Md. officials question plans to buy slot machines

Kopp delays approval of Md. Lottery's project

March 25, 2010|By Julie Bykowicz |

State officials are raising questions over a plan by the Maryland Lottery to spend up to $600 million over the next five years on slot machines.

Maryland Treasurer Nancy K. Kopp delayed on Wednesday approval of a contract that would enable the state to purchase machines and maintenance agreements from nine vendors, saying she wanted a review of whether the state can afford it. The contract was set for a vote at a meeting of the state Board of Public Works, but a decision has been delayed until April 7.

Comptroller Peter Franchot vowed to vote against the arrangement, saying tax money should not be earmarked for a program that appears to be floundering. He called the contract "risky" and recommended that the state buy machines as needed instead of committing to a large five-year contract.

The disagreement is the latest problem facing Maryland's slots program - which state officials project could generate $600 million yearly for the state budget once it is up and running but which has been slow to launch.

Voters in 2008 approved 15,000 machines at five sites, including Baltimore City and Anne Arundel County. However, just two projects with a total of 2,300 machines are on track to open this year. Lottery officials, who oversee slots, said a Cecil County parlor is to open Oct. 26, and one at Ocean Downs racetrack on the Eastern Shore should open this fall.

Larger sites are in limbo. A proposal for a casino near the sports stadiums in Baltimore was rejected and must be rebid, and a casino to be built at Arundel Mills mall appears headed for a fall vote after opponents gathered signatures for a referendum. A small Western Maryland site has yet to attract qualified bidders.

With so much of the program in doubt, Franchot said, the size of the contract - with nine gambling vendors, including Diamond Game Enterprises and Scientific Games International- could become a problem. He cautioned his fellow Board of Public Works members - Kopp and Gov. Martin O'Malley - against awarding contracts that are not funded in the state budget. Slots proceeds are to pay off the machines, but it could be months or years before the money starts coming in.

O'Malley said the state is "not giving money without expecting a return on its investment," pointing out that casino operators must forward 67 percent of their revenue to the state.

The Board of Public Works will take up the contract April 7. It will work like a home equity line of credit, with lottery officials drawing down the money as sites open. The state treasurer's office said the Maryland Lottery has asked them to finance a $65 million purchase of machines for Cecil County and Ocean Downs.

Robert Howells, the lottery's procurement director, said the larger contract puts the state in a position to buy machines quickly when casino operators are ready.

"We want to be prepared," he told the Board of Public Works. "We are hopeful that we'll need to buy all [15,000] of the machines within five years, though there's certainly no guarantee."

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