After sinking millions of dollars into the dream of a world-class tourist destination in the mountains of Western Maryland, the state is poised to cut its losses and turn the Rocky Gap hotel and conference center over to a private company that plans to open a casino at the lakeside resort.
The Board of Public Works is scheduled to vote Wednesday on the final series of agreements needed to complete the transfer of the $54 million complex in Allegany County from the quasi-public Maryland Economic Development Corp. to Evitts Resort LLC, which plans to eventually install 1,000 slot machines at the site.
Bob Brennan, executive director of MEDCO, will be happy to say goodbye to the troubled investment. He said the corporation will write off about $11 million on the deal. Two state agencies will have to write off another $30 million in loans and unpaid ground rent.
"If all my projects were like Rocky Gap, I'd be very thin," said Brennan, whose organization's mission is to promote economic activity in the state while helping to reduce unemployment.
Christopher Summers, president of the conservative Maryland Public Policy Institute, said the Rocky Gap experience is a "costly lesson" for Maryland taxpayers.
"It's a big warning sign that states shouldn't be in the hotel business, nor cities. It's not a core function of government," he said.
The project's bondholders, who have approved the deal before the board today, will share in the hit. As part of the agreement with Evitts, Brennan said, bondholders will share about $7.8 million and absorb about $26 million in losses.
"The investors are not being made whole," Brennan said. "They are settling for cents on the dollar."
The essential elements of the deal have been in place since April, when the state's Video Lottery Facility Location Commission awarded a casino license to Evitts. It will take over as owner and operator of the resort on 260 acres in Rocky Gap State Park.
Because the deal includes a lease on state land, it requires the approval of the public works board — made up Gov. Martin O'Malley, Comptroller Peter Franchot and Treasurer Nancy K. Kopp. The panel, which approved the state's original investment in Rocky Gap 16 years ago under Gov. Parris N. Glendening, is also being asked to approve the terms of the agreement between MEDCO and Evitts.
Under that deal, Evitts, a subsidiary of Minnetonka, Minn.-based Lakes Entertainment, will invest $54.6 million to buy the resort and to build a 50,000-square-foot slots casino next to the existing 220-room lodge and conference center. Of that, Evitts will have to pay only about $6.8 million up front to acquire the resort.
The hope, Brennan said, is that slots will provide the lure Rocky Gap has lacked since its opening in 1998.
"It needs another attraction to help bring customers, and gaming is certainly an additional attraction," he said.
Tim Cope, president of Lakes Entertainment, said the company has succeeded with projects similar to Rocky Gap before and is optimistic about its future. "I think we can provide a little more year-round entertainment," he said.
Cope said a slots parlor adjoining the lodge will be built with enough room to add table games such as blackjack and roulette should the General Assembly approve them. But he predicted that the project will make money even if it remains a slots-only facility.
"We'll be fine either way," he said.
When Rocky Gap was first proposed as a resort site in the 1990s, its backers couldn't imagine that slots would someday be seen as its salvation. It wasn't just that they were bullish on its prospects; Maryland was firmly closed to casinos and didn't seem poised to change.
For many years, dating back to the administration of Gov. William Donald Schaefer, it was the pet project of then-House Speaker Casper R. Taylor Jr., a relentless advocate for Western Maryland and his hometown of Cumberland. Critics warned that the project would be a boondoggle, but Taylor's tireless advocacy, and considerable clout, helped wear down skeptics in Annapolis.