Potential earning power of slots underwhelming so far
By: Alan Suderman
Examiner Staff Writer
April 6, 2009
After years of effort by political heavyweights to legalize slots, Maryland may see less than half the money it projected the machines would bring to state coffers.
The reason: Developers have submitted bids for 6,550 licenses to operate slots so far, considerably fewer than the 15,000 the state expected.
A state referendum legalizing slots — or more precisely, “video lottery terminals” — overwhelmingly passed last year after proponents promised voters the state would make heaps of dough starting in fiscal 2012, including a projected $687 million for the state’s schools.
“We’re already seeing a failure in terms of the bidding,” said Aaron Meisner, former chairman of Stop Slots Maryland. “And that failure is going to be reflected in what we see in 2012.”
Compounding the problem are issues with the efforts to build slots in Anne Arundel County — the closest location for the District’s gamblers and the most potentially lucrative site.
A bid to put slots at the Laurel Park racetrack was rejected because the track’s owner, who has since declared bankruptcy, refused to pay the $28.5 million licensing fee up front. An alternate bid to put 4,750 slots next to the Arundel Mills Mall may be derailed by a divided county council’s upcoming zoning vote.
Slot proponents say a sluggish national economy is to blame for a slow start in the bidding process, but stress that the state will eventually reap big rewards from legalizing slots.
“The fact is, it’s a bad time to sell just about anything in this economy,” said Gov. Martin O’Malley’s spokesman Shaun Adamec.
But recent offers of $435 million and $370 million for gaming licenses in Illinois and New York show investors still have a healthy appetite to invest in gambling operations despite a bad economy, said Jeff Hooke, a Bethesda-based investment consultant.
The problems, Hooke said, is Maryland’s high tax rate of two-thirds of the take. He added that the restrictions on where slot parlors can be built (slots are limited to five locations around the state) are discouraging developers from pursuing the licenses.
Critics of slots predicted that lawmakers will have to make significant concessions to potential slot machine operators to attract enough interest to meet revenue projections.
“We’re on ... a toboggan ride to the bottom,” said Del. Luis R.S. Simmons, D-Montgomery, an outspoken critic of slots, “because we’re constantly going to be trying to justify and rationalize the failure to achieve revenue estimates.”
