1 state of maryland board of public works joint …
TRANSCRIPT
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STATE OF MARYLAND
BOARD OF PUBLIC WORKS
JOINT HEARING ROOM
LEGISLATIVE SERVICES BUILDING, ROOM 100
90 STATE CIRCLE
ANNAPOLIS, MARYLAND November 19, 2008 10:05 a.m.
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P R E S E N T
LIEUTENANT GOVERNOR ANTHONY BROWN, Presiding; HONORABLE PETER FRANCHOT, Comptroller; HONORABLE NANCY KOPP, Treasurer; SHEILA C. MCDONALD, Secretary, Board of Public Works; ALVIN C. COLLINS, Secretary, Department of General Services; T. ELOISE FOSTER, Secretary, Department of Budget and Management; JOEL LEBERKNIGHT, Chief of Procurement, Department of Budget and Management; JOHN PORCARI, Secretary, Department of Transportation; SHAUN FENLON, Director, Land Acquisition Planning, Department of Natural Resources; LUWANDA JENKINS, Special Secretary, Governor’s Office of Minority Affairs; and, MARION BOSCHERT, Recording Secretary, Board of Public Works.
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C O N T E N T S
Subject Agenda Witness Page State’s Right DGS Al Collins 8 of Recovery Item Elizabeth Wright against 25-CGL, Del. Sandy Rosenberg Tuttie’s Place p. 49 Beavan POS Shaun Fenlon 12 Property Item 6A, Jack Russell Acquisition p. 6A Huntersville POS Shaun Fenlon 15 Rural Legacy Item 9A, Donna Sasscer Area p. 10A Naming of SEC Sheila McDonald 18 James P. Muldoon Item 8,p. 12 River Center Modifications SEC Sheila McDonald 18 to Lease for Item 9, David Raith Sports Legends p. 13 Mike Gibbons Museum Amending Ground SEC Sheila McDonald 41 Lease for Rocky Item 11, Robert Brennan Gap p. 18 Stadium SEC Sheila McDonald 70 Authority Bond Item 10, David Raith Swap p. 15 Paul Shelton Settlement from DBM T. Eloise Foster 82 State Insurance Item 9-GM, Trust Fund p. 33B UMB Cooling USM Jim Stirling 86 Tower Item 1-C, Joe Evans Replacement p. 1C DoIT Agenda DoIT Elliot Schlanger 88
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Subject Agenda Witness Page Inspection of DOT John Porcari 89 Bay Bridge Item Geoffrey Kolberg Main Span 9-AE-MOD, Cables p. 18
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P R O C E E D I N G S
LIEUTENANT GOVERNOR BROWN: Good morning,
everyone, and welcome to the November 19, 2008 meeting of
the Board of Public Works. I am Lieutenant Governor
Anthony Brown. I’ll be presiding today at the request,
instruction, direction, command, if you will, of Governor
Martin O’Malley, who’s unavailable this morning. And I’m
pleased to be joined by the permanent and standing members
of the Board of Public Works, our Treasurer and
Comptroller. I don’t have an opening statement to make so
I will ask the Treasurer if she would like to make an
opening comment.
TREASURER KOPP: It’s always a pleasure to be
here, and to be here with you. Three alumni from the House
of Delegates escaped, it’s very nice to be back. No, good
morning.
LIEUTENANT GOVERNOR BROWN: Mr. Comptroller?
COMPTROLLER FRANCHOT: Thank you. I just wanted
to compliment you, Lieutenant Governor, on your role in the
transition of President Elect Obama. And I think you make
Maryland proud that you’re up there co-chairing, I take it,
something with a veterans focus. And as a veteran myself,
I was Private Franchot and I’m sitting next to Colonel
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Brown right now. But it’s great that you’re up there. And
my compliments, and you make the State proud, I think.
LIEUTENANT GOVERNOR BROWN: Well, thank you, Mr.
Comptroller.
TREASURER KOPP: Do you want to spend a minute
telling people what you’re doing? This is all the family -
-
LIEUTENANT GOVERNOR BROWN: Yeah, what is he
doing? Okay. So I am the co-chair of the Agency Review
Team for the Department of Veterans Affairs. It’s part of
the Presidential Transition Team. There are a number of
Agency Review Teams looking at cabinet level departments,
independent agencies, and our work is to help prepare the
incoming administration for, during this transition. And
so I’m very honored and excited to be a part of this, and
working with a number of Americans who have, are willing to
give of their time as we enjoy this peaceful transition of
power in our country. I’m really excited about that. And,
like I said, it’s just an honor to be a part of it. And I,
for those of you who will look at my public calendar and
wonder why there’s all that office time on there, that’s
transition work. And so, but I’m pleased to be able to do
that.
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Okay. Let’s move on, then, if we will to, we’re
going to go a little bit out of order. We’ll start with
the agenda for DGS. And I understand that Delegate Sandy
Rosenberg is here. Where is, oh, there he is, hiding in
the back there. And so we’ll go to that agenda. And then
one of the items that you’re interested in is on that
agenda. So, Secretary Collins?
MR. COLLINS: Yes, sir. Good morning, Lieutenant
Governor Brown, Madam Treasurer, and Mr. Comptroller. The
Department of General Services has twenty-six items on its
agenda today, including one supplemental which is in the
back of your book. We are withdrawing two items, Items 2-
EP and 9-LT. Due to technical reasons we have, we had to
revise an unusual number of items for this particular
meeting. I’ll read those quickly just so they will go into
the record, but they were small technical issues. 1-C, 4-
E, 6-M, 7-M, 13-LL, 13-LT, 14-LT, 17-LT, and 18-LT.
And if I might, sir, I just would like to point
out to the Board two items of significance to us this
morning. Item 5-M, which is a small business reserve of
over three years with a comparable 10 percent MBE with it,
which is really good news. Item 6-M for the Department of
Labor, Licensing, and Regulation, again, 100 percent MBE on
that item because we are using a community service
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provider. That’s a three-year project. And thirdly, Item
7-M for DHMH 71 percent MBE, an amount of $249,000 for
asbestos removal at Rosewood.
Sir, the item of, Item 25-CGL is the item that
Delegate Rosenberg and Deputy Secretary Wright from DJS is
here to speak upon. So if I could bring them forward, if
it please your pleasure.
LIEUTENANT GOVERNOR BROWN: Come on down.
MS. WRIGHT: Good morning. I’m actually
Assistant Secretary of Departmental Support for Juvenile
Services and I thank you for this opportunity to speak with
you. This is regarding Tuttie’s Place, and this is a
program that DJS as well as DHR and, you know, other State
agencies support. We currently have children from both
agencies residing there. And we have representatives from
Tuttie’s Place if you have any questions about the program.
And I would like to then allow you to speak.
DELEGATE ROSENBERG: Thank you. It’s a pleasure
to be in front of three alumni, or alumnae, I’m not sure,
Treasurer Kopp, which is the correct pronunciation.
TREASURER KOPP: It’s not alumnae.
(Laughter)
DELEGATE ROSENBERG: What’s, oh, that’s true. It
would be an I or alumna, that’s right. My Latin teacher is
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still amongst us so I will stand corrected. Tuttie’s Place
is, provides extraordinary care for, and guidance. In fact
one of their alumni, who now works for Tuttie’s Place, is
with us here today, Ms. Robinson. The subordination of the
State’s right of recovery here is essential for an
additional loan to bring about renovation of the facility
in the 41st legislative district, so they can enhance the
services they provide for people who are DGS clients. So I
would urge approval of this proposal of the subordination
by the Board.
LIEUTENANT GOVERNOR BROWN: Any questions or
comments from the members of the Board?
TREASURER KOPP: It’s always a pleasure and an
honor to get the advice of, seriously, of somebody who is
so knowledgeable and involved in the issues. And I really
--
DELEGATE ROSENBERG: Thank you.
TREASURER KOPP: -- appreciate the time, Sandy.
DELEGATE ROSENBERG: Thank you.
LIEUTENANT GOVERNOR BROWN: Yeah, thank you very
much, Delegate Rosenberg, for coming down and testifying.
Also for your important work on this project. So we
really, really appreciate it. And what you didn’t add is
that, so not only are we all, well you’re current, we’re
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former. You all served on Appropriations together at one
time. And then you got promoted to Judiciary, where you --
DELEGATE ROSENBERG: Absolutely.
TREASURER KOPP: Whoa, whoa, whoa --
(Laughter)
LIEUTENANT GOVERNOR BROWN: -- where you assumed
the --
DELEGATE ROSENBERG: Can we send a transcript to
the current chairman?
LIEUTENANT GOVERNOR BROWN: -- distinguished
position of Vice Chairman of Judiciary. So --
DELEGATE ROSENBERG: Trying to fill your shoes,
absolutely, absolutely.
LIEUTENANT GOVERNOR BROWN: Congratulations.
DELEGATE ROSENBERG: Thank you.
LIEUTENANT GOVERNOR BROWN: Thank you very much.
Any other questions or comments on this item, or any other
items on the DGS agenda? Thank you. Hearing none, the
Treasurer moves approval, and the Comptroller seconds. All
those in favor say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Anyone opposed?
Hearing none, the DGS agenda as amended with those
redactions or deletions is approved. Next item, we’re
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going to skip around again, we’ll go to Program Open Space.
And as we do that I want to recognize President Jack
Russell from St. Mary’s County. And welcome today. I know
there’s an item that you’re interested in on this agenda.
And at the appropriate time we’re going to have you come up
and share some words with us, thank you.
MR. FENLON: Lieutenant Governor, Madam
Treasurer, and Mr. Comptroller, today’s agenda includes
twelve recreational development projects. The item you
were just referring to is seventy-six acres that are being
acquired with Program Open Space. And it also includes two
Rural Legacy Easements that are protecting over 196 acres.
And with that, I’m happy to answer any questions.
LIEUTENANT GOVERNOR BROWN: Okay. Why don’t we
ask the President to come on up. And it’s Item 6, is that
correct? Welcome to Annapolis. It was nice seeing you,
what was it, last week? At the Leonardtown Parade,
Veterans Day Parade and commemoration. It was great seeing
you and your colleagues, and all the residents of
Leonardtown. It was a great, patriotic day.
MR. RUSSELL: It was very nice of you to come
down, sir. So, good morning. My name is Jack Russell.
I’m President of the Board of County Commissioners. And I
bring you greetings from St. Mary’s County. And before you
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today, ladies and gentlemen, we have Program Open Space to
purchase a seventy-six acre Beavan Property which is
adjoining 800 acres as we know as the Salem Trek that has
already been protected. This will provide us additional
watershed protection, FIDS habitat, and I might add that
now we are in conversation with Ducks Unlimited to be able
to perhaps provide some bird watching and FIDS habitat on
this piece of property.
It affords us a unique opportunity to get more
students out in connection with nature. It will support or
supplement our Elms Program for Environmental Education,
and also supplement the Skipjack Program that we have for
students in St. Mary’s. This acquisition will balance our
recreational facilities in St. Mary’s County in that we
have about forty-five ballfields in the northern end of the
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county. We have forty to forty-five ballfields in the
southern end of the county. This will balance us in
the central part of the county because as it stands
now we only have about twenty-six ballfields there.
So we would ask, ladies and gentlemen, that
you’ll look favorably on this application. I have
with me Mr. Phil Rollins today, who might be able to
answer any technical questions that you have. Again,
we thank you for having us come before you and speak
to this issue. Thank you.
LIEUTENANT GOVERNOR BROWN: Thank you. Any
questions or comments from the Treasurer or the
Comptroller?
TREASURER KOPP: No, I am interested in the
comment you made about public access ability for bird
watchers, et cetera, to gain access, and that you were
working with the private sector, essentially, to
assure that. I would be interested as that proceeds
in learning more about how it’s working out.
MR. RUSSELL: We will certainly keep you
informed, ma’am. We have had negotiations with Ducks
Unlimited through Mr. Rollins with our Department of
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Recreation and Parks to try to enhance bird habitat
and the essence of bird watching and what not for our
students. It’s a great way to get them outside --
TREASURER KOPP: Right.
MR. RUSSELL: -- out of the classroom with
hands on participation --
TREASURER KOPP: You bet.
MR. RUSSELL: -- and become part of the
world.
TREASURER KOPP: Yeah. And I am concerned,
we don’t, I believe, we don’t always focus enough on
that non-invasive but really very beneficial use of
some of these lands we either get or get access to.
And I’m very glad to hear it, and thank you.
MR. RUSSELL: Indeed. Thank you, ma’am.
LIEUTENANT GOVERNOR BROWN: Anything else?
President Russell?
MR. RUSSELL: Well, we do have another issue
coming up here. Ms. Donna Sasscer’s going to be
coming along in a little while in reference to some
Open Space funds for Huntersville. So we would ask
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that you look kindly on that, also. Thank you very
much, ladies and gentlemen, for having us here today.
LIEUTENANT GOVERNOR BROWN: Thank you. Is
that item on this agenda, or --
TREASURER KOPP: It’s 9A.
MR. FENLON: That’s right. That’s on this
agenda. It’s Item 9.
LIEUTENANT GOVERNOR BROWN: Okay. Well, why
don’t we do that? Let’s go to Item 9 and whoever
would like to speak to that item, please come down and
identify yourself and we welcome you.
MS. SASSCER: Good morning. My name is
Donna Sasscer. I am from St. Mary’s County Economic
and Community Development as the Agriculture Manager.
And just would like to thank you for your support of
the previous Rural Legacy areas in St. Mary’s County.
We have two. This Huntersville Rural Legacy Area was
one of the first established in St. Mary’s County.
And while this is a very small property it is
contiguous to other land that we have preserved and
protected in the Huntersville Rural Legacy Area. And
our overall goal for that Huntersville Rural Legacy
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Area is to protect the Patuxent River and its
watersheds. Thank you very much. And I’m here as
well if you have other questions.
LIEUTENANT GOVERNOR BROWN: Do any of the
members have any questions or comments on this item?
Thank you very much for coming down.
MR. RUSSELL: Thank you. Thank you for
having us.
LIEUTENANT GOVERNOR BROWN: Or coming up.
Okay. Are there any other questions or comments on
any of the items for Program Open Space Agenda?
Hearing none, the Comptroller moves favorable,
seconded by the Treasurer for the adoption of that
agenda for Program Open Space. All those in favor
say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Nay? Hearing
none, that agenda is approved. And now let’s return
to our regular order of business. And that would be
with the Secretary’s Agenda. Good morning.
SECRETARY MCDONALD: Good morning,
Lieutenant Governor, Madam Treasurer, Mr. Comptroller.
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We have eleven items on the Secretary’s Agenda today.
There are two reports of emergency procurements. We
are withdrawing Item 5. I almost said the wrong
number. We are withdrawing Item 5, which is an
application to dredge the inlet to Fox Creek. I had
told the audience before the meeting started that
would be withdrawn, but if anybody was here for that
item we will be bringing Item 5 back to the next Board
meeting on December 3rd. So we have ten items
remaining and two reports of emergency procurements.
LIEUTENANT GOVERNOR BROWN: Any comments or
questions from members of the Board on any of the
items in the Secretary’s Agenda?
COMPTROLLER FRANCHOT: I had a, just on –
LIEUTENANT GOVERNOR BROWN: Mr. Comptroller?
COMPTROLLER FRANCHOT: -- Item 8. I had
several calls from prominent individuals supporting
the naming of the River Center at St. Mary’s College
for Mr. Muldoon. And I heartily support that. He’s a
terrific civic entrepreneur. I believe he’s Chair of
the Board down there. And so I salute that. I did
have another question on --
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LIEUTENANT GOVERNOR BROWN: Please.
COMPTROLLER FRANCHOT: -- Item 9. If
someone could explain --
SECRETARY MCDONALD: Mr. David Raith is
here, the Acting Executive Director of the Stadium
Authority. And Item 9 is forgiveness of rent that had
been due from the Sports Legend Museum, and an
adjustment of the landlord/tenant relationship with
the Sports Legend Museum. And Mr. Raith is here and
can answer questions.
MR. RAITH: Good morning.
COMPTROLLER FRANCHOT: Good morning.
MR. RAITH: We opened up Sports Legends in
May of 2005. And shortly after that, the Sports
Legends came to the Stadium Authority and to the Board
and expressed their concerns about their potential of
being able to exist under the lease structure that we
all agreed upon. The Sports Legends made it very
clear to us that if they were continue at the current
rate of the rent that they would be forced to shut
their doors down.
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The Stadium Authority and the Sports Legends
met on numerous occasions to go over operational
issues, to understand the marketing of the facility,
met with the bank, tried to understand their funding
options, how the bank was willing to work with them.
And the Stadium Authority Board and Sports Legends
felt that it was in the best interest of the State and
of the museum to make the necessary rent reductions in
order to keep this facility open.
The State contributed $1.1 million in
capital grants towards the construction of the museum.
So we were also looking at making sure that we protect
the State’s investment in that building. And that’s
how we arrived that reduction of the rent would help
them continue to move on.
Also, the museum has had a number of
challenges with regards to the attendance being
currently driven at the complex. Also they were
surrounded by a construction zone, with the
construction of the hotel. So they haven’t been able
to attract the number of people and patrons that they
were originally looking for.
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With me today I also have Mike Gibbons, the
Executive Director of the Babe Ruth Museum, and he
could also emphasize the importance of this.
MR. GIBBONS: Good morning. I’m Babe Ruth
Museum, but we also run Sports Legends. So if
there’s, as to avoid any confusion. We have made good
progress with Sports Legends since opening. We’ve had
a balanced operating budget every year based on the
rent reduction packet that the State, or that we
negotiated with MSA. And, but we have clearly been
hindered by diminishing attendance at Orioles’ games.
When we did our original business projections back in
2003 it was based on a little more than double of what
they’re doing right now. And as the Orioles’ real
bodies in the seats has slipped under, well they’ve
announced 1.9 million fans. But I think that the
number of people who actually attend games is actually
less. And that has a direct bearing on how many
people come to our museum and also the Geppi
Entertainment Museum which is right above us.
But we expect that as time goes by those
numbers will improve. The Hilton Hotel has opened
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across the street. And since its opening, they had a
soft opening in August, we have set monthly attendance
records for August and October. And we are on track
to set an attendance record for November. So we see
that things are starting to improve. And I think that
we are a good fit for the Camden Yards complex. Now
that the Hilton is there we have two cultural
attractions right on site.
We have one of the largest State sports
collections in the country. We feature Michael
Phelps. We feature all of the Olympians from the
State of Maryland. The Maryland Athletic Hall of Fame
is housed with us. Pimlico, many of the professional
sports teams, eight area of colleges including the
University of Maryland where we display the
championship trophies from the men’s and women’s
basketball teams. They are there as well.
So I think that we’ve got a good product.
People who come to our facility enjoy it. We are
starting to see success. We are renting the building
after hours and doing all the things that we feel we
should be doing in order to get on an even keel.
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COMPTROLLER FRANCHOT: I’d like to ask Mr.
Raith, I like sports also. And I think museums are
great. But tell me why the Stadium Authority for
fifteen months did not collect $32,000 a month in
rent?
MR. RAITH: We were in constant contact with
Sports Legends. We knew about the problem from day
one. We worked with them closely. They did make a
monthly payment of $1,000 just in, you know, in best
interest. We tried to address it the best we could.
And, you know, we did not let this go for fifteen
months. It was just over a fifteen-month period that
the Board finally decided it was the best way to, you
know, get Sports Legends back into the right
direction.
COMPTROLLER FRANCHOT: Here’s my concern. A
private sector company wouldn’t have put up with this
at all. So why should a taxpayer funded entity like
the Stadium Authority put up with this situation? I
mean, literally, we’re talking, what is it --
MR. RAITH: $444,000.
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COMPTROLLER FRANCHOT: -- $440,000 is, we’re
being asked to forgive that?
MR. RAITH: Well, we were also trying to
protect the State’s investment of $1.1 million, also,
that went into the construction of the museum. If we
had determined that the museum wasn’t going to be able
to be successful and we had removed them from the
building, we would have ended up having to redevelop
that space if we were going to go to more of a market,
or an office, or a retail type. Which would also
include a huge capital outlay from the Stadium
Authority. And then there’s also space that they are
currently renting in the basement that we aren’t 100
percent sure that we could also rent to a private
entity.
COMPTROLLER FRANCHOT: Well, here’s the
concern. Do we really have a viable operation here?
Because you’re saying that, I take it, you want us to
forgive the $440,000-odd because you think that
there’s a light at the end of the tunnel. We’re
looking at an economy which is in a free fall and
everybody’s cutting back on discretionary spending. Do
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you think that there’s really a realistic hope that this
is, you know, this is going to make it given the economic
crisis?
MR. RAITH: Well that was the reason why the
Department of General Services, or Legislative Services,
recommended that we change it from a single term, twenty-
year lease to four five-year terms. That after the
original five-year period we would take a look at, you
know, how successful the museum has been. Do we expect it
to, you know, continue? And we do basically have another
bite at the apple after that five-year period. And if at
that five-year period we see that there is no hope for the
museum, and we understand that, then we would go ahead and
just go ahead and terminate the lease. And, you know,
redevelop it for a better use.
COMPTROLLER FRANCHOT: Well I think I’m a little
concerned that the success of the Orioles is tied to the
museum. I love the Orioles, but I’m not sure that there’s
a significant improvement coming down the road. But why
wouldn’t the Stadium Authority condition this arrangement
for some of the, you know, ask that some of the $450,000 in
back rent be made up over the five-year period?
MR. RAITH: We discussed this with Sports
Legends. They felt that even to make an attempt to make
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some of that up wasn’t going to work within their plan.
And, again, they were in the position that, you know, the
rent that we agreed to was what would work. Anything above
that would potentially, at, basically put them out of
business.
COMPTROLLER FRANCHOT: And who’s advising you?
Is it DLS? Is it you? Or who’s looking at the books and
trying to figure out what is, as you say, the bottom line
here?
MR. RAITH: The Chairman of the Stadium Authority
two years ago created a subcommittee of some Board members
that went to Sports Legends and the Babe Ruth Foundation,
looked at their books and records, again, spoke with the
bank that financed their construction. And, you know, they
came to the recommendation that this was what was needed in
order for the Babe Ruth Museum to be successful. Under the
amendment there is a percentage of net profits that the
Stadium Authority could receive as the museum becomes more
successful. They are to report on a monthly basis as to
their financial position. They are also required to
provide a report at the end of the year that basically
shows what the bottom line is and what the payment to the
Stadium Authority in excess of the original rent would be.
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COMPTROLLER FRANCHOT: Okay. I can see that.
But why wouldn’t we at least try to recapture part of the
debt you’re asking us to forgive by adding installment
payments to the terms of the revised lease agreement?
MR. RAITH: Again, you know --
COMPTROLLER FRANCHOT: I mean, what is the harm
there? If in fact the growth occurs, as you hope it would?
MR. RAITH: If we had asked them to pay this at
the beginning --
COMPTROLLER FRANCHOT: I’m not asking you to pay
it up front. I’m just saying, over the five-year period,
if certain attendance goals are met, we the taxpayers get
back some of the $450,000 in back rent.
MR. RAITH: I agree. But the Board felt that
this was the best mechanism in place to keep the museum
successful.
COMPTROLLER FRANCHOT: Let me ask you about,
Mister, you’re the Executive Director of the museum? You
know, apparently when my staff looked online and found out
that the tickets for a family of four, we’re talking above
$30 to get into the museum. Is that a winning business
model?
MR. GIBBONS: Well we, when we originally created
our ticketing structure, it was based on comparable museums
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in and around the Baltimore area and sports museums around
the country. We still feel that it is a reasonable rate.
We offer a lot of discounts to people as incentives to come
in. But, yeah, I’m thinking that the ticket structure is
okay based on the kind of attraction that we have.
COMPTROLLER FRANCHOT: Has there been any
discussion to reducing the price of admission? I mean,
we’ve had this conversation with the Zoo and they seem to
be moving in that direction.
MR. GIBBONS: Well, it may be. And you brought
up a valid point before. That with the economy the way it
is, I don’t think any of us have been through something
like this and it’s hard to forecast and project what you’re
going to do. And so we are doing things now in terms of
discounting to try and lure people in. But clearly, our
problem has been lack of bodies walking around the Camden
Yards complex on non-Oriole game days. We think that that
is changing now with the Hilton being right across the
street from us. And that we have spent a lot of time in
forging a relationship with the Hilton Hotel.
We just had a gala a couple of weeks ago honoring
Jim McKay and celebrating Jim’s legacy with fifteen
Olympians from the State of Maryland being there. And we
did the event at the Hilton. And it was a wonderful
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success. About 950 people attended. And I think that it
is, that kind of activity that’s going to strengthen our
relation with the hotel so that they will be directing
customers to us. And we’re starting to see more people
walking around the Camden Yards complex, around Sports
Legends Museum. And I expect that that will continue.
We, in preparing this year’s operating budget,
talked with the Hilton about their numbers, their
projections for the first year. And they advised that they
are expecting more, and a healthier visitation, than they
had originally projected. Those things should bode well
for us as we move forward.
COMPTROLLER FRANCHOT: And, well I wish you all
the success in the world. But I’m a little dubious.
Because of basically the economy and your comment earlier
that the attendance at the Orioles’ games is something
that’s important. But let me ask Mr. Raith, are we going
to, will the taxpayers, or you, get the operating cost and
debt service on bonds? Are you going to be able to pay
that off based on their percentage of new revenues, plus
the rent?
MR. RAITH: We’re hoping that, the goal is to
meet those expectations. We may be light in the first year
or two.
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COMPTROLLER FRANCHOT: How much?
MR. RAITH: I believe it’s about $300,000, and we
would basically fund that through other revenues that are
being generated from Camden Yards.
COMPTROLLER FRANCHOT: Well I’m going to, I
appreciate your testimony. I’m going to be voting against
this proposal. I think it’s unwise and inappropriate for a
taxpayer funded agency like yourself to leave nearly
$450,000 on the table, put us in the position of having to
pay up to $300,000 and who knows what more down the road.
And I just think it’s very unfortunately timed,
particularly because we have over a billion dollar deficit
at the State level. And we’re going to be cutting, as we
have in the past, we’re going to be cutting, I assume in
the future, with, at the Board of Public Works. And
talking about the possibility of furloughs, and layoffs.
And so I’m just concerned about us getting
further into this, particularly with the lack of
accountability as far as the forgiven debt. That to me
seems entirely appropriate to see to recapture some of that
if in fact the museum is able to defy the laws of economic
gravity and recover. I like the concept. I can see why it
fits in there. I just think that we have, in these
budgetary times we don’t have the flexibility to continue
30
to subsidize this in the manner that you’re presenting to
us.
And I’m also, frankly, not happy with the fact
that we’re looking at this thing retroactively, I take it.
This has already been approved --
MR. RAITH: Correct.
COMPTROLLER FRANCHOT: -- by the Stadium
Authority, but it wasn’t --
MR. RAITH: Yes. This was approved last
September by the Authority Board, correct.
COMPTROLLER FRANCHOT: And why would it, why
would it not have been submitted to us at that point?
MR. RAITH: Again, it was unfortunate, it was
something that fell through the cracks. The Authority at
that time was going through a transition period. So,
again, we apologize that it didn’t come down sooner than
now.
COMPTROLLER FRANCHOT: Okay.
MR. GIBBONS: If I may? If this vote goes the
wrong way, the Babe Ruth Museum will go out of business.
The Babe Ruth Museum has existed for thirty-five years and
built an incredible collection that celebrates Maryland
sports history. So I would urge the Board to vote
favorably for this. We have been operating under good
31
faith, making every effort to be a successful business. We
are seeing some success and progress. And I think that
after all of this time, and housing the collections of
Johnny Unitas and the Baltimore Orioles, and the various
themes that we represent, I’d hate to see it all dispersed
and go away because I think it, I think that sports and the
celebration of sports heritage in our culture is important.
And it grows more important every day that goes by. It is
part of our society. And we have amassed a celebration of
our State heritage in sports almost unlike any other in the
country.
So I think that we would request the opportunity
to continue to pursue our goals. We are making progress,
as I said. The Hilton Hotel has opened. And I think that
we’re on the right road. Thank you.
LIEUTENANT GOVERNOR BROWN: Madam Treasurer?
TREASURER KOPP: I’d just like to say for the
record that I do share some of the Comptroller’s concerns
and obviously am displeased with the fact that the
Authority did not follow the letter of the law and bring
this before the Board of Public Works when it should have.
I recognize it did bring it before the Legislative Policy
Committee in the Legislature, and that in fact some of the
terms were changed or amended in the State’s interest, I
33
successive leases rather than the long term lease; the
relatively frequent periodic reports of progress or
lack thereof, which I would hope you would share also
with this Board, Mr. Raith, when you send them on to
the Legislature?
MR. RAITH: Absolutely.
TREASURER KOPP: I do think we would lose a
significant investment. I am impressed, if we did not
do this, I am impressed by the progress that’s been
made since the Hotel opened and hope that it
continues. And if so the State then, as I understand
it, has an opportunity to share in the enhanced
revenue from the museum which would certainly be a
good thing if it happens. And if not, we will be
watching.
At the moment, I think actually, to end this
project, to lose the money, to forego the potential
revenue, and to incur a concomitant cost to
reconfigure the place for another use just strikes me
as not the wiser solution.
LIEUTENANT GOVERNOR BROWN: I have a few
questions, and if you could just be brief in your
34
response. The Treasurer alluded to it. I think maybe
you mentioned it. The Stadium Authority will share in
future profits of the museum, is that correct?
MR. RAITH: That’s correct.
LIEUTENANT GOVERNOR BROWN: Is that a change
from what the current arrangement is?
MR. RAITH: The current? No, that was part
of the amendment. When we reduced the rent we also
made it that there would be a percentage --
35
LIEUTENANT GOVERNOR BROWN: Okay. So that
is, that’s part of it, okay.
MR. RAITH: Yes, it is.
LIEUTENANT GOVERNOR BROWN: And, so in a
way, I mean, that could be a mechanism, assuming that
there are future profits, to recover some of that
$440,000?
MR. RAITH: Yes.
LIEUTENANT GOVERNOR BROWN: Okay. So you,
you haven’t really kind of put it on a schedule, but
conceptually we will be recovering, if there are
profits from the museum?
MR. RAITH: That’s correct.
LIEUTENANT GOVERNOR BROWN: Okay. The other
thing is, do you have a Plan B? Because if that light
at the end of the tunnel is an oncoming train and not
the daylight that we’re hoping for, are you beginning
to develop a Plan B for where the Sports Legends
Museum could be located other than at Camden Yards? I
mean, I don’t want to know what it is. I just want to
know do you have a Plan B?
36
MR. GIBBONS: Well, we have the Babe Ruth
birthplace. We have two facilities. And Camden
Yards, the development of Camden Station came about
because our collection grew leaps and bounds over the
years from just being Babe Ruth to being what it is
today. And so we needed a second facility to house
the collection. That’s, so I think that Plan B would
be to go back into the birthplace which is not
adequate for housing this kind of a collection.
LIEUTENANT GOVERNOR BROWN: Mm-hmm. So you
don’t really then have, you don’t have a --
MR. GIBBONS: There is, no there is, no --
LIEUTENANT GOVERNOR BROWN: Right.
MR. GIBBONS: -- there is no situation
that’s on the horizon for us. We’ve made our bet at
Sports Legends. We’ve developed a world class
attraction there and I hope that the State will enable
us to continue.
LIEUTENANT GOVERNOR BROWN: Do you, and I
also agree, I think Maryland does celebrate its sports
legends. I think we take a lot of pride in our teams
and our individuals that compete at a variety of
37
levels. Babe Ruth, Cal Ripken, Michael Phelps. Do
you have anything in the museum on Dominique Dawes,
who we just appointed to the Governor’s Commission on
Fitness? MR. GIBBONS: Yes. Dominique
Dawes actually participated in our tribute to Jim
McKay a couple of weeks ago. And we are now
investigating and putting a project to create a
permanent exhibit on Marylanders in the Olympics. And
Dominique would be a featured athlete, certainly,
there.
LIEUTENANT GOVERNOR BROWN: Mr. Comptroller?
COMPTROLLER FRANCHOT: Yeah, just a follow
up question for Mr. Raith. Are you working on a
similar arrangement with the museum on the second
floor?
MR. RAITH: We have met with Mr. Geppi. Mr.
Geppi came to us with the same situation and we have
requested Mr. Geppi to bring his rent current which he
has committed to do by the end of the year.
COMPTROLLER FRANCHOT: And the, so that
would involve forgiveness of –
38
MR. RAITH: No. There is no forgiveness of
that on Mr. Geppi’s part.
COMPTROLLER FRANCHOT: And the record
attendance that was mentioned for August, September,
and October? Is that enough to put the museum on a
footing where you don’t have to receive additional
subsidies? I’m specifically talking about the
$300,000 operating loss for the first year that could
be there.
MR. GIBBONS: No. These are, these are
small steps, Mr. Comptroller, that we’re taking. And
my point being, by mentioning that we had a record
August, a record October, and are on track for a
record November, is that we are taking steps that are
headed in the right direction. It’s a light at the
end of the tunnel, not a train coming down the track.
So I think that that’s an encouraging sign. And, but
again, these are very unique times. We can’t really
predict anything. All that we can do is go to work
everyday, work as hard as we can, do our jobs, and try
and bring in attendance. And to follow our mission
39
statement, which is to make the best use of our
facilities. And I think that we’re doing that.
Last night we had a wonderful event
celebrating the ‘58 Baltimore Colts championship win
over the Giants. A couple of hundred people showed
up. Sandy Unitas was there. This place is home to
Maryland sports. Gary Williams comes, Brenda Frese,
the Olympians have shown up. So it’s more than just
exhibit cases and dusty old uniforms. And I think
that we are important to this community. We are a
good cultural attraction. We met with the Stadium
Authority and with Steve Geppi, yesterday as a matter
of fact, to improve signage on the Camden Station
building. And I think that these things will help us
to attract more people.
COMPTROLLER FRANCHOT: But --
MR. GIBBONS: So we’ve got a lot of work
ahead of us.
COMPTROLLER FRANCHOT: Sure. No, and I
applaud you for your hard work, and maybe some of
these wonderful athletes could actually contribute and
40
help out based on their economic success. My concern
with this --
TREASURER KOPP: That would be very good.
COMPTROLLER FRANCHOT: My concern, and I
support the Treasurer when she mentioned that rather
than a twenty-one-year lease, five-year leases for
accountability are better. But I’m still going to
vote no because I just don’t see this as being a
viable investment for that State. Yes, we want to
invest what we, protect what we’ve already invested.
But no, we don’t want to just sign up for something
that’s going to be an ongoing bail out and subsidy.
And so --
MR. GIBBONS: I don’t know if this matters,
but the Babe Ruth Museum historically over the years
has had very little support from the State of
Maryland. We have not come down often. We have come
for a bond bill occasionally. The State subsidizes
many, many cultural attractions in the area, in our
region, in the State. And we are not receiving an
operating subsidy from the State of Maryland. We
41
operate on our own. And we are, you know, we’ve had
some trouble here.
COMPTROLLER FRANCHOT: For what? The Babe
Ruth or --
MR. GIBBONS: Well, Babe Ruth and Sports
Legends. It’s one organization. It’s one museum with
two facilities.
COMPTROLLER FRANCHOT: Well, when you talk
about forgiving $445,000 in debt and assuming a
perhaps $300,000 loss the first year, that in my view
is a subsidy that, particularly in these economic
times, we can’t afford.
MR. GIBBONS: Well --
COMPTROLLER FRANCHOT: And --
MR. GIBBONS: -- I appreciate that.
COMPTROLLER FRANCHOT: -- so that’s --
MR. GIBBONS: I do.
LIEUTENANT GOVERNOR BROWN: Okay. Is there
any more questions or comments from the members? What
I’d like to do is separate out Item 9. Right, we’re
on Item 9? Yeah, let’s just separate that out for a
hot second here. Are there any other questions,
42
comments, or presentation on the remainder of the
Secretary’s Agenda?
COMPTROLLER FRANCHOT: Yes, I have a --
LIEUTENANT GOVERNOR BROWN: Okay. So thank
you very much, gentlemen. And don’t go anywhere. I
don’t think we’ll be calling you back, but we just
separate out Item 9 and we’re now on the other items
on the Secretary’s Agenda. So don’t go anywhere.
COMPTROLLER FRANCHOT: I --
LIEUTENANT GOVERNOR BROWN: Thank you.
MR. RAITH: Thank you.
LIEUTENANT GOVERNOR BROWN: Okay. Any --
COMPTROLLER FRANCHOT: Thank you, Lieutenant
Governor. I have a question about Item 11.
SECRETARY MCDONALD: Item 11 is a request
concerning Rocky Gap Resort. And Mr. Bob Brennan and
I believe Mr. Eric Schwaab from Natural Resources, Mr.
Bob Brennan from MEDCO are here. The, it’s a
recommendation that the ground lease between the
Department of Natural Resources and MEDCO be amended.
And the details of the amendment that’s being proposed
are in the second revised item.
43
COMPTROLLER FRANCHOT: Mr. Brennan, welcome.
I think you would agree this is a very complex agenda
item and it has several moving parts to it. And I
want to make sure we’re all fully aware of what’s
being asked of us. And if you could summarize some of
the components I’d be appreciative.
MR. BRENNAN: Sure. And I appreciate your
understanding of the sensitivity to the nature of the
subproject. Most of you know MEDCO’s been involved
with Rocky Gap from its inception. It opened in 1998.
It has struggled financially over that period of time.
Back in 2004 we were at $7.7 million in revenues. It
was very concerned with the ability for it just to
cover its own operating expenses. And we have spent a
lot of time focusing on the day to day operations.
And we have been working with the investors, private
investors, who lent $26.3 million into this project.
Part of our negotiations starting back in 2002 was
actually getting the investors to stand still. What
that meant is, they were not getting paid. Now for
about the last two years they have been receiving some
44
payments, partial interest payments. Approximately
about 25 percent of what they’re due.
Our understanding of the cash flows of this
project is that it will never be able to cover all of
that debt. And our objective was to try to structure
a transaction whereby the investors would allow us to
first fund the operational cost, fund the working
capital reserves, and then fund the FF&E reserve and
replacements for the facility. That was a very big
objective. And it was something we’d been working on
diligently for about the last three years.
There’s a lot of history as to the starts
and stops with this refinancing proposal. But we
really finally cut a deal where everybody agreed. And
I will tell you, the loggerheads got broken with the
assistance of Secretary Edgerley and Secretary Griffin
when they got involved earlier this year. I can tell
you when they got, came in the office, MEDCO sat down,
briefed the two secretaries. They understood what the
objectives were. They understood a lot of the issues.
But until we had their undivided attention and focus,
which believe me MEDCO appreciates, we were not able
45
to get past how to get the investors to agree to
effectively sit on their hands, take an up front
payment, and then just be dependent upon receiving
what equivalently would be excess cash flow. If the
operations going forward do not generate any excess
cash the investors will not be paid.
You mentioned the down economy. This year’s
going to be about a break even operation for us. I
would expect next year to be about the same. So these
investors aren’t looking to run away with a lot of
money over the near term. And the fact of the matter,
one of the items that we’re requesting is to extend
the ground lease to the year 2065. The current ground
lease with the extensions that are provided would
allow the ground lease to go to 2046. Why do we need
the additional time? We have not paid about $10
million in interest on top of the $26.3 million. So
we have more to pay back and we believe we should try
to pay back if the cash flow is there. But come the
year 2065 if it’s not paid back, the ground lease
expires, the investors only have a leasehold mortgage,
46
and the asset reverts back to the State of Maryland.
And that’s --
COMPTROLLER FRANCHOT: So, so since 2002 we
have not paid about $10 million in interest?
MR. BRENNAN: That’s correct, sir.
COMPTROLLER FRANCHOT: And can you just help
me understand what the relationship is and the
differences between the Series A, Series B, and Series
C bonds? It’s described, the description I got was
pretty byzantine, I have to admit. For example, if
there’s insufficient cash flow to cover the interest
on the Series A bonds then the unpaid interest accrues
to the Series C bonds, or purchase some Series A bonds
at a discount which are connected to the issuance of a
new Series B bond, and investors in Series A and B
bonds that aren’t getting paid will be compensated
with new Series C bonds. That --
MR. BRENNAN: Believe it or not, I think
that’s a very simple and elegant structure. But we
will take the time to explain that.
COMPTROLLER FRANCHOT: Yeah, please.
47
MR. BRENNAN: The idea was to separate the
bonds. And initially we were going to issue a series
of $8 million of A bonds which was only to the
investors. The Series B bonds were necessary because
in addition to monies due to the investors there was
also monies that were due to DBED that had a priority.
And it goes back to the $4 million that was invested
back in 2002-2003. And we needed to bifurcate the
investors’ priority interest out of the A bonds and
recognize a shared interest in the B bonds.
The elegance of this transaction was the
State’s willingness through a participation with MEDCO
and DBED to purchase the 8 million bonds at a discount
of $7 million. We were then going to subordinate our
rights in payment but not the rights under the rest of
the documentation. We still have the abilities for
foreclosure and what have you. This basically makes
the transaction default proof. Which is one of the
things that we absolutely needed to have.
Going forward the excess cash flows will
first pay the B bonds. If there is insufficient
interest under the current, to be able to pay the B
48
bonds on a going forward basis, that interest will
accrue to the D bonds, the excess cash flow repayment
agreement. And they do not compound interest, which
is what we have right now. But there is no obligation
for us to make those payments, therefore taking the
risk of the investor saying, “You’re not paying me,
I’m going to foreclose.” That goes away. And that’s
the simple explanation of the elegance of this
transaction.
COMPTROLLER FRANCHOT: And how much is the
elegance going to cost the State of Maryland?
MR. BRENNAN: There’s an investment of $7
million. $3.5 million has come in from MEDCO and
another $3.5 million from the Department of Business
and Economic Development. The remaining $1 million
has not been identified. And we’re still working with
Secretary Edgerley on that.
COMPTROLLER FRANCHOT: And what is the
interest rate on the C bonds?
MR. BRENNAN: There is no interest rate.
They will not accrue interest.
49
COMPTROLLER FRANCHOT: And let me just focus
for a minute. So the elegant solution that you’ve
laid out is going to cost the State $7 million in up
front dollars to purchase this package.
MR. BRENNAN: Correct.
COMPTROLLER FRANCHOT: What are we going to
be paying, if anything, or what are we going to be
losing as far as future payments or any, what’s it
going to cost us to enter into these agreements?
Series A, B, and C? I mean, I take it we’re --
MR. BRENNAN: All of the monies currently
due to the State, be it DBED, DNR, MEDCO, or the
County, will all accrue to an excess cash flow
repayment obligation. So the priority will first be
to retire the A bonds -- or, I’m sorry, retire the B
bonds. Then once the B bonds are retired we will
start making payments on the C bonds. Once the C
bonds are paid, then we get repaid on the A bonds.
And then the D bonds will be paid. And then once all
that’s taken care of MEDCO gets to give the keys to
the resort, the hotel conference center, back to the
State. It’s a State asset.
50
COMPTROLLER FRANCHOT: Okay. And how
realistic is it, once again, given the economy but
even looking longer term, that this is a financially
viable enterprise?
MR. BRENNAN: Well, I’m not going to sit
here and blow smoke around the room. It obviously has
not been financially viable. I do not believe that
Rocky Gap would ever be able to pay back the current
levels of debt under the current economic structure.
And with the downturn in the economy I believe it’s
going to be a couple years before the investors would
start seeing payments out of the cash flows of the
operations unless there’s an extraordinary event.
The additional time is what’s really needed.
You know, we’ve debated terminal values of investments
and how to get down to what is an ultimate value that
is out there for this project. If we go back to about
2006, we would have enough cash flows to make
significant payments under this restructured
obligation. As I said, this year’s going to be break
even. We didn’t start our perform, a year ago we
thought we were going to make a little over $1
51
million. COMPTROLLER FRANCHOT: Well, you
know, so we’re going through this and coming up with
this elegant solution. And in fact we may still have
the same failed, or same inability, to make interest
payments. I notice that the investors -- by the way,
who are the investors?
MR. BRENNAN: There’s two investor groups.
One is Davidson Kempner. They’re out of New York.
They’re a hedge fund. And they acquired the interest
of two of the original investors, All State and
Waddell & Reed. One of the original investors,
Calvert Investments, which is located in Maryland, has
remained in this project.
COMPTROLLER FRANCHOT: And the hedge fund in
New York has got the majority, I take it, or not?
MR. BRENNAN: Yes, they do, sir. They own,
hold approximately $20 million of the $26.2 million.
COMPTROLLER FRANCHOT: Okay. So they’re
making concessions to go from 8 percent to 6 percent
in interest payments, et cetera.
MR. BRENNAN: And write down the principle
from $26.3 million to approximately $20 million.
52
COMPTROLLER FRANCHOT: But in fact, based on
what you were saying about next year, we’re going to
be in the same situation as far as --
MR. BRENNAN: But with this restructuring,
the big difference is if the operations are not
generating excess cash flow then any, and if we don’t
have monies to make the year’s interest payment, then
those interest payments for the B bonds will accrue to
the D obligations. There are, the only payments are
made are conditioned upon having the cash flow to make
them.
COMPTROLLER FRANCHOT: But isn’t that what
we’ve currently got on a year to year basis with the
forbearance?
MR. BRENNAN: With the forbearance.
However, right now, we were negotiating from 2002
through 2007 an annual forbearance. Right now, we
have a moving forbearance where the investors could
exercise their rights with a two-weeks notice to
exercise their rights and remedies which could include
a foreclosure.
53
COMPTROLLER FRANCHOT: Well, have they given
any indication that they’re going to?
MR. BRENNAN: I don’t believe it would be in
their best interest. Nor do I believe it is in our
best interest.
COMPTROLLER FRANCHOT: Of course it wouldn’t
be. Here’s, you know, I’m not, I don’t want to bring
up the policy debate that we have just gone through in
the State. I’m perfectly willing to accept what the
public has voted on. But why wouldn’t we wait until
the spring to see what interest there is in that
facility by the competitive bid process, or whatever
it is that’s being structured, for a slots parlor up
there? Why would we rush into this at this time? Why
wouldn’t we wait to see whether the State can get an
even better deal in a couple of months?
MR. BRENNAN: It’s a very good point. As
I’ve started my presentation, we have always managed
this to try to enhance the operations and to add to
what I was saying without slots. And that is what
this restructuring was intended. As I mentioned, that
we’ve been working on this for a number of years. The
54
prospects of slots could bring significant relief to
this entire project. But somewhere along the line,
even with slots coming in, there’s value that can be
obtained through the use of the land that would be
ground leased, which is part of what we’re discussing
about here. It’s for a gaming company to pay to use
the land adjacent to the hotel. There’s a value that
will come in from that. I haven’t talked in earnest
to any gaming companies but I suspect they will also
want to bargain with us for the use of the hotel.
I’m not sure what any of those numbers could
be. It may be less than what we currently owe the
investors. And under that scenario I would expect
we’re going to be sitting back down with the investors
to say, “Guys, we have an opportunity to allow
somebody else to use it for twenty-five years.
There’s a big kettle of money here that can help you
out.” And we’re going to probably sit down with them
and say, “Will you release your position for that
payment?”
There could be a scenario where the amount
of monies that could be made available from gaming
55
could actually be over and above what they’re due and
then the State gets repayment on the advances that
we’ve made into the project.
COMPTROLLER FRANCHOT: Yeah. But here’s the
question. Why would we vote today to allow $7 million
in taxpayers’ monies to be committed plus $1 million
in unidentified taxpayers’ dollars, to be put into
this scenario? Why wouldn’t we just wait and see what
happens with the process? It’s right around the
corner. And frankly, I think everybody would agree,
we need the money. And yet with this thing we’re
voting to, you know, I can’t quite get my arms around
this elegant solution. But given, conceding it is
elegant it still costs us money. And why wouldn’t we
--
MR. BRENNAN: It costs, sir, the operations
and the negotiations and the position that, the
positions we’ve dealt with with the investors over the
last, particularly eighteen months, have not always
been, I’ll call it cordial. There have been times,
and you can talk to Secretary Edgerley, where I was on
the phone with him, sitting back saying, “The gun’s at
56
our head. And we are right on the brink.” And I want
to make sure that we have a sound, stable operation.
You know, people are more interested in paying more of
a value for a going concern. I do not want to be in a
position --
COMPTROLLER FRANCHOT: Okay, I can see that.
But if, you know, a New York hedge fund is yelling at
you, believe me, you can refer them over to us.
Because we’ve got a lot more problems than they do. But l
talks about this vendor, private vendor payment that
was, according to the legislative audit, none of this
was done with the knowledge or consent of the Board of
Public Works. And I bring it up just because that
audit, in this amended ground lease that you want us
to approve today, there’s, at least I found it hard to
find, there’s buried a retroactive approval of the
2002 contract. And I’m just wondering why that wasn’t
broken out, and presented to us in the light of day.
I didn’t, I, maybe it was an oversight.
MR. BRENNAN: And I have to apologize for
that. But the, when I got to MEDCO in 2004 I was not
aware that my predecessor did not bring that item to
57
the Board. It, the ground lease, requires the Board
approval of the operator. At that time MEDCO was
working, again, with DNR. There were surcharge
payments that the, my predecessor, had verbally
discussed about continuing a subordination. That was
never formalized. Long story short, we worked with
DNR to commence those payments to DNR and we initiated
those January 1, 2006. At the same time, we were
with, we did that with the understanding that DNR was
going to move that request to the Board of Public
Works. The message was, and this was the prior
administration, was that they wanted to move slow.
And they did a good job of doing that, obviously.
Again, when Secretaries Edgerley and Griffin came into
office this was one of the issues, one of the items
that we needed to attend to along with some of the
other administrative changes that needed adjustment in
the ground lease which are in the revised item here.
The, I would have loved to have been here in
2007. But we wanted to bring in a restructuring that
would be part of this consent for the manager. And,
sir, I’m sorry. It’s --
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COMPTROLLER FRANCHOT: Okay. But for the
2002 contract that we’re being asked to approve
retroactively, which will then go until 2010 --
MR. BRENNAN: Actually, it expires April of
2008. And the contract goes through 2010 where we can
give sixty days notice to terminate at any time
between --
COMPTROLLER FRANCHOT: Okay. Was that
competitively bid?
MR. BRENNAN: Yes, sir, it was.
COMPTROLLER FRANCHOT: And was there an MBE
inclusion in it or not?
MR. BRENNAN: Sir, I was not at MEDCO when
that was done. I know there were I believe eight
respondents. And I do not know all the details of
that procurement.
COMPTROLLER FRANCHOT: And can I ask the BPW
staff what the understanding is when this agenda item
was presented to us? Did it have this lease approval
in it?
SECRETARY MCDONALD: When the item was first
submitted as a supplemental item it asked to approve
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the bond deal that Mr. Brennan has described.
Yesterday during the day, as you said, we realized
that inside of the ground lease amendment was this
thing about approving retroactively the contract from
2002. So at that point in the middle of the day I
asked that the item be revised so that it would be
clear to the Board members that the ground lease
included the approval of the contract from 2002. And
we were able to distribute the item to you, the second
revision, at 4:00 yesterday afternoon.
COMPTROLLER FRANCHOT: Thank you. And thank
you for doing that, because otherwise it would have
been lost in the fine print. Okay.
LIEUTENANT GOVERNOR BROWN: Madam Treasurer?
TREASURER KOPP: I think, Mr. Brennan, you
answered this in response to the Comptroller’s very
interesting questions. You have the capacity to
amend. Can you amend this agreement in the coming
years?
MR. BRENNAN: I’m not sure --
TREASURER KOPP: What can --
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MR. BRENNAN: Is this for the Crestline
contract?
TREASURER KOPP: What can, not the Crestline
contract. Well, yeah, the Crestline contract, but you
answered that already. In terms of the agreements
regarding the cash flow. I couldn’t quite understand.
MR. BRENNAN: If the question is, can this
be deferred?
TREASURER KOPP: No. The question is, once
this is approved --
MR. BRENNAN: Yes.
TREASURER KOPP: -- is it written in stone
for how long?
MR. BRENNAN: The amendment is, right now
the contract basically says the Crestline agreement
expires in April of 2010. It had, it was basically a
two-year rolling adjustment. The current contract
actually expires, the, there’s a two-year pre, which
was April of 2008.
TREASURER KOPP: Eight, right.
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MR. BRENNAN: And then from that point
forward we could terminate the contract upon sixty day
notice.
TREASURER KOPP: All right. But I’m talking
about the cash flow sharing agreement. The main --
MR. BRENNAN: Right.
TREASURER KOPP: -- focus.
MR. BRENNAN: The A bonds, B bonds --
TREASURER KOPP: Yes.
MR. BRENNAN: -- C bonds, D bonds? Yes.
I’m not sure what you’re –
TREASURER KOPP: Well I, and the Comptroller
raised the question of the possibility of slot machine
operation --
MR. BRENNAN: Oh, okay.
TREASURER KOPP: -- and how that impacts the
success of the rest of Rocky Gap.
MR. BRENNAN: The, Rocky Gap, if we have a
gaming company that is interested to move in there it
will bring significant relief. We need this
restructuring now because it’s part of the
restructuring, million dollars will go into the
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operations for working capital and capital
replenishments. I need, and I failed to say this
earlier, I need that $400,000 to get us through the
winter. We are not going, we, based on the cash
positions we have right now we’ll be out of cash
probably sometime in March.
TREASURER KOPP: So is it fair to say, and
this is a question, that you need essentially
ratification of this proposal for immediate purposes,
and if there is slot machine revenue and things change
this would still be the structure that would be
beneficial to the State?
MR. BRENNAN: It’s, that’s correct.
Although, I expect we will be back to the Board of
Public Works to talk about subsequent ground lease of
the land for the gaming facility.
TREASURER KOPP: Yes.
MR. BRENNAN: And potentially the use of the
hotel golf course conference center. I don’t know
what those proposals will be.
TREASURER KOPP: I understand.
63
MR. BRENNAN: But I would like to think that
through those negotiations we can fully extinguish the
liabilities that we have with the investors. And it
might be because we have enough cash to fully pay them
out, or we have a big enough of an offer to sit back
and say, “Guys, we’re going to cut a deal, allow the
use. You’re not going to see any cash for a twenty-
five year period. Can you give us some additional
relief?” And I believe --
TREASURER KOPP: And you feel that with the
approval of this item you will be in a position to
negotiate regardless of --
MR. BRENNAN: We will be in a much better –
TREASURER KOPP: -- the configuration of the
slots deal?
MR. BRENNAN: Again, my number one criteria
goes back to sustaining a viable operation.
TREASURER KOPP: I understand.
MR. BRENNAN: That is really the primary
element of what we’re doing here today. With the
prospects of slots give us an opportunity for far
greater relief in correcting this financial position.
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And --
TREASURER KOPP: I think you’re saying if
the possibility of slots comes up you will still be
pleased to have gotten that far and to have a
structure in place that would be the sort of structure
you would like to have going into negotiations
regarding this other item?
MR. BRENNAN: Yep. Yes, ma’am.
TREASURER KOPP: Is that --
MR. BRENNAN: That’s correct.
TREASURER KOPP: Is that correct? Thank
you.
LIEUTENANT GOVERNOR BROWN: I just have a
few questions. I’m a little bit amazed, Mr. Brennan,
that after standing there for thirty minutes you
finally answered my question.
TREASURER KOPP: Right.
LIEUTENANT GOVERNOR BROWN: Which is
probably the first think you should have said, which
is, you know, kind of like what’s your bottom line
here and why are we here today? So it’s the relief,
four hundred and some odd thousand to get you through
65
the winter. That’s what the restructuring helps you
do. And is that what I’m hearing?
MR. BRENNAN: That’s correct, sir.
LIEUTENANT GOVERNOR BROWN: Right. And
that’s the, on this supplemental, this Secretary’s
Agenda 11 that’s item number one, extend the lease
term to 2065. That gives you that relief?
MR. BRENNAN: That’s correct.
LIEUTENANT GOVERNOR BROWN: Okay. On number
four, retroactive approve Crestline Hotels and
Resorts, what time of the day was that revision made?
I’m sorry.
SECRETARY MCDONALD: Sorry, Lieutenant
Governor.
LIEUTENANT GOVERNOR BROWN: What time of the
day was --
SECRETARY MCDONALD: Four o’clock yesterday
afternoon.
LIEUTENANT GOVERNOR BROWN: Four o’clock
yesterday? And then the part about the miscellaneous
amend and add definitions, conform the use?
SECRETARY MCDONALD: Four o’clock also.
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LIEUTENANT GOVERNOR BROWN: Four o’clock?
Okay. I’m not, I’m going to have to get that off of
the agenda because --
SECRETARY MCDONALD: I just would like to
say that Mr. Brennan gave me two big packages this
morning of documents that were here when I got here,
and I haven’t opened them yet.
LIEUTENANT GOVERNOR BROWN: Right. I’m just
going to say, look, and maybe I need to apologize,
maybe it’s because I don’t preside over the Board that
often, there’s a certain time of the day the day
before that I look at items. This came in after I
stopped looking at it. So I’m going to, at the
appropriate time, ask that we take four and five off
of the Item 11. And I hope it doesn’t torpedo the
operations out there in Rocky Gap.
MR. BRENNAN: It won’t torpedo the ability
for us to move forward with this restructuring. What
I will say is that, again, I apologize. I’m not 100
percent familiar with how to do this procedure with
the Board of Public Works. The main items are what we
put on the agenda.
67
LIEUTENANT GOVERNOR BROWN: Good.
MR. BRENNAN: And I apologize for --
LIEUTENANT GOVERNOR BROWN: That’s good. So
there will be no harm there?
TREASURER KOPP: But what, what --
LIEUTENANT GOVERNOR BROWN: You can come
back, a stand alone item on the retroactive approval
of Crestline? To me, that’s worthy of a stand alone
item. And then the miscellaneous stuff, you know,
seems to be --
TREASURER KOPP: My question is the
miscellaneous stuff. That does not refer back to the
primary one?
MR. BRENNAN: Not really. These are --
TREASURER KOPP: Okay. I agree.
MR. BRENNAN: -- amending operating year
periods. Because we’ve changed our calendar, the
fiscal periods. And how we report financially. And
to me it was just very administrative in nature. But
it, since we were adjusting the ground lease it made
sense to clean it all up.
68
TREASURER KOPP: I do think Crestline should
come back to us. It should be before us. It
shouldn’t --
MR. BRENNAN: I’ll be glad to do that.
TREASURER KOPP: And I just want to make
sure this miscellaneous, if we don’t pass that it
doesn’t undermine something else we’re doing.
LIEUTENANT GOVERNOR BROWN: Is the
miscellaneous tied to the extension of the lease?
TREASURER KOPP: That’s --
LIEUTENANT GOVERNOR BROWN: The 2065?
MR. BRENNAN: There are parts of the,
they’re included in the current ground lease amendment
that has been signed and prepared for the Board of
Public Works signature. I can have those items
deleted and bring them back.
LIEUTENANT GOVERNOR BROWN: Is, then let me
restate it differently. Is the miscellaneous
provision --
MR. BRENNAN: These are all components of
the changes in the ground lease, which the ground
lease has the extension to 2065 --
69
LIEUTENANT GOVERNOR BROWN: Yeah.
MR. BRENNAN: -- and all these are elements
of that.
LIEUTENANT GOVERNOR BROWN: They all seem to
be technical, you know, as we would say on, what, how
did we use to say that on the House floor? These are
--
TREASURER KOPP: Clarifying.
LIEUTENANT GOVERNOR BROWN: Clarifying and
technical amendments?
MR. BRENNAN: That’s correct, sir.
LIEUTENANT GOVERNOR BROWN: Well, I can live
with five, then. Because I defer to the technician.
TREASURER KOPP: It’s four. Four.
LIEUTENANT GOVERNOR BROWN: No, that’s five.
Four is the retroactivity.
TREASURER KOPP: I think four should be
taken out.
LIEUTENANT GOVERNOR BROWN: Yeah. So four,
do we have to have a motion for four, to take that
out?
70
SECRETARY MCDONALD: Yes. It would actually
ask that the Board move to defer sub-item four. That
the Board move to defer sub-item four.
LIEUTENANT GOVERNOR BROWN: Okay. I’ll move
to defer sub-item four, seconded by the Comptroller.
All those in favor, say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: All those
opposed say, “Nay.” Okay. So four is out. One, two,
three, and five are in as an item. Those are sub-
items of Item 11. Okay, so Item 11 as amended is
still up here for discussion. Is there further
comments or questions?
COMPTROLLER FRANCHOT: Yeah, if I could,
Lieutenant Governor. Just, Mr. Brennan, for me to
understand or articulate why I’m voting no on this, my
understanding is you need the $400,000 in operating
subsidies to get through the winter. I’m happy to
entertain some kind of offer from Mr. Edgerley and
others who have an investment in this facility to
bridge you over until the spring when this new
bonanza, potentially, could arrive. My concern for
71
the taxpayers is that we’re voting today to spend $7
million in monies that, plus $1 million, so $8 million
in order to get you as part of the elegant solution
some relief for you. And I guess I just question that
from a fiscal standpoint. Why don’t we just save the
$8 million, put the hedge fund in New York on, you
know, automatic dial, or you know, they can yell into
our answering machine, and wait and see what
transpires with the new configuration. Because once
again, we need the $8 million.
MR. BRENNAN: Sir, I would certainly
appreciate your position. But I --
LIEUTENANT GOVERNOR BROWN: Let me just
clarify, let me just say, I don’t know if that was a
question.
COMPTROLLER FRANCHOT: Yeah, but --
LIEUTENANT GOVERNOR BROWN: I thought that
was an explanation of a vote here.
COMPTROLLER FRANCHOT: I was just, I, yeah.
LIEUTENANT GOVERNOR BROWN: Because all I’m
saying is, if you don’t have new information, facts
and figures, and you just want to offer opinion
72
that’s, you know, I would shy away from that. Because
I, you know, really I just think what we need are
facts and figures and perhaps a rationale.
COMPTROLLER FRANCHOT: Yeah. Well, I was
throwing that out --
LIEUTENANT GOVERNOR BROWN: Yeah.
COMPTROLLER FRANCHOT: -- just to ask
whether there’s, am I factually wrong in that?
LIEUTENANT GOVERNOR BROWN: Okay.
COMPTROLLER FRANCHOT: Aren’t we voting
today to obligate the State to $8 million in monies
from Mr. Edgerley and some other entity, your entity I
guess? And couldn’t we potentially, if we waited
several months, avoid that?
MR. BRENNAN: I, if I thought that would
help us --
COMPTROLLER FRANCHOT: If we could arrange
$400,000 for you to buy mattresses and do whatever you
have to do.
MR. BRENNAN: -- I would be saying let’s sit
on our hands. But, sir, I truly believe that with the
dynamics of this transaction, the positioning of it
73
for the long term, this is the way to go. This will
fix this problem. It will create a lot of relief. I
don’t know how the slots will materialize out there.
But these investors are getting impatient. And I
think it’s important for us to preserve this State
asset.
LIEUTENANT GOVERNOR BROWN: Okay. Any other
comments or questions on Item 11? Okay, hearing none
any other comments or questions on other items on the
Secretary’s Agenda?
COMPTROLLER FRANCHOT: Yeah, I do have on
Item 10.
LIEUTENANT GOVERNOR BROWN: Item 10?
COMPTROLLER FRANCHOT: Yep.
SECRETARY MCDONALD: Okay, Item 10, it’s a
good thing Mr. Raith still is here. This is also the
Stadium Authority, and they have a, should I say
complex, or should I just say they also have a bond
swap on the agenda. And I’m not going to begin to
describe it. Mr. Raith is here.
COMPTROLLER FRANCHOT: Well, my item here –
MR. RAITH: Thank you.
74
COMPTROLLER FRANCHOT: Thank you for coming
up, Mr. Raith, says that this is a request from you to
solicit competitive bids for financial institutions to
serve as replacement hedge counterparty for the
interest-rate-swap agreements relating to several
revenue bond series for facilities lease revenue
refunding bonds Series 1998, 1999, 2006, and 2007.
What is motivating all of this?
MR. RAITH: Basically, the volatility in the
market over the past few months, the current swap
providers are AIG and Ambac. During the past few
months there have been tremendous downgrades in their
credit and it has had some impact with regards to the
marketability of these variable rate debts. And we
feel that it is in the best interest to go out and
find a better counterparty with a better credit rating
that will, again, put these bonds in a better position
in the view of the bond holders.
COMPTROLLER FRANCHOT: Okay. And I
understand from the AG that specializes in this,
apparently wrote us and said that it’s urgent because
you experienced a failed remarketing recently?
75
MR. RAITH: Yes. We had approximately $20
million of bonds that were tendered. Unfortunately
the liquidity provider and the swap counterparties
ratings, they weren’t able to successfully remarket
them. So they were turned over to the liquidity
provider, which then made them bank bonds. Since that
point they have been successfully remarketed, which
took us out of that position. So we are in a better
position now to find a counterparty that will step in
that we can eliminate this potential tender again.
COMPTROLLER FRANCHOT: Okay. But your
concern, I take it, is that Ambac or AIG may, how do
you call this, ask for a, use the failed remarketing
as a contract --
MR. RAITH: There is a default arrangement
under the, or a termination of that under these
documents that says any tendered bond that’s not
successfully remarketed, and this is strictly under
the Ambac agreement, that would trigger a termination
event at which time Ambac would have the right to
request payment from the Stadium Authority on the
76
remaining balance of their exposure from this
transaction.
COMPTROLLER FRANCHOT: Okay. So AIG doesn’t
have this urgency?
MR. RAITH: AIG does not have this --
COMPTROLLER FRANCHOT: And how much are
they? How much, what’s the difference, the break out
between them and Ambac?
MR. RAITH: Both of them, if both of them
were to fail and we would have to pay them back, both
of them are between $15 million and $20 million
apiece.
COMPTROLLER FRANCHOT: Apiece, okay. And
have we gotten any indication from Ambac that they
would, what is the description, put back by the owner?
Or how do you describe this? Would actually use this
out of date contract provision to require the State to
pay the bond off immediately?
MR. RAITH: It wouldn’t be that we would be
paying the bond off. What it is, we took an up front
savings when we, or when we entered into these
agreements. So there’s a liability issue for the
77
Stadium Authority until the bonds have matured.
Basically, if there was a put, or if there was a
nonfailure to remarket for an extended period of time,
Ambac would have the right to request whatever
liability is still outstanding --
COMPTROLLER FRANCHOT: Mm-hmm.
MR. RAITH: -- under that advanced payment.
COMPTROLLER FRANCHOT: Okay. And have we
gotten any indication from them that they are --
MR. RAITH: Well, since we have successfully
remarketed those bonds since that time --
COMPTROLLER FRANCHOT: Right.
MR. RAITH: -- they are, we are not
currently in that termination event.
COMPTROLLER FRANCHOT: Okay. So you’re not
in that position. So that urgency is taken away.
What is it going to cost the State of Maryland to go
to, I take it it’s Bank of America, Wells Fargo,
Goldman Sachs, whoever are going to be the new
counters, counterparties, what’s it going to cost us?
MR. RAITH: It’s not going to cost anything.
78
COMPTROLLER FRANCHOT: It would cost
nothing?
MR. RAITH: There’s no, there’s going to be
no cost associated with it at all.
COMPTROLLER FRANCHOT: Really?
MR. RAITH: The new swap will pay off Ambac
for any liability that’s still outstanding and the new
counterparty will assume the interest rate that’s
currently in place.
COMPTROLLER FRANCHOT: So the State of
Maryland will not pay any cost, any additional cost
over the upcoming years?
MR. RAITH: No. I have Paul Shelton –
COMPTROLLER FRANCHOT: Okay. I mean, in my
briefing thing I see Mr. Vanderbosch suggesting that
the cost to the Stadium Authority for this
substitution will be between $1 million and $2 million
for a number of years. Is he wrong?
MR. RAITH: Mr. Shelton who is bond counsel
may be able to answer that for me.
79
MR. SHELTON: What will likely happen, Mr.
Comptroller, is the new counterparties will ask for a
higher fixed rate.
COMPTROLLER FRANCHOT: No kidding?
MR. SHELTON: Yes. So that --
COMPTROLLER FRANCHOT: Gee --
MR. SHELTON: -- is not quite correct that
it won’t cost you anything. It will over time cost
you a little bit more money over, yes, annually. They
will, as Mr. Raith explained, though, come forth with
the $15 million or $20 million. They would give the
State the $20 million. And then the State will give
that $20 million to Ambac and remove that liability.
Now the State will be in a different, a new
relationship with this new counterparty which will
likely be at a slightly higher rate.
MR. SHELTON: And what do you think the
dollar rates, what are the rough figures?
MR. SHELTON: I don’t think anyone can
predict what that is because the bids will go out, and
we will then get, we will select the best bid for the
State. It’s very possible there would be little
80
difference. It may, I don’t know how anyone could
really calculate that until we get the bids in. And I
would never try to speculate what that’s going to be.
This market is too volatile and too uncertain.
But as Mr. Raith was absolutely clear, and
Ambac has sent us a notice telling us that there is an
event of default today. They sent that notice last, a
couple of, about eight days ago because they were
downgraded to below an investment grade. So there is
a termination event, which would allow us to
terminate. The risk is, if Ambac continues to spiral
down the Stadium Authority bonds are less attractive.
At the same time, Dexia is being downgraded which
makes bond holders very nervous that the Belgium
government won’t continue to pour money into it. They
then will start putting the money back. And the
Stadium Authority could find itself in a situation
where it will need within a few days millions of
dollars to pay off the bonds. So this way we avoid
that catastrophe of occurring and we take the right
away from those investors who can put, and put the
control back in the hands of the Stadium Authority.
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COMPTROLLER FRANCHOT: Okay. Well I’m going
to, with all due respect to that, vote no because I
believe that we’re assuming new costs. I can’t
imagine in this volatile market that we’re not going
to be paying a premium for the capital. And I don’t
believe that there’s an urgent reason to move forward
on this, particularly with AIG which now has become
semi-nationalized. And Ambac, I think Mr. Raith was
saying that the contract provision that’s talked about
in my briefing material is the main reason for moving
forward immediately, that that’s been taken care of.
MR. SHELTON: In fact, AIG is, continues to
be downgraded by the rating agencies in spite of the
fact that the federal government has given its money.
And in fact, it’s currently in a position where
there’s, a collateral event has occurred because of
their downgrading. Which means that they should, if
we were in a positive position, have to post
collateral, which they don’t have.
COMPTROLLER FRANCHOT: Right. But that’s --
MR. SHELTON: So in fact there is already an
event --
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COMPTROLLER FRANCHOT: -- from our side.
MR. SHELTON: That’s correct.
COMPTROLLER FRANCHOT: That’s not from their
side.
MR. SHELTON: But --
COMPTROLLER FRANCHOT: And we’re talking, I
don’t, you didn’t, weren’t specific, but if we’re
talking $1 million or $2 million, it could be more for
all I know, when we, to bring in new interested
parties, I just think once again the, well, it’s just
my view and I’ll be voting against this.
LIEUTENANT GOVERNOR BROWN: Madam Treasurer?
TREASURER KOPP: I have a somewhat different
perspective from the Comptroller. I think this is
something we ought to do and we ought to do as soon as
possible. And I think it’s very much in the State’s
interest to not be dependent on these particular
providers. And I’m glad to see that you’re getting
out from under them.
LIEUTENANT GOVERNOR BROWN: Okay. Let’s
carve out also ten and eleven. Items, I don’t think
we said eleven. So Items 9, 10 and 11 are going to be
83
stand alone votes. Are there any other questions or
comments on other items on the Secretary’s Agenda?
Okay. Madam Secretary?
SECRETARY MCDONALD: Do you want me to
summarize which items --
LIEUTENANT GOVERNOR BROWN: I’m sorry?
SECRETARY MCDONALD: The Board could move
approval of Items 1, 2, 3, 4, 6, 7, 8, and the two
emergency reports.
LIEUTENANT GOVERNOR BROWN: Right. And
what’s five? What was five? Was five taken --
SECRETARY MCDONALD: Five was withdrawn.
LIEUTENANT GOVERNOR BROWN: Okay, that was
withdrawn. Okay. That sounds right. Okay. So the
Comptroller moves approval, seconded by the Treasurer.
All those in favor say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Any opposed say,
“Nay.” The ayes have it. So that sort of --
SECRETARY MCDONALD: So that leaves Item 9,
which was the agreement with the Sports Legends Museum
and the Stadium Authority.
84
LIEUTENANT GOVERNOR BROWN: Okay. And the
Treasurer moves favorable, seconded by the Lieutenant
Governor. Any discussion? Okay, all those in favor
say, “Aye.” Aye.
TREASURER KOPP: Aye.
LIEUTENANT GOVERNOR BROWN: Opposed?
COMPTROLLER FRANCHOT: No.
LIEUTENANT GOVERNOR BROWN: Two to one. The
Item 9 is approved.
SECRETARY MCDONALD: Item 10 is the bond
swap from the Stadium Authority.
LIEUTENANT GOVERNOR BROWN: This last one we
just heard of. The Treasurer moves approval, seconded
by the Lieutenant Governor. All those, any
discussion? All those in favor say, “Aye.” Aye.
TREASURER KOPP: Aye.
LIEUTENANT GOVERNOR BROWN: Any opposed?
COMPTROLLER FRANCHOT: No.
LIEUTENANT GOVERNOR BROWN: Okay. Two to
one, approved. Item 11?
SECRETARY MCDONALD: And then Item 11 is the
Rocky Gap Item from the Department of Natural
85
Resources. We have deleted Sub-item 4. So what
remains in front of the Board is Item 11 with Sub-
items 1, 2, 3, and 5.
LIEUTENANT GOVERNOR BROWN: The Lieutenant
Governor moves approval, seconded by the Treasurer.
Any discussion?
COMPTROLLER FRANCHOT: I appreciate the
Lieutenant Governor pulling Item 4 out. I’ll still
vote no.
LIEUTENANT GOVERNOR BROWN: No further
discussion. All those in favor say, “Aye.” Aye.
TREASURER KOPP: Aye.
LIEUTENANT GOVERNOR BROWN: Opposed?
COMPTROLLER FRANCHOT: No.
LIEUTENANT GOVERNOR BROWN: The ayes have
it, two to one. That concludes the business on the
Secretary’s Agenda and we will now move to the next
agenda item which is that of the Department of Budget
and Management. Good morning.
MS. FOSTER: Good morning, Lieutenant
Governor, Madam Treasurer, Mr. Comptroller. There are
nine items on the Department of Budget and
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Management’s Agenda for this morning. I’d like to
withdraw Item 5. And I’ll be happy to answer your
questions.
LIEUTENANT GOVERNOR BROWN: Any questions or
comments for the Secretary of the Department of Budget
and Management?
TREASURER KOPP: I do, on Item number,
something related to Item 9. I have no problem with
Item 9, Madam Secretary, but it is an insurance claim
against the State brought to us by the Attorney
General on behalf of, you don’t even have to look at
that. Trust me. On behalf of sheriffs.
MS. FOSTER: Yes.
TREASURER KOPP: And we brought up the issue
in the past that there’s no specific line item or
provision in the insurance trust for the local
officers whom we cover. And I had made a suggestion
and then didn’t follow up as well as I should have on
the question of whether there could not be some sort
of line item for them. Because, as you know, when the
Board of Public Works approves this sort of item, of
which I approve, the cost of it in terms of premium is
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then apportioned across all the agencies of State
government which really had no, nothing to do with
this particular wrong. But there’s no other way of
going back and assessing a premium. And I just wanted
to bring to your attention that this was another
example of that sort of thing.
MS. FOSTER: Madam Treasurer, thank you. As
you know, this has been an ongoing discussion. I am
aware of your concerns. I guess we did look into it
and I guess really at the present time if we really
tried to be fair and assess these claims against the
sheriffs’ offices of course this would require us to
go back and make a change in the statute.
TREASURER KOPP: I mean, that’s the
question. And obviously, it’s, it’s the Governor or
the State’s budget to be apportioned as you all see
fit. But I’m only pointing out that there are
agencies of State government which are now being
charged for part of the cost of the sheriff’s
misadventures in these tough times.
MS. FOSTER: And overall, you know, I
understand the point that you’re making. But I guess
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as we looked at this over the last several fiscal
years it was such a nominal amount. If, we went back,
my staff went back to 2004. And the total losses for
the system, for the State Insurance Trust Fund, were
$11.3 million. And for that year, the claim for the
sheriff was $2,000. For the next year the total
losses were $9.1 million; the sheriffs’ claims were
$80,000. Over that, really for the last five years,
there’s only been one year where there was a
significant amount that was attributable to sheriffs’
claims. That was $360,000 in fiscal year 2007. So –
TREASURER KOPP: One hopes there will not be
--
MS. FOSTER: Yes.
TREASURER KOPP: -- any more in the future.
And I agree, it’s probably more a question of equity
in policy than of fiscal impact. But it’s just that
here’s another example.
MS. FOSTER: Okay. So noted.
TREASURER KOPP: Thank you.
LIEUTENANT GOVERNOR BROWN: Any other
questions or comments on Item 9, or any other item on
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the agenda for the Department of Budget and
Management? Hearing none, the Treasurer moves
approval seconded by the Comptroller. All those in
favor say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Opposed, “Nay.”
No one. So that, another successful day here,
Secretary Foster, before the Board of Public Works.
Well done. University System of Maryland, come on
down.
SECRETARY MCDONALD: Mr. Stirling is here.
MR. STIRLING: Good morning, Lieutenant
Governor, Madam Treasurer, and Mr. Comptroller.
LIEUTENANT GOVERNOR BROWN: Good morning.
MR. STIRLING: I’m Jim Stirling for the
University System of Maryland. We have three items on
today’s agenda. I’ll be happy to address any
questions that you might have.
TREASURER KOPP: Who are all these people
who don’t care about the University?
(Laughter)
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MR. STIRLING: We have representatives from
all of our institutions --
TREASURER KOPP: Oh, thank you.
MR. STIRLING: -- that have items on the
agenda today.
LIEUTENANT GOVERNOR BROWN: Well thanks a
lot for coming out and preparing yourselves to answer
questions, and what have you. But I think we’re good
to go, so --
TREASURER KOPP: I want, just one, no --
LIEUTENANT GOVERNOR BROWN: -- oh, not so
fast.
TREASURER KOPP: -- just out of curiosity.
Item 1, the UB Cooling, is there any green aspect to
that?
MR. STIRLING: Let me ask Mr. Evans from UMB
to come down and speak to that.
TREASURER KOPP: I mean, I don’t know what
there could be but it’s just a large infrastructure.
You can get back to us in writing, too. I mean, I’m
just curious.
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MR. EVANS: I will have to get back to you
in writing on it.
TREASURER KOPP: Yeah, fine. Thanks.
MR. EVANS: Thank you.
LIEUTENANT GOVERNOR BROWN: So when are you
going to get back to us by? What, give yourself a
deadline?
MR. EVANS: I’ll have it to you by tomorrow.
LIEUTENANT GOVERNOR BROWN: I’m sorry?
MR. EVANS: Tomorrow.
LIEUTENANT GOVERNOR BROWN: Tomorrow, in
writing to the, I guess what’s that, to the Secretary
here, and then all the members will get it? Is that
the way we do it here?
MR. EVANS: It will come back to all the
members, yes, sir.
TREASURER KOPP: Yes.
LIEUTENANT GOVERNOR BROWN: Good. Thank you
very much.
MR. EVANS: Yes, sir.
LIEUTENANT GOVERNOR BROWN: Okay. Any other
questions or comments on this agenda? If not, the
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Treasurer moves approval, seconded by the Comptroller.
All those in favor say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Any opposed?
Hearing none --
MR. STIRLING: Thank you.
LIEUTENANT GOVERNOR BROWN: -- that Agenda
in its entirety is approved. The next is Department
of Information Technology. Good morning, Mr.
Secretary.
MR. SCHLANGER: Good morning, Lieutenant
Governor, Madam Treasurer, Mr. Comptroller. Elliot
Schlanger of Department of Information Technology.
This morning we have two items on the Agenda and we’d
be happy to answer any questions at this time.
LIEUTENANT GOVERNOR BROWN: Any questions or
comments by any members of the Board of Public Works?
Job well done. Good background materials and
briefings, and all that stuff.
TREASURER KOPP: Yeah.
LIEUTENANT GOVERNOR BROWN: You’re doing a
great job. Okay, the Comptroller moves approval
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seconded by the Treasurer. All those in favor say,
“Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Any opposed?
Hearing none, the Agenda for the Department of
Information Technology is approved in its entirety.
Thank you very much, Mr. Secretary.
MR. SCHLANGER: Thank you.
LIEUTENANT GOVERNOR BROWN: And our final
Agenda for today is the Department of Transportation.
Good morning, Mr. Secretary.
MR. PORCARI: Good morning, Lieutenant
Governor, Madam Treasurer, Mr. Comptroller. For the
record, we have twenty-seven items. We are
withdrawing item 28-RP. And I’ll be happy to answer
questions that you may have.
LIEUTENANT GOVERNOR BROWN: Any of the
members have questions or comments? Hearing none --
COMPTROLLER FRANCHOT: Yeah, no, I have –
LIEUTENANT GOVERNOR BROWN: Oh, no, we do
have one.
94
COMPTROLLER FRANCHOT: Mr. Secretary, I was
struck on Item 9-AE that in my briefing materials it
said that the main span cables on the eastbound span
of the Bay Bridge haven’t been inspected since 1979.
And those on the westbound span have never been
inspected. And I’m just wondering how that jives with
statements that I’ve seen in the press that the
Transportation Authority’s inspection process for the
Bay Bridge and other bridges exceed the industry
standard and federal mandate?
MR. PORCARI: The, a couple of things, Mr.
Comptroller. First, we do exceed industry standards.
For example, all of the Transportation Authority
facilities have annual inspections rather than the
every other year cycle that’s required. The cable
inspections themselves that are the subject of this
Agenda item, there are different levels and degrees of
inspection of the cables. This is a far more
intrusive inspection. It is our intention to exceed
that minimum requirement. Under the leadership of
Geoff Kolberg, our Chief Engineer, we have been much
more aggressive about this.
95
In this particular case, these cable
inspections, the timing of them are triggered in part
by some Homeland Security target hardening that we’re
doing of the cables themselves, where at the
conclusion of this target hardening it will be more
difficult to have this more intrusive cable
inspection. It makes sense to do it now before we do
that hardening.
We also on the inspection and security side
have recently gone through a security assistance visit
and inspection from the Department of Homeland
Security that in part triggers recommendations that
we’re following up on here today. But I’d ask at this
point Geoff Kolberg, our Chief Engineer, to come up
and talk a little bit more about the engineering side
of it. It is the result of the more, much more
aggressive inspection procedures that Geoff has
instituted that we’re doing this here today.
MR. KOLBERG: Good morning. I’m Geoff
Kolberg, I’m the Chief Engineer for the Transportation
Authority. The cables and all elements of the Bay
Bridge as well as all of the Authority infrastructure
96
are inspected once a year. The specific cables on the
suspension span of the Bay Bridge are parallel wire
cables and they’re wrapped with a neoprene material to
keep them dry and keep them protected. On the annual
basis that wrap material is inspected and the
encasement is inspected to look for any damage with
relation to that.
The national standard with regard to
parallel wire cable inspection is once every thirty
years and that’s established by the National
Cooperative Highway Research Council. And what we,
what was done in ‘79 was approximately thirty years
after the eastbound bridge was open and it was, they
were inspected with that wrap being removed. The
cables, it’s about an eighteen-inch diameter parallel
wire cable. The cable is actually spread apart as
part of the inspection and the interior strands of the
cable are inspected.
Now as Secretary Porcari mentioned, the
Authority is reviewing and intensifying, if you will,
our inspection program. We have, as the Governor has
appointed, a peer review to review our inspection
97
program. That peer review has initiated, has started.
Their first meeting was October 29th and 30th and
we’re well into their review of our program.
But the inspection that we’re talking about,
I guess from the Chief Engineer’s perspective, my
perspective, once every thirty years is not often
enough and we will be doing them more often in the
future. But the two inspections that we’re doing are
what would be considered nationally on schedule. But,
again, in my opinion not quite often enough.
COMPTROLLER FRANCHOT: Okay. So the
eastbound is, the, well your testimony is that this is
more intrusive than the annual inspection --
MR. KOLBERG: Yes, sir, you’re absolutely
right.
COMPTROLLER FRANCHOT: -- that’s done every
thirty years.
MR. KOLBERG: Yes, sir.
COMPTROLLER FRANCHOT: But what about the
westbound span?
MR. KOLBERG: The westbound was open to
traffic in ‘73. Thirty years after it was open to
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traffic would be about 2003. We’re a little late
from, doing that inspection and that’s why we’re doing
it now, too.
COMPTROLLER FRANCHOT: Okay. And what about
the repair needs on the Bay Bridge? They’re talking
about substantial girder section loss, weld cracks,
and concrete deterioration. Is that any kind of
current or near term threat to safety --
MR. KOLBERG: That is, that is a --
COMPTROLLER FRANCHOT: -- and structural
integrity?
MR. KOLBERG: That is findings, our most
recent, hands on, detailed inspection was ‘08. And
again, it’s in 2008. It’s one of the annual
inspections. We’ve elevated and intensified our
inspection program. These findings that we’re doing
and will be doing with the existing contractor that’s
doing the redecking on the suspension and through
truss, those findings require some design level of
effort. And that effort will also be a part of this
modification --
99
COMPTROLLER FRANCHOT: And when are you
going to commence that repair work?
MR. KOLBERG: I’m sorry, sir?
COMPTROLLER FRANCHOT: When will that repair
work --
MR. KOLBERG: That --
COMPTROLLER FRANCHOT: -- commence?
MR. KOLBERG: The actual construction work
will be done with the existing contractor who is doing
the redecking and the suspension span, and the through
truss. So we have the contractor on board that’s
doing other work. We’re going to do that design and
add it to his contract.
COMPTROLLER FRANCHOT: And when is that
going to happen?
MR. KOLBERG: As soon as we can move ahead
on this contract as far as approval of modification
we’re going to initiate design. We’ve got about two
years more of construction due on the suspension span
and through truss and it will be incorporated in that
two-year period.
COMPTROLLER FRANCHOT: Thank you.
100
LIEUTENANT GOVERNOR BROWN: I have a
question. I apologize, I do have a question. It’s a
trivia question. When I’m driving in the car with my
children I always like to stump them with trivia
questions so help me out today. How much --
MR. KOLBERG: I’ll try.
LIEUTENANT GOVERNOR BROWN: -- would you
estimate, or perhaps you have an actual figure, does
it cost to inspect the Bay Bridge? That annual
inspection? No repairs associated with it, just to
inspect it.
MR. KOLBERG: That’s approximately $1
million --
LIEUTENANT GOVERNOR BROWN: $1 million?
MR. KOLBERG: -- for the two parallel spans.
LIEUTENANT GOVERNOR BROWN: For both spans,
the entire bridge? $1 million?
MR. KOLBERG: Approximately $1 million.
LIEUTENANT GOVERNOR BROWN: Good. I can
remember that one, and we’ll be going over the Bridge
during the holiday season so I’m going to see what
their guess is. Thank you very much.
101
MR. KOLBERG: Yes, sir.
LIEUTENANT GOVERNOR BROWN: Any other
questions --
TREASURER KOPP: Could, could I just –
LIEUTENANT GOVERNOR BROWN: -- or comments
on this item or any other item?
TREASURER KOPP: -- just say on that one,
and I think it’s more to the Secretary, although I’m
not sure. We got a revised, a revised description
which in fact described better the degree of
intrusiveness of it.
MR. KOLBERG: Yes, ma’am, you did.
TREASURER KOPP: I would just urge you to
read the things that you’re sending us before you send
them to us. Because that ought to have jumped out and
hit somebody right in the face.
MR. PORCARI: It’s a fair point, and I think
sometimes we need to translate this into English. And
in part what Geoff is describing with the annual
inspection of the cables is, the first rule is, first
do no harm. And with that, you don’t want to expose
the cables, for example, to corrosion.
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TREASURER KOPP: I understand that quite
well. But what the Comptroller read to you is the
same, is what we all received. And what he read to
you was the eastbound bridge was last inspected in
1979 while the westbound bridge has never been
inspected. That, in fact, I think is not what, the
impression you meant to convey.
MR. KOLBERG: Correct.
MR. PORCARI: You’re, it’s a good point.
That in fact is not the case. We will do a better job
of describing exactly what is going on.
MR. KOLBERG: Thank you.
LIEUTENANT GOVERNOR BROWN: Okay. Any other
question or comments on that item or any other item of
the Department of Transportation Agenda? I see here
none. The Treasurer moves approval, seconded by the
Comptroller. All those in favor say, “Aye.”
THE BOARD: Aye.
LIEUTENANT GOVERNOR BROWN: Nay? That item
passes in its entirety and that concludes the business
of today’s Board of Public Works. Thank you.