August 12, 2010

Board postpones approving financial services contract with only one bidder

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By Len Lazarick

Len@MarylandReporter.com

The Board of Public Works on Wednesday deferred a $2.5 million contract to give advice on housing agency bonds because there was just one bidder, but — despite objections from Comptroller Peter Franchot — approved $32 million for video lottery terminals at the Ocean Downs Casino.

Franchot, as usual, was the principal naysayer on the most controversial items for the board, which must approve state contracts over $25,000. The board is made up of Franchot, Gov. Martin O’Malley, and Treasurer Nancy Kopp.

Caine Mitter & Associates of New York was the only qualified bidder for a new $2.5 million contract to advise the state on the sale of bonds by the Department of Housing and Community Development. Franchot opposed awarding them the contract.

“I don’t think this is an area where we should accept just one bidder,” Franchot said. “It concerns me that there is no competition.”

Caine Mitter has been advising the housing department for years on the bonds its sells to finance low-interest mortgages, rental units and community development projects. The bonds are paid off with revenues from the homeowners and renters in the projects.

Stephen Silver, chief financial officer for the department, said they sent out requests for proposals to 22 firms. Only two firms responded with bids. One was automatically disqualified because it did not meet minimum requirements and did not fill out documents correctly.

Silver said advising on the bonds “is a unique area of the world” of finance, and Caine Mitter had been performing its duties well.

Franchot also balked on approving the contract because he thinks that much of the work could be done by staff in the state treasurer’s office, which oversees debt and the issuance of general obligation bonds.

Kopp responded that her staff does not have “the specialized competence” to review the cash flow for the bonds, but as a legal obligation believes “that we ought to have been involved” in the selection.

The board will reconsider the contract at its Sept. 1 meeting.

Also on Wednesday, Franchot repeated his longtime objection to the Maryland State Lottery Commission’s $32 million purchase of the video slot machines, since the state is paying for the terminals before they bring in any money. Even though the legislature set up the program this way, Franchot believes the operators of the casinos should be buying the equipment.

“We still don’t know what the financing is going to be,” Franchot complained.

Also, Franchot said, $14 million of the contract is going to international video lottery terminal manufacturer IGT, which had only 15% participation by minority business enterprises — compared to 25% and higher for six of the other firms involved.

Franchot also objected to spending $160 million over the next eight years on engineering studies for three new mass transit lines, but the Department of Transportation pulled the complicated consulting contracts from the agenda so the transportation secretary could review the agreements.

Franchot said the contracts were too big to manage properly and were spread over too long a time, especially when $160 million had been taken by the state from local highway user funds used to pay for county road projects. This has “gutted” county programs, he said. “Right now they can’t fill a little pothole, no less a big one.”

Transportation Secretary Beverley Swaim-Staley said she wanted to take some more time to review the contracts, which involve multiple subcontracts to plan the Purple Line in the Washington suburbs, the Red Line in Baltimore, and the Corridor Cities Transitway along I-270 in Montgomery County.

“I share your concerns,” Swaim-Staley told Franchot. She pointed out that 50 to 80% of the money would come from federal funds.