt on those claims and a lack of transparency in how the Department of General Services presented those deals to a state panel led by Moore.
“Our audit disclosed that DGS could not support that $410.9 million in leases to relocate state agencies to downtown Baltimore were in the State’s best interest,” Legislative Auditor Brian Tanen wrote in the report.
Tanen added that the department, which handles state leasing, “did not perform an analysis of the cost-benefits of purchasing property instead of awarding leases to private entities and the lease awards were not always presented to the Board of Public Works in a transparent manner.”
The audit of the Department of General Services, released Thursday, also includes criticism of an unusual 20-year lease agreement that bakes in $10 million in renovations. The deal for office space for the Maryland Department of the Environment severely limits the state’s ability to cancel the lease.
Moore vowed to find at least $50 million in savings as part of a fiscal 2026 spending plan he proposed earlier this year. The effort was a small part of attacking what was then a projected $3.3 billion structural budget deficit.
Chief Performance Officer Asma Mirza (left) speaks with state Budget Secretary Helene Grady during a July meeting of the Board of Public Works. (File photo by Bryan P. Sears/Maryland Matters)
He convened a panel, led by Chief Performance Officer Asma Mirza, and charged it with finding efficiencies in procurement, real estate, and fleet management.
Mirza told reporters in June that the effort represented a “data-driven approach to modernizing state government operations.”
In June, they declared they had exceeded the target by identifying more than $400 million in savings. Of that, more than 80% of the announced savings is projected to come from moving departments from state-owned buildings into leased commercial space in downtown Baltimore. The projected savings would not be immediate but over 20 to 25 years.
The plan appeared to capture some savings already expected from a decision to move thousands of state employees out of the decaying State Center property in Baltimore.
At one point, the plan was to partner with the private sector to redevelop the 25-acre state office complex, which sits on a Metro stop and is adjacent to the light rail.
The plan, approved in 2009, fell apart after officials balked at the excessive rents and parking rates that would be charged to state agencies moving back into the new facility. Later, then-Gov. Larry Hogan (R) filed a lawsuit to terminate the $1.5 billion project. The developer countersued. The Board of Public Works, led by Moore, voted unanimously in November to settle with developer State Center LLC for $58.5 million.
At the time of the settlement, there were fewer than 5,000 employees from seven state agencies at the center. The state plans to move all remaining employees to other locations by the end of 2026.
The future of the State Center property is undetermined. Options include turning over the midtown property to the city or selling to a developer.
In a written response to the auditor’s findings, the department called the conclusions on State Center “not factually accurate.”
“DGS conducted cost-benefit analyses for the State Center campus in order to determine the most cost beneficial option for the state agencies located on this site,” the agency wrote in its response.
The department added that two cost-benefit analyses were conducted on the State Center move and determined the move to leased space was in the best interest of the state.
“While DGS could not explore every conceivable option for relocating State Center, DGS was deliberate in considering relevant, realistic, and viable options,” the department wrote in its response to the auditor.
Purchasing new properties to relocate state agencies was “determined to not be a viable option.” The department cited concerns about “extensive capital funding” for renovations and “extensive maintenance costs.”
Auditors, in a footnote, wrote that the department could not provide documentation including formal analysis that showed efforts to maximize the state’s purchasing power. Auditors added that “the response does not contradict the facts presented in the finding.”
Negotiating “aggressive lease rates”
One official, in a June briefing with reporters, said the state would take advantage of the large amount of available commercial office space and negotiate “very aggressive lease rates.”
The recent audit cast doubt on some of those claims.
In one case, auditors noted that the state was spending nearly $278 million over 15 years for office space for the Maryland Department of Health. The space is leased in a building that the current landlord purchased for $16 million in 2016, the report notes.
“Given the significant amount of space being leased by certain of these agencies, we question whether the decision to lease was the most cost-beneficial alternative,” auditors wrote.
Auditors also noted that the Department of General Services could not document how much consideration was given to consolidating leases into a single location. Auditors could find only one example where two departments relocated under a single lease.
Auditors wrote that while the department said it did consider multiple agencies in a single lease, it “did not formally analyze whether agencies should be co-located to maximize the State’s purchasing power to achieve operational efficiencies.”
Additionally, auditors noted that the department failed to determine fair market rates for the leases “resulting in a lack of assurance that the leases were at or below market rates.”
Again, officials at the department disagreed with the findings.
In a response to auditors, the department said it “contracts with independent commercial real estate brokers to accurately determine the fair market rates for all leases in order to ensure that leases are procured at rates that are either at, or below, market rates for the area.”
Hidden costs
Another concern for auditors was the lack of transparency in how lease deals were presented to the Board of Public Works. The three-member panel led by the governor reviews and approves billions in state contracts annually.
A review of board agendas, minutes and other documents raised concerns that the total costs of lease awards was not always disclosed.
Auditors looked at eight agreements. They found that the department reported only the first year of the cost of the lease to the board but not the full cost over agreements that lasted 10-15 years. Excluded from those costs were annual rent escalations.
In one case, a lease for the Department of Human Services was presented as a $3.7 million deal. Not disclosed was that the lease costs grow to $5.8 million by the 10th year and cost nearly $50 million over the life of the deal.
Also excluded were other costs such as parking. The eight leases reviewed included nearly $5 million in annual parking costs that were not reflected in presentations to the board.
Auditors added that the department “did not properly evaluate lease proposals, raising questions as to whether the lease awards were the most advantageous to the state.”
In its response, the department said its presentation of leases was “legally sufficient”
However, the department signaled that it would change how it presents leases in the future.
“DGS acknowledges that additional clarification can be obtained by reporting the total rent value for the rental term, which can meet best practices,” the agency wrote in its response. “Accordingly, DGS will begin including a line item for the total rent value for the term of the lease and a line item for parking costs when parking is a component of the lease, on all lease transaction items beginning with the July 2, 2025, BPW agenda.”
– This story was updated on Friday, Aug. 1, to correct, in the 23rd paragraph, the year in which a leased building had been bought by its landlord.
by Bryan P. Sears, Maryland Matters
July 31, 2025
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