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Baltimore is accelerating its search for another vendor to help it finance large contracts, part of the widespread fallout of the “Healthy Holly” children’s book scandal that continues to shake up city government.
The city has a longstanding financing agreement to help it make expensive purchases — dubbed the “master lease” — with Grant Capital Management, J.P. Grant’s Columbia-based firm. Grant, a well-connected political donor, is among those who together paid former Democratic Mayor Catherine Pugh roughly $800,000 for her self-published books.
Grant’s master lease deal has come under scrutiny since federal prosecutors revealed their charges last month against Pugh; the indictment against her provided new information regarding her financial relationship with Grant. She pleaded guilty to several counts of conspiracy and tax evasion related to the book deals. He has not been charged with any crime.
Last week, City Council President Brandon Scott raised alarms that the city’s Board of Estimates was continuing to funnel money toward Grant by approving a contract to spend $13 million on new radios using the master lease.
On Wednesday, city purchasers asked the five-member spending panel to vote on another item, again financed through Grant’s company. This time, it was a $643,700 contract to replace old and faulty air compressors that the city needs to help fix water main breaks.
Scott unsuccessfully asked the board Wednesday to put off its vote on the compressors — and any other master lease purchases — until the city’s inspector general can complete an investigation Scott requested into Grant’s contracts.
“Even understanding that this equipment is needed and we can’t rush to judgement on anyone,” he said, “for me, it begs the question if we should defer these items until you’re able to, one, expedite the process and have multiple vendors and, two, the investigations have taken their course.”
Other city officials emphasized that the money Grant’s company puts up enables agencies to get the equipment they need, particularly vehicles. In the past, the master lease financed a $33 million upgrade to the city’s 911 system and a $53 million contract to install energy conservation systems in public housing.
The city previously held two master lease agreements, one with Grant’s company and another with GE Public Financing, but the latter ended its deal with the city several years ago.
Finance Director Henry Raymond told the board Wednesday that the city appreciated having multiple master lease vendors because they were “always competing against each other so the city could get the lowest interest rate.”
Officials are now in the process of seeking other vendors to operate a master lease with the city, and hope to find one or more within the next three months.
“We want to expedite it, especially under the current circumstances,” Raymond said.
In the plea deal Pugh agreed to last month with prosecutors, they alleged Grant gave $164,000 to Pugh for her self-published children’s books over the course of several years and while he was in business with the city, despite knowing that she was funneling some of the funds into her home and political campaign.
In addition to making campaign contributions to Pugh, Grant has donated in the past to Scott, Mayor Bernard C. “Jack" Young and Comptroller Joan Pratt — all Democrats and members of the Board of Estimates. The city solicitor and public works director, positions controlled by the mayor, also sit on the spending panel.
Under Pugh’s leadership, the city last year renewed the master lease deal with Grant’s company. The city received a second proposal in 2018 from Bank of America Public Capital Corp., but documents show the law department determined its bid was “nonresponsive” because it sought to make “material changes” to the conditions of the request for proposal.
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There are generally a couple of items on each Board of Estimates agenda financed through Grant’s arrangement with the city. The deal provides upfront cash for capital projects that the cash-strapped city might otherwise be unable to buy as quickly.
“It gives the city flexibility to preserve our cash flow,” Raymond told the panel Wednesday.
Grant’s company has held the rights to a master lease agreement with the city since 2003. It has financed roughly $135 million in deals. The value of the contract depends on what the city uses it to buy — meaning the more they use it, the more Grant makes. Contracts approved under his master lease are often not competitively bid.
After Scott asked the board to defer its vote, City Solicitor Andre Davis emphasized how many other contracts are slated to come before the spending panel over the next three months and questioned Raymond on what would happen “if the board decides to shut down the Grant financing opportunity entirely.”
The finance director responded that the city would likely have to find cash to pay for contracts in the pipeline.
“There are going to be others, and some will be a lot more urgent," City Purchasing Agent Erin Sher Smyth said. “I would ask that because it touches on so many procurements already in the works, that we continue with those that will be using the master lease.”
Scott’s motion to defer approving the contract failed because no one seconded it. Three members of the Board of Estimates voted to approve the air compressor contract, while Scott and Pratt abstained.
This article has been corrected to reflect that city Comptroller Joan Pratt abstained from voting on the air compressor contract.