1

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.

2

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.

3

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

4

Subject Agenda Witness Page Inspection of DOT John Porcari 89 Bay Bridge Item Geoffrey Kolberg Main Span 9-AE-MOD, Cables p. 18

---

5

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

6

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.

7

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

8

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

9

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

10

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

11

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

12

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

13

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

14

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

15

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

16

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.

17

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 --

18

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.

19

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.

20

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

21

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.

22

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.

23

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

24

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

25

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.

26

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

27

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

28

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.

29

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

32

believe it is in the State’s interest, after that. For

instance, the short term

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 --

58

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

59

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 --

60

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.

61

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

62

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.

64

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.

66

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.

81

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 --

82

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

86

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

87

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

88

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

89

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)

90

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.

91

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

92

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

93

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

98

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.

102

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.

103

(Whereupon, at 11:50 a.m., the meeting

was concluded.)

.

.

.

.

.

.

.

.

.

.

.

.

.

.

.