Site Fight: Anne Arundel County, Md.

In November 2008, voters passed a referendum allowing video lottery terminals (VLTs) to be located in five locations in Maryland, with each location allowing only one video lottery operator (VLO) licensee, creating a competitive bidding process. One of those locations is Anne Arundel County—more specifically, “a location in Anne Arundel County, within 2 miles of MD Route 295.” Md. Stat. § 9-1A-36(H)(1)(II). When Maryland voters went to the polls, it is believed that many voters assumed the VLTs were going to be placed at Laurel Park, an admired horse racetrack. The Laurel Racing Association also appears to have shared this belief, as they invested heavily in the pro-VLT campaign leading up to the election. On Feb. 2, 2009, the application deadline, both the Laurel Racing Association (a subsidiary Magna Entertainment Corp.) and Cordish Companies Inc. submitted bids for the Anne Arundel County site to the Video Lottery Facility Location Commission (VLFLC), the entity responsible for issuing VLO licenses. Unsurprisingly, Laurel’s plan is to place the VLTs at the Laurel Park racetrack, and surprisingly, Cordish submitted a plan to place VLTs at a facility next to a popular shopping mall.

A couple of weeks later, Laurel’s bid was returned by the VLFLC because the application did not include the costly application fee. This resulted in Cordish having the sole bid and Laurel facing a costly and time-consuming appeal, which the Maryland Court of Appeals sent back to the Anne Arundel Circuit Court on July 20, 2009, with instructions to the judge to dismiss the case. Although to one unfamiliar with the complexities of gaming law, one could imagine that a sole application is like being the only contestant in the Olympics—a gold medal is inevitable. But to gaming experts, the finish line is nowhere in site, and there are people standing on the sidelines creating distractions and physical obstacles—a gold medal is uncertain.

When Maryland state legislators passed the Maryland Education Trust Fund-Video Lottery Terminals Act in 2008, they inserted a provision that provides local governments with zoning authority. Sounds straightforward, but the local authority power itself has evolved into a convoluted situation for Cordish: Even if it is awarded a VLO license, it still needs zoning changes from the Anne Arundel County Council (AACC). The AACC, with only seven members, is deeply divided on changing the zoning laws and allowing Cordish to operate VLTs next to a shopping mall. A couple councilmen have introduced bills to amend zoning and have held public hearings, but as of this writing, the AACC has delayed the zoning vote a total of five times. AACC members’ beliefs are deeply divided and range from approving of the zoning changes to staunchly against the zoning changes to VLTs should only be located at Laurel to simply undecided.

The public also participates at the AACC’s zoning hearings, many of which I have attended. Anyone can testify for or against the zoning changes. Grassroots groups wearing red, symbolizing their opposition to the zoning changes, have seized on this opportunity and are always present. During public testimony, these grassroots groups sometimes deliver elaborate and emotional testimony, while others provide ridiculous statements. One woman, in particular, unleashes a passionate strategy that causes the audience and the AACC to get emotional—a strategy I consider highly inappropriate. Her testimony is accompanied by her two young daughters’ testimony, one of whom is probably 6 or 7 years old, the other 8 or 9. Both young ladies, fully dressed in red, read from a document that their mother either wrote or dictated to them. Obviously, it is hard to counter heartwrenching testimony delivered by a child, but there are people who do testify in favor of the zoning changes—though one of the councilmen is steadfastly against VLTs and sometimes tries to score political points by unloading questions during testimony, trying to uncover the motive behind whoever is testifying in favor of the zoning changes.

To toss another monkey wrench into the process, Edward Reilly, the powerful chairman of the AACC who supports zoning changes, resigned in order to be appointed to the state senate. There is a procedure for filling this new vacancy, and I believe it will be controversial.

With the AACC’s final action on the zoning uncertain, much to Cordish’s dislike, many friendly competitors are on the sideline discussing contingency plans if the zoning changes fail to pass. In March 2009, Magna encountered unfortunate circumstances and filled Chapter 11 bankruptcy protection. One of the assets that was originally placed on the auction block was Laurel. However, one month later, Magna removed Laurel. Some believe Laurel was removed because of the controversy surrounding Cordish’s plan to place VLTs next to a shopping mall. Others believe that Magna simply removed Laurel because it was appealing the VLFLC’s decision.

On May 10, it was disclosed that Greenberg Gibbons Commercial and Ribera Development, a group that builds homes, offices and shops, was taking a wait-and-see approach to Cordish’s zoning dilemma. The developers “believe that slots are better suited at Arundel Gateway, a 300-acre site in Laurel.”  I believe, however, that their plan slightly mirrors Cordish’s, because ultimately both want to place VLTs next to shopping areas. This means that if the AACC does not approve Cordish’s request for zoning changes, Greenberg’s plan would likely share the same fate.

As June rolled around, Penn National Gaming jumped on the bandwagon, saying that it too, is interested in Anne Arundel County. Eric Schippers, spokesman for Penn, stated, “We’re not interfering in any way, but if Cordish is denied, we want to see what opportunities exist elsewhere in the county.”  Currently, Penn has an application pending for Cecil County, another of the five VLT sites. I think it is safe to say that Penn is almost certain to receive a VLO license for the Cecil site. Although Maryland law limits companies to one license, it is believed that another company could hold the license and Penn would serve as the operator. If regrettable circumstances cause Cordish to fail, I could foresee a situation where Magna and Penn form some type of joint venture for the Laurel racetrack.

Between the AACC, the outcome of Magna’s appeal and other friendly competitors, Cordish’s process of winning approval continues to get more drawn-out daily. It is almost like David Cordish, president of the Cordish Group, is outside watering his prized garden when around the corner, you have the AACC and competitors playing the role of the mischievous child mucking about with the hose. The VLFLC is expected to issue the VLO licenses in fall of 2009. If Magna’s next move is unsuccessful, Cordish is likely to receive a VLO license. Even if Cordish faces additional unexpected hurdles with either the VLFLC or the AACC, the company has several administrative or legal options yet to be explored. In fact, the discussion of contingency plans for the Anne Arundel site may be premature, because if Cordish has to appeal, the process is likely to be very time consuming.

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