Spurned slots developer challenges city casino plans

Developer seeks injunction to halt search for new casino operator

April 27, 2011|By Julie Scharper, The Baltimore Sun

Spurned developer Michael Moldenhauer is attempting to throw up an 11th-hour obstacle to the state's efforts to find new candidates to build and run Baltimore's casino.

Lawyers for the Canadian homebuilder, who was the only applicant in the initial round of bidding for the Baltimore slots license, filed papers Wednesday in Baltimore Circuit Court asking a judge to stop the state slots commission from seeking new proposals.

The head of the commission expressed confidence that the effort would not slow the process down.

"Based on the advice from our legal counsel, we feel we are on solid legal ground to move forward," Donald Fry, chairman of the Maryland Video Lottery Facility Location Commission, said Wednesday. "We're confident that the decisions we made will be upheld."

Moldenhaur's requests for a restraining order and an injunction came the day after city and state officials announced plans to issue a new request for proposals for the project, which could include as many as 3,750 slot machines.

"We're asking the court to stay the new [request for proposals] until we get a decision on the old [request for proposals]," said John F. Dougherty, an attorney for Moldenhauer.

"We've got a court that's going to decide whether we're right or wrong, and we think we're right," he said.

Deputy Mayor Kaliope Parthemos said it was imperative that the city avoid further delays. The city is planning to use revenue from slots to reduce the property tax rate and build and repair school buildings.

"We need to get it moving," said Parthemos, who is the first deputy mayor for economic development. "It's a new way to generate revenue, and we don't have many options. We don't have any pots sitting around of gold."

The casino is slated to be constructed on a 17-acre parcel on Russell Street, near Oriole Park at Camden Yards and M&T Bank Stadium.

Also Wednesday, the city spending board approved the terms under which slots operators would be required to abide. Those requirements are to be incorporated in the slots commission's request for proposals, eliminating the need for separate negotiations with the city.

Under the agreement, the casino operators would pay the city the greater of $8 million or 2.99 percent of revenue in the first year. The amount would increase to $14 million in the fifth year.

The operators would also be required to pay $3.2 million in property taxes on the site.

Comptroller Joan M. Pratt, who says she opposes gambling for moral reasons, was the only member of the five-person board to vote against the terms.

Baltimore is one of five locations in the state approved for slots.

Moldenhauer's request represented his latest challenge to the commission's decision in 2009 to refuse to grant a slots license to his Baltimore City Entertainment Group.

The state board of contract appeals upheld the slots commission's decision to rebid the project last fall. Moldenhauer has appealed that ruling to the Circuit Court; Dougherty said a hearing has been scheduled for May 26.

In the legal papers filed Wednesday, Moldenhauer says his company "will suffer irreparable injury if the court denies a temporary restraining order and preliminary injunction until after all appeals have been exhausted."

He says his company, the Baltimore City Entertainment Group, stands to lose its right "to have its bid fairly and equally evaluated" by the slots commission if the new request for proposals is allowed to go ahead.

Moldenhauer contends that the state failed to refund the $3 million licensing fee that he paid in 2009.

To participate in the new proposals process, Moldenhauer says, the company would have to tender an additional $3 million licensing fee, putting it at a competitive and financial disadvantage to other bidders.

"The Location Commission is already holding $3 million of BCEG's money," the document says.

Dougherty noted that the board of contract appeals took nearly a year to rule on Moldenhauer's appeal.

He said state and city officials "are complaining it's taking too long, but we've done everything in the deadline or less time."

"We want this thing to move as quickly as possible," he said. "The Baltimore City Entertainment Group wants to get back in the bidding process that was started years ago and get a proposal in and build a casino."

C. Christopher Brown, a professor emeritus at University of Maryland School of Law, said that the developer's tactics bring to mind the struggle over the casino at Arundel Mills. That debate pitted developer David Cordish against those who opposed a slots parlor at the mall.

Moldenhauer might be attempting to "prevail by delay," said Brown, who is not involved in the case. "On the other hand," said Brown, "If the city or state did something wrong and the license was improperly held back, that needs to be rectified.

"A delay is not necessarily bad," he said. "A delay could help get to the truth of the matter."

Moldenhauer's attorneys filed motions for a temporary restraining order and a preliminary injunction.

A temporary restraining order generally halts progress for no more than 10 days, Brown said. A preliminary injunction would last until the case goes to trial, he said.

A hearing has not yet been set to review the motions.

Baltimore Sun reporter Nick Madigan contributed to this article.



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