Marta Mossburg//June 26, 2011
//June 26, 2011
The Baltimore Development Corp. is to transparency what Venezuelan dictator Hugo Chavez is to democracy.
Despite a 2006 ruling by the state’s highest court that ordered the taxpayer-funded agency to open its meetings and documents to public review, its culture of secrecy still thrives.
The financial statement of the $305 million taxpayer-financed Hilton Baltimore Convention Center Hotel — managed by the BDC — is a case in point. It is incomplete, misleading and late, issues that would trigger criminal penalties for a public company. Topping off those problems is the fact that the hotel lost more than $11 million in 2010, putting its cumulative loss at $43 million.
As a result of Sarbanes-Oxley, chief executive officers and chief financial officers must certify that each disclosure “fairly presents, in all material respects, the financial condition and results of operations.” They risk fines or imprisonment for knowingly and/or willfully submitting a report that does not comply with the law.
Those who operate the hotel on behalf of the people of Baltimore should at minimum comply with the same rules. But they have no such fiduciary responsibility and treat the financial statement as if it were a press release.
Here’s a gem from a document that is supposed to provide a meaningful description of business operations: “The Hotel promotes the health, safety and general welfare of the residents of the city, increases commerce and industry, enhances economic development within the city and advances the efficiency of citizens.”
Worse, the financial statement does not include guidance on future results, insight into important economic and other factors influencing the business. Neither does it mention credit rating agency Standard & Poor’s affirming as junk earlier this year some of the hotel bonds as a result of convention bookings declining. This type of information is regularly included in the notes of public companies’ financial statements. Not doing so would not only be suspect, but criminal under current law. After all, who would want to invest in a company that hid major threats to its business and whose long-term viability was questionable?
As it turns out, taxpayers are the lucky beneficiaries of investing in just such a business. And they are likely to be pick-pocketed to finance in part a nearly $1 billion expansion of the convention center, a new arena and a hotel based on fantasy math produced by the same agency or the Maryland Stadium Authority, another bastion of obfuscation.
The BDC neither outlines risks in its public documents nor keeps a separate statement that shows its strategies for improving bookings and business. It does give “public briefings periodically about the hotels; the last one was a review of fiscal 2010 and 2011 in February before Councilman [Carl] Stokes’ committee,” according to Irene Van Sant, a project manager at BDC. If it does so little on behalf of the hotel and makes it so hard for residents to find out about its operations, why has the BDC earned $485,000 in management fees from the hotel in the past two years?
Last but not least, the BDC released the 2010 financials six months after the year ended. And the document is not available on the BDC’s website, nor are earlier financial statements, making it incredibly difficult to find out how this “investment” and others in the city are doing. No press release was issued about the results.
All of this should make residents wonder why the BDC exists. Is it for the sake of taxpayers or for the sake of itself and a few developers who have benefitted at the same time the city sheds thousands of jobs each year?
According to the Bureau of Labor Statistics, the city has lost 53,000 jobs in the last decade. The city also lost nearly 80,000 people from 2000 to 2009 to net migration. Immigrants and births are the only reason the city lost only 30,000 people overall in the last 10 years.
With a record like that and a history of misleading city residents and hiding and delaying crucial economic information from them, the mayor should explain why the BDC shouldn’t be fired.
Marta Hummel Mossburg is a senior fellow at the Maryland Public Policy Institute. She can be reached at [email protected]g