Lawmakers consider slots changes

Hope to sweeten deal for Rocky Gap

March 16, 2010|By Annie Linskey | Baltimore Sun reporter

Western Maryland slots proponents came to Annapolis Tuesday with a dire message: Sweeten the gaming deal for Rocky Gap or nobody will want to build a casino there. Without a slots casino, the state-owned facility will go belly up and millions of dollars will have been wasted, they warned.

"Take it off our hands," said Sen. George C. Edwards, whose district includes the money-losing Rocky Gap Lodge and Golf Course.

The state is re-bidding the Rocky Gap license after receiving no qualified proposals during the initial round.

Investors, he explained, want to change the 67 percent state tax rate on gross gaming revenues there and lowering the required capital investment to entice a potential casino owner to buy the lodge. "We think it should get some preferential treatment," Edwards said, saying the rural location makes it different from the other four parts of the state where gaming is permitted.

Edwards spoke at a hearing that included a raft of slots proposals, and admitted the tax reductions will be hard to sell. When he suggested it to the slots commission "they weren't that darned receptive," he said.

But former Speaker Casper R. Taylor, Jr., who is lobbying on behalf of Davidson Kemper Capital Management and Calvert Investments, two private firms that own Rocky Gap bonds, reminded the Budget and Taxation committee that the legislature already poured $30 million in public money into the faltering project.

Using an age-old tactic, he informed lawmakers that the money they've spent would be wasted if the project dies. "There is no question in our minds ... after all of this investment that has already been made that the prospect of [Rocky Gap] lasting permanently going into the future is absurd," he told the committee.

He also sent them a letter from Davidson Kemper which draws a gloomy picture of Rocky Gap's finances. The project has not been able to make a full interest payment since Oct. 2003. It lost $1.6 million in 2007 and is expected to lose $132,000 this year. Also, the facility also needs a face lift, requiring a new capital investment.

"You are very direct about what is happening here," observed Sen. Edward J. Kasemeyer, a Baltimore Democrat on the committee. "The project is insolvent, you make that very clear."

Kasemeyer and his colleagues did not vote on any of the measures. But a shift in the tax rate would be a major change to the state's fledging gaming program. The panel also heard less drastic enhancements to the Rocky Gap proposal that have been endorsed by the state slots commission, including a rule change to allow an owner of one facility to operate another one.

In November 2008 Maryland voters approved gaming in five parts of the state, creating a revenue source that was supposed to generate hundreds of millions of dollars.

Now, as the state struggles with a $2 billion budget hole, not a single casino has opened and only the two smallest facilities in Ocean Downs and Cecil County are on track to begin operations. A third planned facility in Anne Arundel county is mired in a local zoning fight. The sole bidder for the Baltimore City casino was tossed out, and is now appealing that decision.

The state slots commissioners did not endorse the proposed changes to the state tax rate or capital investment for Rocky Gap. Instead they want to allow investors to count the purchase of the state-built lodge toward the required $75 million capital investment required in state law.

As the legislature mulls these changes, surrounding states have expanded their own gaming programs to include card games like poker and blackjack, raising fears among many observers that the Maryland program will be out of date by the time it is up and running.

The committee briefly heard two ideas put forward by Sen. Catherine E. Pugh to address the out-of-state competition: The first, requested by the slots commission, requires the panel to study the effect of table games in the surrounding states. The second approves the table games at the Maryland sites, which would have to be approved by the voters. Similar legislation allowing tables games will be heard in the House on Thursday but faces opposition from House Speaker Michael E. Busch.

Meanwhile, a measure supported by Senate President Thomas V. Mike Miller to expand gaming to include Rosecroft Raceway in Prince George's County will be considered by the Senate today. It was expected to pass in the Senate Tuesday, but Sen. George Della, a Baltimore Democrat, tabled the measure to amend the bill today.

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