The city of Baltimore must be prepared to move quickly, with reasonable terms, for the lease of city property for the Baltimore City slots casino. The last bid process was fatally flawed. This time the city and state must get it right.
The 2007 slots legislation requires the Baltimore City casino to be built on city-owned property. This requirement is unique to Baltimore; casinos located in other jurisdictions may be built on private property so long as the casino is located within specified geographical boundaries. This requirement will bring additional revenue to the city, but it means Baltimore must offer reasonable terms that will entice potential bidders. If the city gets it wrong, we risk another multi-year delay and the loss of millions of dollars in tax revenue.
During the first bid process, potential bidders complained that they were unaware of the availability of parcels of property located along Russell Street that were ultimately made conditionally available to the Baltimore City Entertainment Group (BCEG). The other potential bidders believed that the only site available was a small parcel currently occupied by the Baltimore Animal Rescue Center.
The Dixon administration and the Baltimore City Development Corporation (BDC) asserted that the Russell Street property was controlled by another entity, Cormony Development, and the agreement to make the site available for a slots parlor was between private parties. True, Cormony acquired the exclusive negotiating rights to develop the property, but the company never actually developed those parcels. More importantly, the BDC and the city administration retained the ability to take control of the property prior to bid submissions — but did not.
In the end, the mayor and City Council approved the agreement to lease the Russell Street parcels to BCEG contingent upon the award of a slots license. The city even entered into an agreement with BCEG to provide $50 million in city bonds to finance the construction of a parking garage for the casino. As we all know, the BCEG bid was ultimately rejected, and litigation has ensued on both the license and the property. Fortunately, it appears that the litigation is winding down, and the city and state will be able to proceed in the very near future.
Going forward, one thing is clear: Potential bidders need to know whether the site will be large enough to adequately accommodate the casino structure and parking for patrons and whether the site would be convenient and attractive to customers. Finally, and most importantly, the potential bidders need to know the precise terms and conditions for leasing the property prior to submission of their bids — the land use restrictions on the property and any known existing conditions of the property, including environmental remediation issues.
If the BDC and the city did not make all potential bidders aware of the Russell Street property or the availability of municipal bonds during the first bid process, they can't make the same mistake again. The city must be prepared to disclose the crucial terms prior to the submission of bids so it can attract qualified and financially sound bidders who have the ability to build and operate a successful casino.
Maryland is facing a staggering budget deficit for the coming fiscal year. The current estimated shortfall is approximately $1.6 billion. The city is facing its own significant deficit of $81 million. The casino in Perryville has collected $27.5 million in revenue since it opened in late September. If all goes well, a much larger Baltimore casino should result in $250 million to $425 million of tax revenue per year to the state. Of the total state tax revenue, the city will collect an estimated $12 million to $20 million, which will allow the city to reduce its property tax rate. The new city casino will also result in new jobs for city residents and increased income tax revenue. All are desperately needed now.
A fair and open process that provides all potential bidders with an attractive site and terms consistent with market conditions will attract the best possible developers. The citizens of Baltimore City and the state cannot risk another delay, especially in light of the severe budget deficits and a property tax rate in the city that is two times greater than those of surrounding counties.
This time, we must get the process right for the citizens of Baltimore and the state of Maryland. Once we get it right, we should turn our attention to expanding to full table games so we can fully compete with the surrounding states.
Catherine Pugh represents the 40th District in the Maryland Senate. Her e-mail is catherine.pugh@senate.state.md.us.