A better plan for city slots bids

Our view: Baltimore, state slots commission, have learned from past mistakes

April 27, 2011

If Maryland's experience so far with slot machines tells us anything, it's that we shouldn't get too excited that the state Video Lottery Facility Commission is about to issue a new request for proposals for a Baltimore City casino. The theoretical timeline for bids, license review, awards, permits and construction — if all goes well, ground could be broken early next year — shouldn't be taken too seriously. Although the city and state have so far prevailed in all of the litigation related to the developer who failed to secure a slots license in the first round of bidding, there's no telling how much he may be able to delay the process — indeed, he has already sought a restraining order — or what other litigation could surface.

That said, the way the city and state are going about the bidding this time is much smarter. While there are no guarantees, the prospects for robust bidding and a good deal for the taxpayers are much better than they were when the license for the city's slots site were first put out for bid two and a half years ago.

Baltimore, unique among the slots locations authorized in Maryland's constitution, inserted into state law a requirement that its casino be located on city-owned land and that a slots operator pay ground rent in addition to property taxes and taxes on the proceeds from the slots themselves. That set up a level of uncertainty about the economics of a city slots parlor that didn't exist elsewhere and almost certainly dampened interest by other potential bidders.

It also set up an awkward dual-track application process. While the sole bidder in the 2008 request for proposals worked to satisfy the state commission about its plans and finances, it also had to negotiate with the city on the terms of its rent deal — and, in something of a surprise to some of those who took a pass on bidding, on the precise location of the casino itself. The city could have refused to negotiate with certain bidders, giving it effective veto power over the state licensing process.

Since there was only one bidder, Baltimore City Entertainment Group, that wasn't an issue. But the convoluted process did set up conflicting interests between the city and state; then-Mayor Sheila Dixon opposed the slots commission's decision not to grant a license to BCEG, even though the developer had missed repeated deadlines to submit the additional licensing fees it needed to expand its proposal enough to make the deal with the city work.

The upside of that failure and the years of delay is that Mayor Stephanie Rawlings-Blake is now piggybacking off of the agreement BCEG negotiated with former Dixon deputy Andrew B. Frank. The city's Board of Estimates approved a memorandum of understanding Wednesday morning that spells out the minimum financial terms, which are essentially the same as those Mr. Frank and BCEG worked out in 2009. The city is indicating that it will accept 2.99 percent of casino proceeds in rent, or a minimum of $8 million in the first year, increasing to $14 million in the fifth year and thereafter. The city is also requiring a minimum of $3.2 million in annual property taxes. The request for proposals that the slots license commission plans to issue as early as Thursday also spells out exactly what property is available.

All that means that bidders won't necessarily have to negotiate with the city at all. If they are willing to sign the memorandum of understanding as part of their license application, then the entire process remains in the purview of the slots licensing commission, which is as it should be.

A bidder could offer more money to the city as part of its proposal, just as it could offer to pay a higher tax rate to the state than is required by law, and the slots licensing commission would consider that as a factor in deciding between multiple bidders — assuming we're lucky enough to get multiple bidders. But it would not be the only factor. The state needs also to consider the experience and qualifications of the bidders, their financial wherewithal, the size and scope of their proposals, their marketing plans and a host of other factors. As much as the city is banking on the benefits of a casino to lower property taxes, it is a state project, primarily designed to benefit the taxpayers of the entire state, and the state needs to be running the show.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.