State urges Baltimore judge to deny would-be casino developer’s challenge

The state of Maryland urged a Baltimore judge on Wednesday to deny a challenge by a would-be casino developer seeking to secure the lone city gaming license.

Baltimore City Entertainment Group “was a terrible, terrible applicant,” said Daniel A. Friedman, counsel to the state’s Video Lottery Facility Location Commission. “It filed a confused application. It never got its financing deal together. It made and broke dozens of promises to the location commission and its staff.”

The oft-heated hearing in Baltimore City Circuit Court was the latest sparring match between the state and BCEG, which have slogged through administrative and legal appeals over the last 18 months.

BCEG was the only bidder for the city’s license in February 2009, positioning it to build what could have been the state’s second-largest casino, but the commission threw out BCEG’s bid 10 months later.

BCEG argued the commission made its decision behind closed doors, without demanding a best and final offer from the group.

“They made it up as they went along,” said attorney John Dougherty of Kramon & Graham P.A.

Dougherty said that decision was upheld by a “highly deferential” Maryland State Board of Contract Appeals in December 2010. BCEG appealed the slots commission’s decision there after its bid was turned down. An appeal of the board’s ruling upholding the slots commission’s decision was the matter heard Wednesday.

Dougherty denied BCEG, led by Canadian homebuilder Michael Moldenhauer, has pursued the lengthy appeals process to delay development of the city’s casino, but because BCEG wants to be the one to build it.

“Call our bluff,” said Dougherty. “If you think we’re bluffing, we’re not.”

But Friedman said the slots commission had the right to toss the bid under the request for proposals BCEG answered.

“The state has the flexibility, and needs the flexibility to call a do-over,” he said.

The commission cited a string of delays in the group producing an updated proposal, $19.5 million in license fees and a financing plan, in rejecting the bid. And commissioners hoped improving economic conditions would lead to more interest in the license, which would allow a developer to build a casino with up to 3,750 slot machines on city-owned land south of M&T Bank Stadium.

The slots commission opened a second round of bidding for the Baltimore license last month, with proposals due to the state July 28. Judge Sylvester B. Cox said he will hand down a ruling well before that date, although his decision will likely be appealed.

Groups from across the country, and at least one in Canada, have shown interest in the Baltimore license this time around. They include the Chickasaw tribe of Oklahoma, a Missouri-based casino owner, a Canadian equity firm and a fledgling development outfit based out of a downtown Baltimore law firm and led by attorney Hassan Murphy.

Moldenhauer said after the hearing Wednesday he is not working on another bid.

Some have expressed concern the tax rate imposed on the Baltimore casino will turn off potential developers. The state takes 67 percent of gaming revenue from all casinos. And because the Baltimore casino will be on public property, the city will take 2.99 percent of revenue, or at least $8 million in the first year, $10 million in the second, $12 million in the third, $13 million in the fourth and $14 million thereafter. The eventual casino owner will also pay $3.2 million in property taxes each year.