Purveyors of slots jockeying to cash in

February 21, 2010|By Annie Linskey | annie.linskey@baltsun.com

A small group of companies vying to provide the slot machines for Maryland's fledging program have spent hundreds of thousands of dollars hiring Annapolis lobbyists, betting that State House influence would help them shape the gambling program and win part of a contract that could be worth up to $150 million.

The first round of the process is expected to start within weeks, when Maryland's lottery commission produces a master list of companies eligible to provide the machines to the slots casinos. The right mix of games is needed to lure masses of gamblers, entertaining them as they part with their money.

The state is counting on collecting tens of millions of dollars in gambling revenues this year, with a 1,500-machine slots casino set to open in Cecil County in October. A smaller slots parlor could open in a temporary facility at Ocean Downs Racetrack near Ocean City as early as this summer.

If planned slots parlors eventually open in Baltimore, Rocky Gap and Anne Arundel County, the total contract could reach 15,000 machines.

While most expect that the contract will be split, it would be a huge coup in the gambling industry if it were to be awarded to a single manufacturer, said Jeffrey Hooke, a Bethesda-based analyst.

But there's a catch: The state has the final say on which slot machines it will buy, not the casino operators. Most other states allow the casinos to contract directly with the slots manufacturer.

"It is a very different model," said Scott Milne, government affairs director for IGT, a major manufacturer that has paid roughly $100,000 a year in lobbying fees for the past eight years as the state has debated starting a slots program. "With the state, you have the rigors of [a public bidding] process."

He said it is "very typical" for the machine manufacturers to hire lobbyists in states where they want to do business. "They help us understand the process."

Of the dozen manufacturing firms attending a pre-proposal conference in November for companies interested in selling slot machines to the state, at least five have hired lobbyists in Annapolis and paid a total of $1.6 million in fees over several years. Three of the firms hired the lobbyists in November 2008, the month that voters approved slots in Maryland.

The video lottery terminal manufacturing business is controlled by a small group of players who compete fiercely for new business, Hooke said. Big names include Bally Technologies, WMS and Spielo. Representatives from those companies either did not return phone calls or declined to speak on the record, citing concerns that they might inadvertently upset state lottery officials.

Much of the lobbying effort has been focused on tracking the state's progress toward developing the slots program. And some companies, such as Diamond Game, have other business before the state but said they are using their Annapolis muscle to gain insight on the procurement process where they can.

The lobbying effort has thus far not been directed at the lottery commissioners. Kirby Fowler, chairman of the state lottery commission that oversees the slots program, said he has seen "no evidence" of such lobbying.

"I don't think it is necessary," he said. "The process is an objective one."

And it is a new one to Maryland.

Gina M. Smith, interim director of the Maryland Lottery, said she could say almost nothing about the procurement process because it is ongoing. Her agency issued a 193-page request for proposals in late November and then amended it three times. The due date was delayed twice. Proposals had to be turned in by mid-December.

Lottery officials would not say how many bids they have received or confirm who made those bids, adhering to state procurement rules. The documents are being evaluated by a review committee, but officials would give no information about who or how many members are on the committee.

Smith said she believes a list of vendors who meet technical and financial benchmarks will be approved soon - but that will be only the first step. Next, the state will offer contracts to buy other machines in smaller numbers. State officials gave no specific details about how that part of the process would work.

But that second step is when the casino operators will have some say - the state won't say how much - in which machines will go on their floors. That leaves manufacturers pondering a significant question: To whom do they pitch their product?

Milne of IGT expects a "multiprong process" in which representatives from his company will talk with state officials and casino operators. But other companies said they feel more comfortable talking only to the casino operators.

Some manufacturers say privately that they fear the Maryland system will create an inherent conflict, with casino operators pushing for high-end, crowd-pleasing games while the state, which is paying for the machines, will want to keep costs low.

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