Maryland's General Assembly is poised to reduce the tax rate at one of the state's five approved slots locations, hoping the change will entice bidders to Rocky Gap State Park.
The proposal represents the first significant alteration to the state's gambling program and would roll back the expected revenues by about $2 million over five years. Rocky Gap was the only location that failed to draw a qualified bidder.
"If you don't get someone to bid on slots at Rocky Gap you don't get anything," said Sen. George C. Edwards, a Western Maryland Republican who proposed the change in the Senate. "It is a win. We were looking at some way to get this rebid."
Under the plan approved by the Senate on Monday night, those funds would be taken from the proposed Education Trust Fund, though House leaders might take the money from a different pot. Most of the state tax revenues from slots would go to school construction, but there is also money for local grants, enhanced horse racing purses, racetrack refurbishment and minority-owned businesses.
In exchange for the tax discount, Allegany County will become ineligible for a racetrack license, Edwards said.
Bidders would receive the discounted tax rate only if they also purchase the state-financed Rocky Gap Lodge, which is losing money and in need of a multimillion-dollar overhaul.
"We would like to get rid of that hotel if we can," Del. Frank S. Turner, chairman of a panel of the House Ways and Means Committee that oversees gambling.
Under the new rate, the owner of a Rocky Gap emporium would keep 35.5 percent of gross gambling revenues and the state would take 64.5 percent. The owners of the other four facilities are taxed at 67 percent, one of the highest rates on gambling in the nation. The owner of a Baltimore location also must pay ground rent to the city. The Rocky Gap discount would last for five years.
Edwards had initially proposed lowering the tax rate further, to 60 percent. But that idea was rejected by the Senate Budget and Taxation Committee, he said, because lawmakers thought that type of discount would prompt an outcry from the owners of the other gaming parlors. "How do you tell these other sites 'You can't get some break?' " he said.
The current plan, he said, reflects that Rocky Gap is in a unique position: It has so far failed to attract a qualified bidder, its 1,500 machines are projected to generate the least amount of revenue and the deal would include removing a money-losing project from the state's tax rolls.
"We're just trying to get something moving here that doesn't impact the other four sites," Edwards said.
David Cordish, who has a license to build the largest emporium, in Anne Arundel County, and would be taxed at the higher rate, agreed. He said in an e-mail that the change "makes sense" and "does not create any analogies for the rest of the state."
Analysts estimate that the Rocky Gap site would net $17.9 million in gross gambling revenues by fiscal year 2014, and the change in tax rate would cost the state roughly $400,000 a year.
The General Assembly also is considering other technical changes to enhance the Rocky Gap site. The bidders could count the cost of purchasing the hotel against the required $75 million capital investment. Also, they would be able to set up temporary machines for up to 30 months in the hotel.
At least two potential bidders have been briefed on the new plan, said Del. LeRoy E. Myers Jr., an Allegany County Republican. The license is expected to be rebid later this year.