Maryland's slots commission rejected Thursday a bid to build a casino in downtown Baltimore, a decision that will delay much-needed revenue for the state and hamper city efforts to cut property taxes.
Commissioners said they were frustrated by the Baltimore City Entertainment Group's failure to meet deadlines or to pay millions of dollars in required fees, as well as a lack of clarity about who would control the project.
Chairman Donald C. Fry said the panel had been "more than patient" during the 10 months it weighed the Baltimore proposal, but decided not to wait longer because of "considerable doubt that additional time will produce a complete proposal."
The commission's unanimous decision marks another setback for the fledgling slots program in Maryland, which many had hoped would provide needed tax revenue amid repeated budget shortfalls. It means that two of the five casino sites approved last fall by Maryland voters are nonstarters and must be rebid, while another location at Arundel Mills mall is mired in a county zoning debate. The Anne Arundel facility is considered the biggest potential money-maker.
Mayor Sheila Dixon, who had promised that Baltimore's share of slots revenue would go directly to a property tax cut, expressed disappointment that the license was not granted.
"We did everything we were supposed to do," Dixon said. "I'm not sure if these facilities are a true priority for the state."
With the strong backing of city leaders, the would-be developers of a Baltimore slots facility had asked the state panel for more time, saying that they had just that morning secured a $50 million commitment from an investor with ties to Maryland horse racing.
But the developers acknowledged that they could not pull together the $19.5 million licensing fee and an updated proposal outlining the 3,750-machine slots project until February, a full year after bids were due.
"We make no pretense about being wealthy," Michael Cryor, a partner in the project, told the commission. Cryor, a former Maryland Democratic Party chairman, joined with Canadian homebuilder Michael Moldenhauer and several local developers to form the Baltimore slots venture.
Fry said the Baltimore City Entertainment Group is welcome to submit a new bid for the project, but the commission gave no time frame for when it would request proposals. The panel also must seek bids for a small slots parlor at Rocky Gap State Park in Western Maryland, a location for which no acceptable bids were received the first time.
Moldenhauer and other members of the Baltimore City Entertainment Group declined to comment. Reached last night, Cryor said it was "too early to know if the group will rebid."
"We will take a moment and review what they've said, and our options," he said.
The commission had said in October that it wanted to complete the licensing process by the end of the year and called the Baltimore group in to make its case for time.
In their presentation Thursday, Moldenhauer and Cryor said that they, too, had been frustrated by their inability to secure financing for the project, which includes a legally required capital investment of $187.5 million.
The pair said the sour credit market and onerous city requirements led to the delays. In September, October and again earlier this month, representatives of the Baltimore group had told the commission that they would submit the fee and their expanded proposal. They missed each self-imposed deadline.
"The problem was missed deadlines. And lost credibility," said First Deputy Mayor Andrew B. Frank, who worked closely with the casino group. "The BCEG publicly set some deadlines and wasn't able, for a variety of reasons, to make them. That didn't help."
The developers spent months hammering out a deal that would have enabled the city to collect 2.99 percent of the slots facility's net gambling revenues and guaranteed millions of dollars in payments to the city if a certain amount did not materialize.
Frank said any new slots development team would be required to match those terms, which would enable the city to provide a 7-cent property tax reduction in the first year of the casino's operation.
The unraveling of the Baltimore deal also throws into question the location of any future city slots parlor because the city's land deal for the site was tied solely to the development group whose bid was thrown out.
The city-owned parcel where the casino would have been built will now revert to Cormany Development, which is headed by a Baltimore builder who with Ravens linebacker Ray Lewis proposed to construct a "sportsplex" complex with a football-shaped tower.
Frank said the agreement with Cormany is now considered the "prevailing" use for the parcel.
Samuel Polakoff, the head of Cormany, said he could not comment on whether that development will move forward until he gets "a lot more information."
City officials who attended the slots commission meeting were visibly upset by the rejection. Kim Clark, executive vice president of the Baltimore Development Corp., burst into tears.
The Canadian-led bidders "are good guys and they've worked hard and deserve the opportunity and they were not given it," she said. "We've put in a lot of hard work."
Late Wednesday, members of the group worked with lawyers to negotiate a deal they hoped would buoy their efforts, obtaining a commitment for $50 million from York Capital Management. A manager from that investment firm, Luis Medeiros, attended the commission meeting. In the 1998, Medeiros was managing director of Leucadia National Corp., which purchased substantial shares of both Pimlico Race Course and Laurel Park at a time when they were in financial danger.
But the cash infusion came at a price: The group would give up the controlling interest in the venture. Moldenhauer said he would have remained the managing partner, but his stake would have been cut by more than half.
And York was not ready to commit to the deal until it studied it for an additional 45 to 60 days.
Cryor insisted that much of the developers' financing was already in place, saying they had a $150 million construction financing commitment. But those funds could not be tapped for the state license fees, Cryor said.
Moldenhauer said he believed that Baltimore could be the first Maryland slots parlor in operation, with 2,000 machines in a temporary facility by June.
Commissioner Robert R. Neall said he was offended by Moldenhauer's assertions, saying the group was "nowhere near" opening by June.
The bid, he said, "has not moved, in the eyes of the commission, 1 millimeter" in months.
A spokesman for Gov. Martin O'Malley said the slots panel had done its job.
"It's unfortunate they couldn't get the financing in place, but we look forward to a new bidding process - and hopefully with improved credit markets, this is a small setback and we can move forward quickly," said spokesman Shaun Adamec.