ANNAPOLIS – The Board of Public Works compromised with the Maryland State Lottery Agency Wednesday morning, awarding a master contract with a $200 million spending ceiling that will allow the agency enough room to begin buying machines for two gaming facilities set to open this fall.
The master contract, which will be in effect for three years, allots significantly less money than the initial proposal from the Maryland Lottery that asked for spending of up to $800 million over a 10-year period. Members of the board think a contract with a smaller price cap is more fitting for the immediate future.
Maryland lottery officials expect to spend much less than the contract permits on the two facilities opening this fall, but requested the $200 million in case the Anne Arundel slots parlor makes progress and they have to quickly purchase machines to get that facility running.
Comptroller Peter Franchot, who balked at the high price of the Maryland Lottery’s initial master contract proposal, is still wary of what he calls an “irregular” procurement process.
“I’m speaking in your own defense, you don’t want this,” Franchot said to the lottery’s representatives. “It’s a really toxic mix of things.”
Franchot has been opposed to any contract that allows the lottery to sign onto subcontracts with game manufacturers without approval from the Board of Public Works. He said the negotiations with the “in the dumps” gambling industry shouldn’t be made behind closed doors.
“At a minimum the public would be served if we brought these contracts back (for approval),” Franchot said.
The new master contract will require the Maryland Lottery to gain approval for the first subcontracts to purchase machines for the facilities opening this fall. After that, the agency can freely work with the money awarded under the master contract, only having to report its spending on a quarterly basis.
Gov. Martin O’Malley expressed concern that the limits of a master contract can be misinterpreted by the public, who might think a contract with the originally requested spending cap of $800 million is a commitment to spending that much taxpayer money.
Maryland Lottery officials said they do not intend to spend all the money set aside under the master contract, they just want to avoid the slow process of gaining approval from the Board of Public Works every time they want to purchase machines.
“The state does not want to be the holdup here,” said Gina Smith, the interim director for the Maryland State Lottery Agency. “We don’t want to be the ones saying the state is not ready.”
John Finamore, senior vice president for regional operations at Penn National Gaming Inc., said the process of ordering machines, getting them delivered and installing them in gaming facilities can take up to four months.
In addition to awarding a contract to the Maryland Lottery, the Board of Public Works approved an extension to a contract between Rocky Gap Lodge and Crestline Hotels and Resorts that annually awards the floundering resort a $400,000 line of credit for short-term operating needs. Rocky Gap Lodge is currently a state-owned facility run by the Maryland Economic Development Corporation.
Rocky Gap Lodge is one of the five sites designated by Maryland for gaming, but the state’s Video Lottery Facility Location Commission has had difficulty finding a private company to purchase the site.
Members of the Board of Public Works reluctantly approved the extension, saying the next time the lodge comes before them they’d like it to be a competitive bid for private management.
“I just think it’s a loser and it’s going to be a headache for us,” Franchot said.
Franchot said if a gambling company doesn’t come forward with a successful bid for the lodge, the state might have to look for a buyer outside of the gambling industry.
“That’s what we’re contemplating,” said Robert C. Brennan, executive director of the Maryland Economic Development Corporation.
But Brennan is optimistic Maryland’s slots commission will find a suitable gaming company as the economy continues to improve.
“I think it’s going to play out,” Brennan said.