Harrah's casino to pay city at least $11 million in first year

Lease approved by the Board of Estimates; would make property tax cut possible, administration says

October 31, 2012|By Luke Broadwater and Steve Kilar, The Baltimore Sun

The developers of Baltimore's casino will pay the city at least $11 million in their first year of operation — significantly less than terms proposed in 2009, but enough to help fund a small property tax cut for city homeowners, officials said.

The details of the deal, which was approved by the city's spending board Wednesday, were made public this week. A local group headed by Caesars Entertainment Corp. will lease land near M&T Bank Stadium, where the company is to open a $375 million Harrah's casino in 2014.

"We're elated," said Theo Rodgers, CEO of A&R Development Corp., local partner in the project. "With the action of the board today, we are set to go. We will start immediately with the expectation that the casino will be under construction by the second quarter of next year.”

The lease of city-owned property contains a profit-sharing agreement that largely mimics a deal proposed under former Mayor Sheila Dixon with the previous developer, Baltimore City Entertainment Group, to build a slots parlor and fund a property tax cut. One key difference is that under the 2009 deal, the city expected to get $18 million in the casino's first year, and $21 million in the second.

The agreement with the Caesars group — called CBAC Gaming — sets minimum payments to the city of $11 million in the casino's first year and $13 million in the second.

Kimberly A. Clark, acting president of the Baltimore Development Corp., acknowledged that the terms could call for less money for the city. She said it had to settle for less because competitor casinos opened in the state before Baltimore's could.

"Our projections were a lot higher back then, because we thought, wrongly, that the city site had the potential to be the first to open," Clark said. "There was significant value in being the first."

The deal with the Canadian-led Baltimore City Entertainment Group fell apart after the project was denied a state slots license in 2011. A state appeals court deemed the company "an unsatisfactory bidder" and cited a "series of delays and unfulfilled promises."

Clark stressed that the $11 million figure is a minimum payment and could be exceeded through the city's profit-sharing agreement, should Caesars experience a boom in business.

"That's the bare minimum," she said. "Caesars feels very confident."

Rodgers said it was "probable" that the casino would exceed expectations.

The deal proposes no new tax breaks for Caesars. The company will be eligible to apply for a state "brownfields" tax credit — for development of abandoned and potentially contaminated former industrial properties — after it pays city property taxes. Caesars could receive a state tax break due to competition from a sixth casino in Prince George's County if that is approved in next week's election.

Mayor Stephanie Rawlings-Blake has been a vocal supporter of expanded gambling -- called Question 7 on the state ballot -- and stars in a frequently-aired television ad with former Ravens player Jonathan Ogden.

"If Question 7 passes, the facility will be larger, it will create more jobs, and it will generate more revenue for the city," the mayor said Wednesday. "With the approval of Question 7, there will more funds available for school construction and recreation centers for our kids."

She said she was not concerned about competition from the state's other casinos.

"Our venue will stand on its own," Rawlings-Blake said. "Baltimore has a tourism brand it's very proud of and this venue will add to that."

City officials say the casino's construction would create 1,939 "direct and indirect" jobs with $119 million in annual wages and benefits. The casino's operation would create 1,894 "direct and indirect" jobs and $72 million in annual wages and benefits, officials say.

Of those jobs, about 1,200 are permanent positions, according to the mayor's office. About 500 more jobs would be added if table games are approved by voters.

The administration says money generated from the casino will cover a 5-cent city property tax reduction in the casino's first year, and a 7-cent property tax cut by the casino's fifth year. The mayor has said she plans to reduce the city's property tax rate by 20 cents by 2020 for Baltimore homeowners. According to the mayor's office, the plan would give an owner-occupied home, valued at $200,000, an annual tax reduction of $40 next year. That reduction would grow to $400 by 2020.

The company has agreed through a memorandum of understanding to work with the city to ensure that Baltimore residents are hired in the casino, Clark said.

"It's a lot of employees," she said. "It's a big win for employment for city residents. These properties have been deteriorating for years. This is an exciting development for Baltimore City."

Maryland law requires the casino's land to be owned by the city. Under the terms of the deal, CBAC Gaming will be leasing four properties on Russell Street from the city for up to 50 years.

CBAC will pay the city 2.99 percent of gross gaming revenue with a guaranteed minimum payment of $8 million in the first year of operation, $10 million in the second year, $12 million in the third year, $13 million in the fourth year and $14 million every year thereafter, according to the terms of the deal.

In addition to a cut of gross gaming revenues, Caesars also will be required to pay property taxes or $3.2 million, whichever is greater.

The company will also pay $1.2 million per acre to Baltimore to purchase several parcels of land — equaling about 5 acres — off Russell Street on which officials plan to build a 4,000-vehicle parking garage that will be attached to the casino.





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