Maryland finally has slots -- now comes the hard part

Our view: The opening of Maryland's first casino is an important occasion, but tough questions remain about how to make the slots program successful

September 27, 2010

Shortly after 8 a.m., a dollar was lost by a member of the general public in a legal slot machine in Maryland for the first time in more than 40 years. The moment probably lacked some of the satisfying drama one associates with slot machines — a quarter dropping into a slot, an arm being pulled, clicking reels; all that has largely been replaced by casino credits, push buttons and electronic displays. But the occasion was an important one nonetheless. After a decade and a half of debate, the opening of the Hollywood Casino in Perryville meant Maryland has finally joined most of its neighbors in expanding gambling to shore up its finances. Whoever lost that dollar just paid 67 cents to the state treasury.

As welcome as it is in a time of fiscal crisis for Maryland to tap into so lucrative a potential revenue stream as slots, the story of the Hollywood Casino and the state's foray into casinos in general is a reminder that there is no such thing as easy money. The road to get here was tortuous, but the state still has tricky waters to navigate to nurture and maintain its slots program. We have entered a highly competitive industry in which other states are already trying to beat us out, and we have, for the first time, placed a significant portion of our state's fiscal future in the hands of corporations whose interests don't necessarily align with our own. The debate over whether to expand gambling is over for now, but the debate over how to make slots succeed has only just begun.

The opening of the Hollywood Casino today was a surprise, and not just because it came three days before the planned grand opening. The slots parlor is operating under a legal cloud because of the actions of its owner, Penn National Gaming, in trying to affect the outcome of November's vote in Anne Arundel County on zoning related to what would be the state's largest casino.

The Cordish Cos., which has a license to build a slots parlor at Arundel Mills Mall, objected to Penn National's support of efforts to overturn its zoning approval and argued that it violated a clause of Penn National's contract with the state prohibiting interference with other slots licensees. When lottery commissioners indicated at a recent meeting that they saw Cordish's point, Penn National threatened to put off its opening in Perryville until the matter was resolved, potentially until after the November vote. The fact that the Hollywood Casino has opened doesn't mean Penn National has backed down or that this problem has gone away. The company is standing behind its argument that it has a First Amendment right to engage in the political process and says it will continue working in hopes of stopping slots at Arundel Mills and getting them instead at Laurel Park, which it now jointly owns and operates with the Maryland Jockey Club.

The U.S. Constitution does, of course, guarantee Penn National the right to free speech, but it doesn't guarantee it the right to a slots license. The state lottery commission needs to continue pursuing this matter because it sets an important precedent about the primacy of the state's interests over those of the private companies that will actually run Maryland's slots parlors.

In theory, the interests of the state and the slots licensees should be aligned — more gambling means more money for both parties. But in the case of Penn National, it's more complicated. Penn National owns Hollywood Casino at Charles Town Races, one of the most lucrative casinos in the country, and company officials have long acknowledged that competition from Maryland would negatively affect its performance. The company's involvement in the Arundel fight is clearly in its interest — if it winds up eventually getting slots at Laurel, it wins. If it merely succeeds in delaying a slots parlor in Anne Arundel, it still wins.

The latter possibility is clearly not in the state's financial interest. A delay in opening a slots parlor in Anne Arundel would cost the state potentially hundreds of millions of dollars. But even if Penn National and the Jockey Club were somehow able to engineer a quick shift to slots at Laurel (not likely, given the way things have gone so far), that wouldn't necessarily be in the state's financial interests either; Maryland law prohibits any single entity from having more than one slots license, so Penn National's involvement in both Laurel and Perryville could disrupt the flow of money into the treasury.

So far, both the state slots licensing commission and lottery commission have done an admirable job of approaching the implementation of the slots program with political independence. That trait may be tested by the pressures of the coming election, but they need to maintain it. Now that we have slots, we need to do everything possible to make sure the program succeeds and puts the state's interests first.

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