The conflict of interest question was much more narrow. It involved a statute,
since repealed and replaced by a much broader code of conduct, that made certain
types of actions criminal but specifically exempted the Board of Public Works from
the purview of the statute. That exemption governed the result; it reflected, said the
court, "a legislative apprehension that, in view of the multitude of matters in which
the State has an interest, an over-technical, unrealistic application of the sound con-
flict of interests principle might make it difficult for the State to find citizens of the
caliber and broad interests whom it wishes to act on its behalf." Notwithstanding the
legal exemption the court suggested that it would be prudent for a board member
having such an interest as the treasurer to abstain from voting, and, in fact, when
the question of the full loan to the particular hospital came back before the board,
Luetkemeyer did not vote on the matter.36
The court's decision, filed in June 1966, should have cleared the way for loans to
be made under the act, but another snag developed—this one with the commission.
The commission had been appointed promptly, applications for assistance had been
filed with it almost immediately, and it had had a year or more to review them. Yet
the commission was unable to make a decision. It made one study of hospital needs
and then ordered another. In August 1966 it told the board that it needed time to
review the latest study and would have no recommendations until October.37
Pressure was building. The applicant hospitals were becoming desperate. GBMC,
for example, had already commenced construction with demand bank loans and found
itself in an extremely precarious position when the banks, fearing unfavorable com-
ment from their examiners, pressed for repayment. A state loan was its (and possibly
the banks') only salvation. Other hospitals had delayed their projects waiting for the
legal challenge to be resolved and were anxious to get started. The state loan had to
be coordinated with other fund-raising efforts, which required some lead time.
The commission finally acted, after its chairman resigned, on 2 September 1966,
when it recommended approval of nine applications and deferral of nine others. The
board quickly adopted those recommendations and thus the program was finally under
way. Eventually fourteen hospitals received forty-year loans under the program.38
The board discharged a multiple role in the hospital funding program. In addition
to considering and approving the individual loans, which were its primary responsi-
bilities, the board had to establish the interest rate applicable to each loan and then
review and approve the loan documents. The board also, of course, had to coordinate
the sale of the bonds with the disbursements required under the loan agreements.
Altogether the board devoted parts of at least fourteen meetings between April 1966
and June 1967 to these matters.
Once the initial hurdle was cleared, the hospital funding program went smoothly,
except in the case of GBMC. That hospital, recently formed through the merger of two
old, established Baltimore City hospitals, seemed to be having some serious manage-
ment problems. It was also in the process of forsaking the city and building a new
large facility in Baltimore County not more than a mile from the facility proposed by
St. Joseph's. The commission had some reservations on both scores, but was especially
concerned over the managerial problems and refused to recommend approval of the
loan unless a number of significant changes were made in the hospital's governing
structure. GBMC and its worried lenders attempted to pressure the board into ap-
proving the loan—$7 million—without requiring the changes insisted upon by the
commission, which the hospital was reluctant to make. But the board remained firm.39
36. Ibid., p. 397; BPW Minutes, 2 September 1966, MdHR 40281-144.
37. E. D. Rosenfeld Associates, Survey and Report of Hospital Facility and Service Needs of the State of
Maryland, June 1966, MdHR 806193; BPW Minutes, 2 August 1966, p. 10, MdHR 40281-142.
38. BPW Minutes, 2 September 1966, pp. 3-5, MdHR 40281-144.
39. Ibid., 9 January 1967, pp. 38-39, MdHR 40281-149-1.
