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Our view: The rejection of a failed Baltimore slots bidder's appeal doesn't completely clear the way for a city casino

details about the location and lease terms need to be ironed out

December 13, 2010

The Maryland Board of Contract Appeals' rejection last week of a petition from the failed bidder for a Baltimore slots parlor is an important step to getting the city's casino project back on track, but it hardly clears the way. Several potential legal obstacles remain, and perhaps more significantly, the city and the state slots licensing commission need to learn from the mistakes of the first round of slots bidding to ensure they get the most competitive proposals possible. Both the state's finances and the city's ability to lower its property taxes — a critical element of its hopes for revitalization — depend on it. The state can and should move soon to issue a new request for bids, but not before ironing out a few key details.

The rules governing slots in the city are different from those at the state's other four casino sites, and that has injected an element of uncertainty for would-be bidders. The constitutional amendment authorizing slots calls for a Baltimore slots parlor to be located on city-owned land within a half-mile of both I-95 and Route 295. That means a successful licensee needs not only to win the favor of the licensing commission but also to negotiate a lease with the city — a delicate operation since the applicant that provides the best deal for the state won't necessarily be the one that offers the best deal to the city.

Not knowing what a lease would cost or what terms the city might try to extract might have played as much of a role as the recession did in the lack of competition for a city license in the first round of bidding. Getting more bidders this time around is crucial to making sure the city and the state get the best deal, so the licensing commission and Mayor Stephanie Rawlings-Blake's administration need to do whatever they can to make the process as transparent as possible before soliciting proposals.

The mayor has been advocating for such an approach since the original slots bid from the Baltimore City Entertainment Group was rejected, and slots commission Chairman Don Fry has identified the same goal. But that leaves some important decisions still to be made.

The first question for how to proceed is one of timing. Although the decision by the Board of Contract Appeals was a severe blow to the bidder, Baltimore City Entertainment Group, it doesn't clear up all of the potential litigation surrounding the proposal. BCEG can appeal in circuit court, and it is already engaged in a suit and counter-suit with the city about the development rights for the parcel on Russell Street where the casino was to be built.

But those complications shouldn't force a delay from the city's and slots commission's goal to start a new bidding process as early as February. The chances of BCEG's success in an appeal of last week's decision are slim. The board issued a 58-page opinion supporting its decision and found — quite rightly — that the state "bent over backwards" to try to accommodate BCEG but had to reject it after the group's continued failure to pay an additional licensing fee to correspond with its amended proposal to bring 3,750 slot machines to a site near M&T Bank Stadium. To succeed in court, BCEG would have to show that the slots commission engaged in an unlawful procedure or that its decision is "unsupported by competent, material, and substantial evidence" or "is arbitrary or capricious." The odds of that aren't good.

The contract appeals board's decision also dampens BCEG's chances for success in its suit over the Russell Street site, and the court could provide some clarity about that issue at a hearing this week, when the city will seek summary judgment on the grounds that BCEG's failure to get a slots license means it isn't holding up its end of the development deal.

More significant, though, is the need for the city to regain unencumbered control over the parcel itself. BCEG wasn't the first group to try to develop that land; a previous investment group that included Raven linebacker Ray Lewis had plans to build a sports-themed complex there, though the proposal has languished for years. That group, Cormony Development, had negotiated a deal to transfer the development rights to BCEG, but once the slots developer is out of the way, it will still hold exclusive negotiating rights over what happens to the land. The city has notified Cormony that it was terminating the group's negotiating rights, but it may owe the developers some reimbursement.

That does need to be settled before the state seeks new slots bids. Questions about the availability of that site — which is much more visible and accessible than other options for a slots parlor — very likely scared off some bidders last time.

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