Could the Maryland Stadium Authority use lottery-funded 'pay-go' money to buy the Camden Yards land, or only to build on land it already owned?

Plain-English summary

Maryland's 1987 stadium law let the Maryland Stadium Authority pay for the Camden Yards project two ways: selling bonds (capped at $235 million outstanding at any time) and spending sports-lottery revenue that had built up in a separate Facilities Fund as "pay-go" money instead of issuing bonds. The Authority's chairman asked two questions: whether Facilities Fund money could be used to buy the Camden Yards land itself, not just to build on it, and if so, whether spending that pay-go money would count against the $235 million bond ceiling. The Attorney General concluded that "capital construction," the term the statute used for what pay-go money could fund, was intended broadly enough to include land acquisition, and that the bond cap only limited how many bonds could be outstanding at once, so using Facilities Fund dollars instead of bond proceeds did not shrink the amount of bonds the Authority could still issue.

Currency note

This opinion was issued in 1988. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did "capital construction" in the stadium law cover buying the land, or just putting up the building?
The opinion concluded it covered both. Comparing how the same term was used in other Maryland statutes, including library-financing laws for several counties and a general capital-projects reporting statute, the opinion found "capital construction" was consistently understood to include the cost of acquiring the land a project would sit on, not just the physical construction itself.

If the Stadium Authority used lottery money instead of bonds to buy land, did that eat into the $235 million bond limit?
No, according to the opinion. It read the $235 million cap as a limit only on how many bonds could be outstanding and unpaid at any given moment, not a cap on the total cost of the project, so spending Facilities Fund "pay-go" dollars instead of issuing more bonds simply reduced reliance on debt without reducing the Authority's remaining bond capacity.

Was there any limit on how the sports lottery money in the Facilities Fund could be used?
The Facilities Fund could hold up to $24 million plus a debt service reserve, and the statute specifically authorized it to pay rent to the Authority, make limited grants or loans, finance capital construction in place of issuing bonds, or support private financing of the project, with the General Assembly favoring bonds as the primary tool but explicitly allowing lottery money to supplement or substitute for them as the Board of Public Works saw fit.

Background and statutory framework

The 1987 stadium legislation created the Maryland Stadium Facilities Fund under SF §7-312, funded mainly by two to four sports lotteries and usable, among other things, to "finance capital construction in lieu of issuing bonds" under SF §7-312(e)(3). Separately, FI §13-712(a)(1)(ii) capped outstanding and unpaid stadium bonds at $235 million absent further General Assembly authorization. The Stadium Authority's financing plan combined roughly 30-year lease-backed revenue bonds with "pay-go" Facilities Fund spending, and the chairman asked whether pay-go money could be used for buying the Camden Yards site itself and, if so, whether doing so would reduce the $235 million bond cap.

On the first question, the opinion read "capital construction," a term used sparingly elsewhere in the Maryland Code, in light of its use in Article 25 statutes letting several counties borrow for "capital construction costs" of library buildings (which the opinion found were understood to include land acquisition, since it would be nonsensical to fund a library-building program only on land the county already owned) and in SF §2-105's reporting requirement for capital construction projects funded outside the normal budget process. Applying the interpretive approach from NCR Corp. v. Comptroller and Kaczorowski v. City of Baltimore, and drawing support from an Alaska decision, Wright v. City of Palmer, treating land acquisition as part of "capital improvement," the opinion concluded "capital construction" in the stadium statute was meant broadly enough to include site acquisition, distinguishing Demory Brothers, Inc. v. Board of Public Works, where "construction costs" in Maryland's Prevailing Wage Law was read narrowly because that statute's own language and purpose pointed only to structural costs. The opinion also found legislative history, including the stadium bill's own preamble referencing both a "facility site" and construction, and the Court of Appeals' description in Kelly v. Marylanders for Sports Sanity of site acquisition and construction as a "unitary solution to a singular objective," supported treating site acquisition and construction as inseparable parts of the same capital project that pay-go financing could reach.

On the second question, the opinion read the $235 million cap by its plain terms as limiting only the face amount of bonds outstanding and unpaid at any one time, not the total cost of the stadium project (which everyone understood would exceed that figure once debt service was included) and not the total amount of bonds that could ever be issued, so long as the amount outstanding at any moment stayed under the ceiling. Applying Carolina Freight Carriers v. Keane's purposive approach to statutory language, the opinion reasoned that using Facilities Fund pay-go money "in lieu of" bonds was simply an alternative financing tool serving the cap's real purpose, protecting the State's bond rating by limiting outstanding debt principal, and that reading the cap to shrink every time pay-go dollars were spent would perversely discourage the Authority from using the cheaper, debt-free financing option Kindley v. Governor of Maryland's interpretive principles suggested the General Assembly meant to make available for exactly this kind of evolving, long-term project. The opinion concluded the Authority could combine bond proceeds and Facilities Fund money to finance capital construction, including site acquisition, so long as the bonds actually outstanding and unpaid at any time stayed below $235 million.

Citations and references

Statutes:
- §7-312(e)(3) of the State Finance and Procurement Article
- SF §7-312(b) and (d)
- SF §7-312(f)(1)
- SF §7-312(f)(2)
- SF §7-312(e)(4)
- SF §2-105
- §13-712(a)(1)(ii) of the Financial Institutions Article
- FI §13-712.1
- FI §13-712.1(4)
- §9-120.1 of the State Government Article
- §9-120.1(a) of the State Government Article
- Article 25, §§233, 234 and 235
- Chapter 124, Laws of Maryland 1987
- Chapter 122, Laws of Maryland 1987

Cases:
- Kelly v. Marylanders for Sports Sanity, 310 Md. 437, 467, 530 A.2d 245 (1987)
- NCR Corp. v. Comptroller, 313 Md. 118, 124, 544 A.2d 764 (1988)
- Kaczorowski v. City of Baltimore, 309 Md. 505, 514, 525 A.2d 628 (1987)
- Wright v. City of Palmer, 468 P.2d 326, 329-30 (Alaska 1970)
- Demory Brothers, Inc. v. Board of Public Works, 273 Md. 320, 329 A.2d 674 (1974)
- Carolina Freight Carriers v. Keane, 311 Md. 335, 339, 534 A.2d 1337 (1988)
- Kindley v. Governor of Maryland, 289 Md. 620, 625, 426 A.2d 908 (1981)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1988/Volume73_1988.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

Maryland Stadium Authority—Facilities Fund—Stadium Authority May Use Facilities Fund Monies To Acquire Property Without Effect on Bond Ceiling.

November 2, 1988

Herbert J. Belgrad, Chairman
Maryland Stadium Authority

You have requested our opinion on two questions:
1. Whether the Maryland Stadium Authority is authorized by §7-312(e)(3) of the State Finance and Procurement Article ("SF" Article) to use monies in the Maryland Stadium Facilities Fund to finance the acquisition of property in Camden Yards?
2. If so, whether the use of such "pay-go" monies reduces the $235 million ceiling on "outstanding and unpaid" bonds established by §13-712(a)(1)(ii) of the Financial Institutions Article ("FI" Article)?
For the reasons stated below, we conclude that the Authority may use Facilities Fund monies to acquire property in Camden Yards and that the use of these "pay-go" funds does not reduce the bond ceiling.

                               I
                    Statutory Background

In Chapter 124 of the Laws of Maryland 1987, the General Assembly created an intricate public financing mechanism to fund the building of sports facilities for professional baseball and football at Camden Yards. See Kelly v. Marylanders for Sports Sanity, 310 Md. 437, 467, 530 A.2d 245 (1987). The legislation requires at least two, but not more than four, sports lotteries to be held for the benefit of the Maryland Stadium Authority. §9-120.1 of the State Government Article. Lottery proceeds are paid into the Maryland Stadium Facilities Fund created by SF §7-312. The Fund can also receive monies "from any source," including appropriations and transferred funds, and can be invested with earnings being retained in the Fund. SF §7-312(b) and (d). Under SF §7-312(e):

   Moneys credited to the Maryland Stadium Facilities Fund may be used, in accordance with approved comprehensive financing plans, to:

    (1) pay rent to the Maryland Stadium Authority;
   (2) with the approval of the Board of Public Works, make grants or loans, not exceeding $1 million in any fiscal year, to the Authority for its corporate purposes;
  (3) with the approval of the Board of Public Works, finance capital construction in lieu of issuing bonds; or
  (4) financially support, through equity investment, loan, guarantee, or otherwise, full or partial private financing of any element of the facility.

The Fund can contain up to $24 million, plus a sizable "debt service reserve fund." SF §7-312(f)(1). Although excess revenues are to be transferred to the State Reserve Fund, they can be recaptured by an appropriation or budget amendment approved by the Legislative Policy Committee. SF §7-312(f)(2).
This legislation enables the Authority to issue taxable or tax-exempt lease-backed revenue bonds with a term of up to 40 years, the debt service of which is to be financed primarily by annual lease payments to the Authority appropriated by the General Assembly. The sports lotteries, in turn, constitute the main source of revenues for the lease payment appropriation. See Kelly, 310 Md. at 445. The General Assembly contemplated that $206 million in bonds might be issued in segments beginning in January 1988. 310 Md. at 473.1 However, it gave the Authority discretion as to the timing of bond issues and significant leeway on the total amount and term of the issues. FI §13-712(a)(1)(ii) provides that:

     Unless authorized by the General Assembly, the Board of Public Works may not give approval to an issuance of bonds if after issuance there would be outstanding and unpaid $235 million face amount of bonds, whether taxable or tax exempt, for the purposes of financing site acquisition and preparation, relocation, demolition and removal, construction and related

1
The General Assembly was also aware that the State had allocated $200 million of its 1986-87 private activity bond cap under the federal 1986 Tax Reform Act ("TRA") for stadium bond issues. See Department of Fiscal Services, The Stadium Issue 13-14 (March 1987). In light of the TRA's cutback of the private activity bonds available in future years, this selection of the stadiums over other private activity bond projects and needs was necessary to insure the tax exempt status of $200 million worth of stadium bonds. These bond allocations expire three years from the date they were made.

      expenses for construction management, professional fees, and contingencies of baseball and football stadiums or a multiuse stadium.2

    In the preamble to Chapter 124, the General Assembly "expressed a preference ... to minimize the use of state lottery revenues." Kelly, 310 Md. at 467. However, as the Court of Appeals also noted, "this preference was not intended ... to partially or totally inhibit or forestall public involvement where that course of action becomes essential." Id. In fact, although the bond issues contemplated for the project were keyed in some measure specifically to the anticipated cost of the facilities, the lottery revenues in the Facilities Fund were not.3
Finally, SF §7-312(e) authorizes the Authority to "finance capital construction in lieu of issuing bonds."4 As noted by the Senate Budget and Taxation Committee, this provision "would allow pay-go if there were sufficient revenues." Floor Report on Senate Bill 847, at 3. With a first bond issue being forecast for January 1988, the General Assembly probably did not expect that there would be sufficient revenues in the Fund immediately for purposes other than debt service. However, it did contemplate that at some point the Fund would be sufficient. See The Stadium Issue at 18 ("If revenues and expenditures accrue as projected, some portion of the fund could be used to offset a portion of the bond issue for the football stadium or to fund any 'call provisions' included in the bond issues, or to provide for a renovation reserve fund.").5

2 The General Assembly placed other restrictions on the issuance of bonds, including requiring a long-term Oriole lease in connection with the baseball facility and the obtaining of an NFL franchise and a long-term lease in connection with the football facility. FI §13-712.1. See 73 Opinions of the Attorney General 270 (1988).
3
Under §9-120.1(a) of the State Government Article, the State Lottery Agency "shall conduct at least 2, but no more than 4, sports lotteries for the benefit of the Maryland Stadium Authority." The Senate committees considering Chapter 124 rejected a ceiling on lottery revenues: "One option is to cap the amount raised to $18 million so as not to decrease general fund revenues from other State lotteries." SB 847 Issues (document in the files of the Senate Budget and Taxation Committee and Senate Finance Committee) (1987).
4
Facilities Fund monies were also authorized without limit to financially support private financing of the stadiums "through equity investment, loan, guarantee, or otherwise" SF §7-312(e)(4).
5
The Authority's consultants had noted the advantages of "pay-go." Peat Marwick, Report on Phase 2, at 39 (Feb. 2, 1987). At one time, they recommended "a combination of debt financing with some pay-as-you-go options." The Stadium Issue at 13.

                                       II
                 Stadium Authority Financing Plan

The comprehensive financing plan of the Stadium Authority dated October 5, 1988, features a combination of "pay-go" and 30-year lease-backed revenue bonds. Under the plan, if only a baseball stadium is constructed, approximately $153 million in bonds will be outstanding by the end of fiscal year 1990, and $39 million of Facilities Fund monies will have been used for pay-go purposes. If both a football and baseball stadium are built, approximately $217 million in bonds will be outstanding by December 1990, and $62 million of Facilities Fund monies will have been used for pay-go purposes.6

                                      III
                     Scope of "Pay-Go" Authority

In our opinion, SF §7-312(e)(3), viewed in context and in light of the purposes of the stadium legislation, does not preclude use of Facilities Fund monies to finance the acquisition of property in Camden Yards as well as stadium construction.

6
Under FI §13-712(a)(1)(ii)2, the Authority is subject to certain caps on bonds for aspects of the overall stadium project:

     "A. $85 million in bonds for the purposes of site acquisition and preparation, relocation, demolition and removal at, and construction and related expenses for construction management, professional fees, and contingencies for Camden Yards;
     B. $70 million in bonds for the purposes of site work, construction and related expenses for construction management, professional fees, and contingencies of a baseball stadium;
     C. $80 million in bonds for the purposes of site work, construction and related expenses for construction management, professional fees, and contingencies of a football stadium, and an additional $15 million in bonds if a football stadium is constructed prior to a baseball stadium in which case the $70 million in bonds for a baseball stadium is reduced to $55 million; and
     D. $195 million in bonds for the purposes of the site acquisition and preparation, relocation, demolition and removal, construction and related expenses for construction management, professional fees, and contingencies of multiuse stadium."

To exceed these limits, "the Authority shall obtain the authorization of the Board of Public Works and notify the Legislative Policy Committee with accompanying justification."

We begin, as we must, with the pertinent statutory language. NCR Corp. v. Comptroller, 313 Md. 118, 124, 544 A.2d 764 (1988). SF §7-312(e)(3) authorizes pay-go financing of "capital construction," a term used only infrequently in the Maryland Code and in no other place in the stadium legislation.
The term's use elsewhere in the Code does help clarify the intended reach of the term, however. Article 25, §§233, 234 and 235 authorize Harford, St. Mary's, and Calvert Counties to borrow money for the "capital construction costs" of library buildings. The provision for Harford County, §233, is the model:

     The Board of County Commissioners of Harford County may borrow funds for paying part or all of the capital construction costs of public library buildings in Harford County; and they may issue bonds, notes, or other evidence of indebtedness for the repayment of any such borrowed funds, and may levy for payments of principal and of interest on these evidences of indebtedness.

This legislation was meant to provide the financial means by which new libraries might be built in the county. It seems most unlikely that this broad grant of borrowing authority could only be exercised to build needed libraries on land already owned by the county. Rather, we believe that "capital construction" was the term chosen to describe all of the costs associated with building a library, including land acquisition costs. And, indeed, we understand that on two occasions bond proceeds under §233 have been used to purchase land.
SF §2-105 also uses the term "capital construction":

     On or before January 10 of each year, each unit of the State government, including the University of Maryland System, that is using nonbudgeted or dedicated funds for a capital construction project shall submit to the Joint Budget and Audit Committee a detailed report on the use of those funds.

We are confident that here, too, the General Assembly meant to include land acquisition for a building within "capital construction" project costs and, we understand, SF §2-105 has always been so applied.7

7 See also Wright v. City of Palmer, 468 P.2d 326, 329-30 (Alaska 1970) (term "capital improvement" includes land acquisition for purposes of a building).

This interpretation of the term "capital construction," that it includes all elements reasonably related to the erection of a stadium, is best-suited to accomplishing the legislative purpose.8 "Our endeavor always is to construe a statute so as to implement the legislative goal, not to frustrate it." NCR Corp., 313 Md. at 146. See generally Kaczorowski v. City of Baltimore, 309 Md. 505, 514, 525 A.2d 628 (1987). There is evidence in both the text of the 1987 stadium legislation and its legislative history that the General Assembly viewed site acquisition as an integral phase of the stadium capital construction project. For example, key portions of the title and preamble of Chapter 122 of the Laws of Maryland 1987 refer to the General Assembly's approval of "a facility site" at Camden Yards, while the body of the bill approves both the acquisition and construction. The preamble to Chapter 124 encourages financing of "construction" with private investment, while SF §7-312(e)(4) authorizes the Stadium Authority to support private funding of "any element of the facility." Most importantly, there is a significant overlap between acquisition and construction in the legislative descriptions of particular bond issues. For example, the bond issue described in The Stadium Issue, at page 7, as being for "site acquisition" actually includes certain construction expenses. See FI §13-712(a)(1)(ii)2.A.9
Critical in our view is the fact that pay-go authority was viewed by both the General Assembly and the stadium's consultants as a desirable mechanism to diminish reliance on financing solely by issuing bonds, bonds that were authorized for all segments of the stadium project, including both construction and site acquisition.10 In fact, we

8
In our view, the term "capital construction" in this context is broader than the term "construction" might be in a wholly different statutory setting. Cf. Demory Brothers, Inc. v. Board of Public Works, 273 Md. 320, 329 A.2d 674 (1974). In Demory, the Court of Appeals concluded that the words "construction costs" in the State's Prevailing Wage Law applied to the costs of the improvements located on a site but not to the costs of land acquisition. However, the language and purpose of that statute left little doubt that the legislative intent was to cover only structural costs.
9
It is true that when the Legislature wanted to differentiate between the two, e.g. for purposes of emphasizing that a long-term Orioles lease or an NFL franchise was a precondition to the issuance of bonds for any phase of the project, it clearly did so. See FI §13-712.1(4). However, in other parts of the statute, the line between the two is less clear.
10
In Kelly, the Court noted that the site acquisition and financing bills in the stadium package were intended as "a unitary solution to [a] singular objective." 310 Md. at 473. The Court specifically noted that site selection, site acquisition, and funding the project over a 30-year period would "accomplish the end result of stadium construction." Id.

can conceive of no reason why the General Assembly would have prohibited the Stadium Authority from using pay-go at the acquisition stage and sanctioning it only for construction activities.11 In short, when the term "capital construction" is placed in its context and SF §7-312(e)(3) is reasonably construed in light of its purpose, we conclude that this provision enables the Stadium Authority to use the Facilities Fund to finance land acquisition as well as construction.

                                      IV
                      Impact of the Bond Ceiling

At present, the question of whether the Authority may use pay-go monies and also have a full $235 million in bonds outstanding is decidedly hypothetical. The Stadium Authority has not yet secured an NFL franchise, a precondition to issuing bonds for the football stadium. FI §13-712.1(4)(ii). Even if it had, under the Authority's present plans the amount of outstanding bonds and anticipated use of pay-go monies would not exceed $235 million until fiscal year 1991. See Part II above. Moreover, if only a baseball stadium is built, direct expenditure of Facilities Fund dollars and anticipated bond issues would never approach $235 million. However, because the Authority must be prepared for any eventuality and must necessarily engage in long-term financial planning, we will address the issue.
The 1987 stadium legislation does not contain an express ceiling on either Facilities Fund expenditures or lottery revenues; nor does it have within it a specific mechanism for the deduction of bond issuances or authorizations from the $235 million bond cap. The question we must decide is whether the statute that authorizes pay-go "in lieu of issuing bonds" impliedly mandates a reduction of the $235 million bond cap for each pay-go dollar expended on capital construction. In our opinion, it does not.

11
Because a bond issue was scheduled for January 1988, the General Assembly may have believed that there would be insufficient revenues in the Facilities Fund for site acquisition. However, even though the Legislature timed the stadium project "for immediate implementation," Kelly, 310 Md. at 473, it nevertheless intended a provision such as SF §7-312(e)(3) "to be capable of encompassing circumstances and situations which did not exist at the time of its enactment." Kindley v. Governor of Maryland, 289 Md. 620, 625, 426 A.2d 908 (1981).

By its express terms, the $235 million cap imposed by FI §13-712(a)(1)(ii) is a ceiling only on the face amount of bonds outstanding and unpaid at any given time. It is not a cap on the total cost of the project; indeed, it always has been clear that debt service will take the total cost well beyond $235 million. Neither does the cap limit the total amount of bonds that may be issued for the project. So long as less than $235 million is outstanding and unpaid at any given time, total bond issuances may exceed $235 million. The cap, therefore, is merely a limit on outstanding debt principal at any given time. Its sole apparent function is to prevent the stadium project from adversely affecting the State's triple-A bond rating.
In the light of the bond cap's limited purpose and function, the use of the words "in lieu of" in SF §7-312(e)(3) cannot reasonably be construed to reflect a legislative intention that the bond cap be reduced to the extent that Facilities Fund pay-go, instead of bond proceeds, are used to fund the project. The two have entirely different functions. Unlike the bond cap, the pay-go authorization reaches well beyond the amount of debt principal outstanding at any given time. Its function is to reduce the overall cost of the project by eliminating the cost of debt. To condition the use of pay-go upon a corresponding reduction in the bond cap would be to transform the cap from a limit on outstanding debt principal into a limit on total project cost, while at the same time creating an economically perverse disincentive for the use of Facilities Fund pay-go.12 Only if the bond cap were a cap on total project cost would the pay-go authorization affect the cap. The language of the cap demonstrates conclusively that the cap is not a cap on total project cost; therefore, the cap is not reduced by the use of Facilities Fund pay-go. "We look at the words of the statute in the context of their adoption and from that perspective determine the meaning of the language in a manner consistent with the goal the legislature was trying to achieve." Carolina Freight Carriers v. Keane, 311 Md. 335, 339, 534 A.2d 1337 (1988).
Consequently, in our opinion, it is within the discretion of the Stadium Authority, with the approval of the Board of Public Works,

12
It is quite possible that expenditure of pay-go monies plus bond issues, all in excess of $235 million, would still bring the State greater savings than years of debt financing at $17 million per annum. For instance, the Authority has the power to issue 40-year bonds, rather than the 30-year bonds presently planned. See FI §13-712. Use of pay-go monies now could avoid resort to an additional 10 years of debt financing. Moreover, because FI §13-712(a)(1)(ii) is only a limit on the amount of bonds outstanding at any one time, the cap could be avoided by the simple device of using pay-go monies to retire old bonds, then initiating new debt.

to use Facilities Fund monies instead of bond proceeds to finance, in whole or in part, capital construction. And because bond proceeds in excess of $235 million may be used to finance capital construction so long as the face value of the bonds that are outstanding and unpaid is less than $235 million, it necessarily follows that a combination of bond proceeds and Facilities Fund monies in excess of $235 million also may be used to finance capital construction, so long as the face value of the bonds that are outstanding and unpaid is less than $235 million.
To summarize, when the General Assembly authorized the Authority's use of lottery revenues "in lieu of issuing bonds" to finance the stadium project, it meant to provide an additional financing tool. At any stage of the project, the Authority may use bonds exclusively. But if the Authority finds that the use of lottery funds "in lieu of" exclusive reliance on bonds is financially advantageous, it (with approval of the Board of Public Works) may use that combined financing instead. The statutory authorization to use monies credited to the Facilities Fund "to finance capital construction ... in lieu of issuing bonds" simply means that lottery revenues may be used in lieu of using bond proceeds alone to finance the entire cost of capital construction.

                              V
                         Conclusion

In summary, it is our opinion that SF §7-312(e)(3) permits the Stadium Authority to use Facilities Fund monies to finance acquisition of property in Camden Yards, and these sums need not be subtracted from the $235 million bond ceiling established by FI §13-712(a)(1)(ii).

       J. Joseph Curran, Jr., Attorney General
       Judson P. Garrett, Jr., Deputy Attorney General
       Norman E. Parker, Jr., Assistant Attorney General

Jack Schwartz
Chief Counsel
Opinions & Advice