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Md. Board of Contract Appeals upholds rejection of Baltimore slots bid

The former site of Maryland Chemical Company, and possible future home of Celebration Casino.

The former site of Maryland Chemical Company, and possible future home of Celebration Casino.

The Maryland State Board of Contract Appeals on Wednesday denied an appeal from a Canadian homebuilder whose bid for a slots casino in downtown Baltimore was rejected last December.

The decision opens the door for the state to rebid the license for the Baltimore casino, which could be the state’s second largest with 3,750  slot machines. Donald C. Fry, chairman of the Video Lottery Facility Location Commission, said the board planned to discuss how to approach rebidding the license at its meeting next week.

“It’s our hope we can move forward now,” Fry said. “It’s very important for the state of Maryland to see all the facilities to be built as soon as possible.”

John F. Dougherty, an attorney with Kramon & Graham P.A. in Baltimore who represented casino bidder Baltimore City Entertainment Group, said a further appeal could happen this week.

“We’re very likely going to ask for a judicial review in circuit court,” Dougherty said. “There are some interesting conclusions in the opinion that cause us to wonder they didn’t rule in BCEG’s favor.”

When the request for proposals was issued in 2009, the state received one bid for the license, from Michael Moldenhauer, owner of Baltimore City Entertainment Group. The group proposed a casino with the maximum number of slot machines but only paid the state $3 million in upfront licensing fees, which accounted for 500 machines.

Moldenhauer told the Video Lottery Facility Location Commission he would phase in the remaining number of machines, but never provided full details for a planned $212 million casino fronting Russell Street, south of M&T Bank Stadium.

The commission ultimately rejected the group’s proposal, and Moldenhauer appealed to the Maryland State Board of Contract Appeals. More than two months after the board heard arguments in the appeal, it ruled the state commission had every right to deny the bid.

“It is essential to responsible fiscal planning that the State retain the option of cancelling any procurement,” the board wrote in its opinion. “A myriad of reasons are readily imaginable for the State’s reasonable exercise of enormous discretion in this regard.”

The board ruled that the commission was right to conclude that without paying the $19.5 million application fee for 3,750 machines, the true proposal was for 500 machines. That, the board wrote, would not “maximize” state revenue at the site. The board further said the power to cancel a procurement was broad enough that the state could even cancel one that had already been awarded based on its own convenience.

“The State is simply not obligated to finalize a procurement and award a contract just because an RFP has been issued,” the board wrote.

Dougherty said Moldenhauer’s plan would have taken advantage of the full number of machines, and as the only bid would have benefitted the state. He said the board seemed to have agreed with the location commission that BCEG had been missing deadlines, which was not the case. He said rebidding the license now would cost the company time and money and possibly put a rival bidder at a competitive advantage.

“The rug was pulled out from BCEG here,” Dougherty said. “And, now anyone can take BECG’s good idea and the millions they’ve spent putting together the Russell Street package. With no notice it will be stolen and put back on the street to get a better price for it. That’s not fair.”

BCEG’s proposed moving the casino from its initially designated site to a more visible location a few hundred yards away.

Given how they were treated and the lack of interest initially in all of the licenses, Dougherty said there are not likely to be too many bidders for the city site.

“If this is how bidders are treated, how do they expect anyone to bid now?” Dougherty said. “No one knows what Maryland will do.”

Fry said the commission acted in the best interest of Maryland and said the specific concerns raised by BCEG had been addressed in the initial hearing and in the opinion.

“We’re just very pleased that the Board of Contract Appeals has ruled in our favor,” he said. “We think we took appropriate steps to do what was best for the State of Maryland and this decision upholds that.”

A new request for proposals for the Baltimore license could be put out with third attempt for up to 1,500 slot machines at Rocky Gap Lodge & Golf Resort in Allegany County. The first two RFPs for Rocky Gap drew no bidders.