An aide to Mayor Stephanie Rawlings-Blake last night defended the use of $6 million in community impact grants to the proposed Harrah’s casino, calling the agreement a “recommended reimbursement” that would be presented to a community council.

Responding to a Brew article analyzing the city’s pact with investors led by Caesars Entertainment Corp., Mary Pat Fannon emailed a 1,250-word memo to two neighborhood activists who questioned the diversion of funds set aside for communities by state law.

One of those activists, James Alston, said he found the memo unconvincing.

The agreement, he said in an interview today, effectively takes the power to determine the use of the grants away from a local development council (LDC), which is vested with that power by state law.

“This is wrong,” he said. “The city government has already decided prematurely how the money should be used.”

Like other community leaders interviewed, Alston said he was unaware of the city’s agreement before it was disclosed by The Brew. 

“We Were Not Trying to Hide Anything”

Fannon admitted in the memo that the city had not told community leaders of the $6 million in planned reimbursements to the casino developer.

“I apologize for the oversight; it was not intentional in any way,” she wrote.

But she defended the disbursement, saying, “This is not a $6 million give-a-away as insinuated by the newspaper, but a recommended reimbursement that the Mayor would include in a spending proposal that would be presented to the LDC for final approval.”

She said the information was contained “in the documents available to the public and we were not trying to hide anything.”

What The Brew article showed was that the city had hammered out and – via Wednesday’s Board of Estimates approval – thrown its weight behind a plan to direct $6 million in impact grants to Caesars.

This use of the grants runs counter to the understanding of the previous LDC set up by former Mayor Sheila Dixon when Canadian developer Michael Moldenhauer proposed the first casino on the South Baltimore site, according to then-LDC chairman, George Della.

After Moldenhauer’s bid was rejected by the Maryland Video Lottery Facility Location Commission, the city disbanded the LDC and, as recently as last month, said the council was “on hold.”

Only now, after the Board of Estimates ratified a land disposition and ground lease agreement with Caesars, is the city talking about re-establishing the LDC.

A new LDC (which the mayor is planning to appoint by the end of the year, according to Fannon’s memo) is unlikely to have any real power to alter the city’s agreement with Caesars.

Advisory Role

Fannon, in fact, refers to the future council’s role as “advisory . . . in reviewing the use of this money.” (See paragraph 12 in her memo printed below.)

Mayor Rawlings-Blake and her two appointees on the Board of Estimates – Public Works Director Alfred Foxx and City Solicitor George Nilson – voted for the agreement last Wednesday. City Comptroller Joan Pratt cast a “no” vote, saying after the meeting that gambling is against her moral code.

The panel’s fifth member, City Council President Bernard C. “Jack” Young, was not in attendance.

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Below is the full text of a memo emailed at 9:44 last night by Mary Pat Fannon, senior policy advisor at the Mayor’s Office of Government Relations, to James Alston, of the Westport Improvement Association, and Amy E. Mutch, president of the South Baltimore Neighborhood Association.

Copies were sent to State Senator Bill Ferguson, Delegates Luke Clippinger, Peter A. Hammen and Brian K. McHale, and City Councilmen William H. Cole IV and Edward Reisinger.

I am writing to clarify some of the misleading information in today’s Baltimore Brew article. Amy, I hope this information will help your Board more fully understand all the issues concerning the Local Development Council’s role and responsibilities, as well as the $6 million referenced in the article.

The State law requires that each local government that hosts a casino create a Local Development Council (LDC). A summary of the purpose and make-up of the Council is attached for your reference. It is true that we have not created a new LDC, in part because of the experience of the last LDC, which was created well in advance of the State choosing the licensee for the facility. At that time, all the work done by the LDC in the summer of 2009 was premature because the bidder at that time was denied a license.

As you’ll see in the attached document, the LDC has three primary roles – consultation in the expenditures of the local impact grant funds, review of the VLT licensee’s master plan for the development of the VLT site, and consultation in transportation planning. Since the main function of the LDC is to approve the spending plan for the local impact funds, and these are not expected to materialize fiscal year 2015 (more than likely late in calendar year 2014), it is the Mayor’s intention to name and create the LDC by the year’s end with the input from all the elected officials in South Baltimore.

As you know I have been collecting names of those individuals and organizations that are interested in serving and will continue to do so in the next few weeks.

As explained in the attached document the acceptable uses for the local impact money is for the communities in immediate proximity to the VLT facility and may be used for: infrastructure improvements, facilities, public safety, sanitation, economic and community development, including housing and other public services and improvements.

It’s important to note that during the August special session of the General Assembly, the bill as introduced expanded the use of local impact money beyond the communities immediately adjacent to the casinos. With the Mayor’s support and encouragement, your South Baltimore legislators put forth an amendment to protect this money and ensure that it is used only in South Baltimore. Additionally, it was the Mayor’s position throughout the regular and special session that the addition of any gaming facility would include a “hold harmless” provision for local impact money before that facility opened. This provision, while controversial in Prince George’s County, passed and we were able to protect local impact money for South Baltimore.

The estimates for the local impact funds have varied over the years since the proposed South Baltimore site was put forth in 2007. The current revenue estimates, and they are estimates, are as follows:

FY ’15             $15.5 million
FY ’16             $17.8 million
FY ’17             $22.5 million

Many factors will contribute to the attainment of these figures including:

• When the Baltimore facility opens;
• How successful the three biggest casinos are (the local impact money will pull from the Gross Gaming Revenue of these three sites);
• Whether or not Question 7 is approved for table games; and
• Whether or not Question 7 is approved in Prince George’s County for a sixth Maryland casino facility.

After the election next Tuesday I expect the State will re-evaluate all estimates based on the outcome of Question 7.

Regarding the $6 million referenced in the article. In August of 2011 after the second round of State RFPs were released to the public and once again, only one bidder responded, we began discussions with the now-licensee, known locally as Caesar’s or Harrah’s. Part of the new RFP was a requirement that applicants sign a Memorandum of Understanding with the City which set forth our minimum acceptable revenue requirements. The Baltimore City deal is the most complex in the State because the casino must be located on City-owned property according to State law. This was done to protect both the citizens of South Baltimore, but also to take advantage of a new revenue stream as “landlord” to the casino. We pledged to our legislators that the revenue we received as landlord would be dedicated only to the reduction of property taxes and school construction and renovation.

During the discussions and negotiations it became obvious that our urban development site posed significant challenges different than some of our suburban competitors. We negotiated that we would recommend to the LDC that the licensee could be reimbursed up to $2 million a year, for three years out of the local impact funds for items that would benefit the community such as new pedestrian lighting and streetscaping beyond their immediate development site. This is not a $6 million give-a-away as insinuated by the newspaper, but a recommended reimbursement that the Mayor would include in a spending proposal that would be presented to the LDC for final approval. These are infrastructure improvements that will benefit the community, a very clear and appropriate use of these funds.

This was not done to usurp the LDC’s advisory role in reviewing the use of this money. We made this information public in August of 2011 in an amendment to our Memorandum of Understanding (explained above) that was presented very publicly to the Board of Estimates. It was in the documents available to the public and we were not trying to hide anything. In fact the exact language states, “The City will recommend that a portion of local impact grant should be paid to the Applicant to reimburse it for qualified expenses related to the construction of the Video Lottery Facility.” It further defines the terms as no more than $2 million a year for the first three years only. Could there have been better communication to the former members of the LDC at that time – in hindsight, yes. While the former LDC no longer has jurisdiction over the current casino proposal, I recognize that sending an update to former members prior to the BoE vote in August of 2011 would have been a clearer line of communication. I apologize for the oversight; it was not intentional in any way.

The failure of Question 7 does not benefit the South Baltimore community. The passage of table games brings more jobs and a better destination location for the Harrah’s site. In addition, Baltimore City will receive a 5% tax on the table games (assuming a Prince George’s County facility is opened) that your legislators directed to school construction and recreation centers – no other local government has this directive but the Mayor accepted this suggestion openly. If the Question fails, this is less money for these two very important uses.

Amy, I hope this answers your pressing questions from this morning and that I have prepared you with enough information for your meeting. James, I hope this reassures and informs you more completely. Please feel free to contact me with any other questions you may have.

Mary Pat Fannon
Mayor’s Office of Government Relations
City of Baltimore