Is Maryland's slots program making progress?

Analysts say casinos holding their own against out-of-state competition, but critics are waiting to see program's payout

May 08, 2011|By Hanah Cho, The Baltimore Sun

Lady luck is on Tim Blair's side. Since making Hollywood Casino in Perryville his regular gambling spot, he has won some mini-jackpots of $1,700 to $2,200.

Blair, who used to drive across the border to Delaware to hit the slots, is now sold on Maryland's casinos.

"I will not go past Exit 93, which is the exit for Perryville," said Blair, 41, owner of a construction company in Rosedale, whose once- or twice-weekly trips to the Perryville casino take half an hour. "My money's staying in the state."

Gamblers like Blair have pumped millions of dollars into Maryland's gambling industry since September when the Cecil County slots parlor opened; a second casino near Ocean City kicked off in January. Some gambling analysts say thosee casinos are holding their own despite competition from neighboring states with alluring games such as poker, blackjack and roulette. But critics question whether the state's program can fulfill its promises.

The two parlors generated $77 million in gross revenue through April. About 67 percent — or almost $52 million — is directed to the state's coffers and other public interests, while the rest goes to the casino operators. Three other approved sites, including one in Baltimore City and at another at nearby Arundel Mills mall, have not opened.

Gambling came with great expectations when Maryland voters approved a referendum in 2008 to legalize slots. All five slots casinos were expected to begin operations by this summer and make nearly $157 million in gross revenue during the state's 2011 fiscal year ending June 30. When all casinos are fully running, the slots program is supposed to contribute $600 million annually to the state's treasury.

"This has gone nowhere," said Aaron Meisner, a Mount Washington stockbroker who headed the Stop Slots Maryland campaign to defeat the ballot measure. "Why is nobody talking about meaningfully restructuring this and asking the question of whether it's a good idea at all? Look at how many years we're into this thing and how small the revenues are."

Meisner also takes exception to the state likely spending hundreds of millions more to buy slot machines when the remaining three parlors open. That's on top of the $200 million the state has already authorized to buy slot machines for the two casinos now open, he said.

Supporters acknowledge that the slots program has been slow to start because of delays and legal battles. But they also note that the state made its revenue projections in 2007, before the recession and before neighboring states such as West Virginia, Pennsylvania and Delaware expanded their gambling programs by adding table games last year.

Consumer spending on gambling at commercial casinos inched up ever so slightly in 2010 after two years of declining revenues, according to a study released last week by the American Gaming Association. Last year, gamblers spent $34.6 billion at the nation's casinos, up from $34.28 billion in 2009.

Stephen Martino, director of the Maryland Lottery, which regulates the casinos, said the state's slots program is achieving its goals of adding jobs — more than 500 between the two facilities — and contributing revenue to the state's budget.

Of the $77 million total revenue generated by the two casinos, $37 million has been directed for education spending.

"Success is in the eye of the beholder," Martino said, noting that the state is considering updating slots revenue projections to reflect the new realities of the marketplace. "But from our vantage point, at this point, we've been pleased with the progress we've made."

Martino added that there have been no significant problems with surveillance or other regulatory issues at the Perryville slots parlor and the Casino at Ocean Downs in Berlin.

For its part, the Perryville casino posted nearly $3 million in profit from operations during the first three months of 2011, according to owner Penn National Gaming, a publicly traded company and one of the largest U.S. casino operators. Revenue at the Cecil County facility during the quarter was $27.8 million, which includes food and beverage sales.

The casino's gambling revenue, averaging $198.22 daily per machine since it opened, and most recent quarterly income are in line with Wall Street expectations, said Steven M. Wieczynski, an analyst at Stifel Nicolaus in Baltimore. The parlor operates 1,500 machines.

To increase revenue for the casinos and the state, Maryland will need to add table games and lower its gambling tax rate, which is the highest in the country at 67 percent, Wieczynski said.

Efforts to legalize table games and expand the state's gambling program are expected to arise again during next year's General Assembly session.

After a strong opening, the Perryville facility's business dropped off in November, December and January before revenue began to climb back up in February. The casino generated $10 million in April, the second-biggest take since its opening.

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