Rocky Gap deal OK’d

‘Elegant solution’ restructures finances; sports museum gets help

For the Cumberland Times-News

ANNAPOLIS — A state board on Wednesday approved spending $8 million to restructure a financial agreement with investors at Rocky Gap Lodge & Golf Resort, which has struggled financially for years and is one of five potential sites for slot machines in Maryland.

The Board of Public Works also approved $440,000 in debt relief for the fiscally ailing Sports Legends Museum at Camden Yards in Baltimore.

Both decisions were made on a 2-1 vote, with Comptroller Peter Franchot voting against the proposals after citing difficult financial times for the state and uncertainty surrounding the two ventures. Treasurer Nancy Kopp and Lt. Gov. Anthony Brown, who was sitting in for Gov. Martin O’Malley, voted for the proposals.

For Rocky Gap, the board approved money for a complex arrangement that will provide investors with money up front in exchange for extending a land lease from 2046 until 2065. It also will give the Maryland Economic Development Corp. more time to pay off debt obligations it incurred when floating revenue bonds to construct the lodge.

The deal also will include about $400,000 in operational expenses to the lodge to help get it through the difficult winter months when it doesn’t generate much revenue.

Franchot voted against the plan, questioning why the state would rush into the arrangement, when it’s unclear how slot machines could affect the property. Franchot also pointed out that the arrangement is costing the state more money during tough fiscal times.

“I can’t quite get my arms around this elegant solution,” Franchot said. “But conceding it is elegant, it’s still costing us money.”

Under the arrangement, about $3.5 million will come from the Maryland Economic Development Corp., and another $3.5 million will be added through the Maryland Department of Business and Economic Development. The other $1 million has yet to be identified.

Two investors in a lodge and golf course at the park have lent about $26.3 million to the Rocky Gap project. Since 2002, Maryland has not paid about $10 million in interest on top of the initial investment.

Currently, the state is obligated to make scheduled principal and interest payments. Under the new arrangement, payments will only be made based on cash flow. So, to induce the investors to agree, the state is making an upfront payment.

Franchot also questioned how realistic it was to consider Rocky Gap “a financially viable enterprise.”

Bob Brennan, executive director of Maryland Economic Development Corporation, said “the gun’s at our head,” because investors have threatened to foreclose.

“I’m not going to sit here and blow smoke around the room,” Brennan told the board. “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.”

But Brennan said the new arrangement “makes the transaction default proof, which is one of the things that we absolutely need to have.”

Brennan also said with the economic downturn, it will be a couple of years before the investors start seeing payments out of the cash flows, unless an “extraordinary event” happens.

“The additional time is what’s really needed,” Brennan said.

Rocky Gap, which is near Cumberland, could end up with as many as 1,500 slot machines — the lowest amount of machines for the five sites in Maryland. Brennan said if a gambling company is interested in setting up a slots parlor there, “it will bring significant relief.”

But Brennan said “no serious players” have emerged to express interest in setting up a slots parlor at Rocky Gap. Deadlines for bids on the five slot machine licenses are in February.

“I think the real players will emerge when they receive those responses,” Brennan said.

The board also voted for about $440,000 in debt relief for the Sports Legends Museum at Camden Yards.

Mike Gibbons, the museum’s executive director, said the museum has been hindered by diminishing attendance at Baltimore Orioles games. He also appealed to the board for help, saying the nearby Babe Ruth Museum also could suffer without the help.

Under the agreement, the rent for the museum building will be reduced and the lease will be restructured from 21 years to 5 years, with an option to renew the lease for three additional five-year terms.

The museum opened in 2005 but has struggled to attract visitors.