By Dylan Waugh
Capital News Service
Thursday, Feb. 12, 2009
ANNAPOLIS - The state slots commission Thursday voted unanimously to throw out bids for parlors at Laurel Park racetrack and Rocky Gap State Park, leaving just four proposals in what was expected to be a lucrative bidding process.
But the fight over the 3,000-machine Laurel Park bid might just be getting started.
Lawyers for the Laurel Park bidder filed a motion Thursday morning in Anne Arundel County Circuit Court calling the fees required with the bids "unconstitutional." Following the commission meeting, Laurel Park's lawyers and the attorney general's office entered into a standstill agreement, meaning the state will hold onto the application pending the court's decision, expected to be Feb. 26.
"There are many legal chapters yet to be written on this manner," said Alan M. Rifkin of Rifkin, Livingston, Levitan and Silver. The firm represents the Maryland Jockey Club, which operates the Laurel Park bidder, Laurel Racing Association.
The Laurel Park and Rocky Gap bids did not include the required $3 million in initial fees for every 500 machines requested, making them ineligible for consideration for the state's five slot parlor licenses, the Video Lottery Facility Location Commission ruled. The seven-person panel voted after hearing recommendations to toss out the bids from a state lottery official and a representative of the attorney general's office.
"This was the appropriate action to take at this time," said Donald C. Fry, chairman of the commission, after the meeting.
Laurel Racing Association did not include the required money with its Laurel Park bid over hesitation that it would not be refunded if the proposal was not accepted or could not receive proper zoning authorization. Its parent company, Magna Entertainment Corp., announced last week it had $28.5 million in an escrow account ready to turn over to the state if the refund could be guaranteed.
New York-based Empire Rocky Gap LLC's bid for 750 machines at the Rocky Gap site in Allegany County was also disqualified for failing to include the licensing fee and money to conduct a background search, another requirement. The group also challenged the condition that slots owners can only keep one-third of the slots proceeds.
The commission will consider rebidding the slots license for the Rocky Gap site, Fry said, since Thursday's ruling left no valid bids for the Allegany County license.
Senate President Thomas V. Mike Miller, Jr., D-Calvert, said the Rocky Gap site "will certainly have to be rebid."
After clashing at times over the bidding process, state leaders appeared unified in their support of the commission's ruling.
"We have the greatest amount of confidence in this commission," said Miller. "I don't think the commission had any other choice."
Gov. Martin O'Malley, a Democrat, said the poor showing of bidders is a result of the harsh economic times and trusts the commission will make solid decisions concerning the existing bids.
"I believe that we should let the commission do its job, make its evaluations, and be guided by their recommendations at the end of their process," O'Malley said.
House Speaker Michael Busch, D-Anne Arundel, echoed the sentiment.
"I think they're going to come back with whatever appropriate recommendations they have," Busch said. "But I think you've got to let the process play out."
Last week Miller said the commission should consider restarting the bidding process before softening his position. O'Malley and Busch have routinely supported the commission and called for patience in dealing with the bidding process.
The four valid bids are in Baltimore, and Anne Arundel, Worcester and Cecil counties.
The 4,750-machine proposal for Arundel Mills Mall in Anne Arundel County by Baltimore-based Cordish Cos. is by far the biggest.
The commission is not expected to award any licenses for several months. It has the authority to accept or reject any of the bids.
Maryland voters approved slots in a November referendum. Bidders requested only 6,550 of the 15,000 terminals allowed under the law before the Feb. 2 deadline.
The low number of bids means the state might not reach the at least $600 million state officials hoped the machines would generate for education by the 2012 fiscal year.
And the dearth of bids means the state received only $39.3 million of $90 million it expected to get from the licensing fees.
O'Malley said the revenue lost because of the weak slots payments will be more than offset by the projected $3.3 billion the state is expected to receive from the federal stimulus package.
"[$3.3 billion] is a lot more than what we were anticipating in this current fiscal year from slots," O'Malley said. "And in fact it's a lot more than we were anticipating in the next 27 months for slots."
Capital News Service Staff Writer Erich Wagner contributed to this report.