The state of Maryland has agreed to pay $74 million in infrastructure improvements to settle a condemnation lawsuit with the developers of one of the largest proposed mixed-use projects in Prince George’s, according to county officials.

The two sides have been feuding since 2007 over the value of 240 acres of property owned by the developer of Konterra, a community along the Interstate 95 corridor in Laurel that has been billed as a future mini-city the size of Reston.

The State Highway Administration needs the land, which it valued at $32 million, to build out the Intercounty Connector, which is a critical artery for Konterra.

The state condemned the property and offered to buy the land from Kingdon Gould Jr. and his son, Caleb Gould, the developers of Konterra. They refused and challenged the valuation, and the state sued.

Under the preliminary agreement, Konterra will deed the property to the state and the highway administration will construct an interchange at Contee Road that will cost $44 million; the state will pay Prince George’s $30 million to rebuild Virginia Manor Road. The work is supposed to be completed by 2015.

The plan also requires the county to reimburse the state $10 million. The payment would be made in cash and through the donation of county-owned surplus land, valued at $3 million and needed for the Contee Road interchange.

“It’s a great deal for the citizens of this county and the state,” said Haitham A. Hijazi, the director of the Prince George’s County Department of Public Works and Transportation.

The county estimates that the core development of Konterrra will generate 30,000 permanent jobs and 48,000 construction jobs. Once the project is fully built, it will bring in $31 million in annual revenue to the county and $65 million to the state, according to county estimates.

Valerie Burnette Edgar, a spokeswoman for the State Highway Administration, said it was premature to talk about the agreement, which still has to be filed with the courts.

“There are things that have to happen with the budget,” she said. “If it doesn’t happen, it’s back to the table.”

Caleb Gould, who is running the project, declined to comment on the settlement.

A shift in vision

The idea to build Konterra came during Kingdon Gould Jr.’s commute from his Howard County house to his District office. He bought the site, a sand and gravel pit, about 30 years ago.

He snatched up the largest undeveloped tract of land along the Baltimore-Washington corridor during a foreclosure sale in 1981 and envisioned building a community similar to Columbia in Howard County.

But he ultimately scrapped the idea for a pedestrian-friendly development where people can live, work and dine. Forest City Washington is partnering with the Gould Property Co. to develop Konterra Town Center East, the 488-acre anchor of the development.

The scope of that project is expected to surpass National Harbor, a multibillion-dollar development on the Potomac River in Prince George’s, by offering 4,500 residential units, 5.3 million square feet of commercial, retail and office space, and 500,000 square feet of hospitality space.

“This is [County Executive Rushern Baker’s] National Harbor,” said Council Member Mary Lehman (D-Laurel). “And I have hope for that.”

Konterra officials have previously pushed for major transportation improvements near the development. Among them, an exit from Interstate 95 that would feed directly into Konterra; a stop along a proposed Metro Green Line extension; and two ramps off the Intercounty Connector.

State and county officials have said that Konterra can develop only so far without the upgrades.

Lehman said recently that she had trouble accepting the county’s decision to commit money to build Virginia Manor Road when other roadways, namely the Route 1 corridor, are in need of major repair.

“I grudgingly accepted this,” Lehman said.

Moving forward

Hajazi said the state and Konterra were close to reaching an agreement last year, but they could not broker a deal with Prince George’s County on how much it would reimburse the state.

The settlement is “a win-win,” Hajazi said. He said the court could have decided to award Konterra money that it could have pocketed. Instead, the state gets land it needs, and a project that will bring in jobs and tax dollars moves forward.

Susan Hubbard, a spokeswoman for the county Department of Public Works and Transportation, said in an e-mail that Prince George’s will repay the state using future highway user fee allocations. Beginning in fiscal year 2013, the county will pay the state eight percent of its highway user fee allocations on a year-by-year basis until the $7 million is repaid. In order for the county to be responsible for the annual payment, the county’s allocation must be at least $5 million.

Hijazi said the interchange and new road will make Konterra a viable economic engine. “Just like National Harbor would not have been a viable engine without the Woodrow Wilson project and the state and county funding,” Konterra needs the transportation improvements, Hijazi said.