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The hope was that the 18-hole, Jack Nicklaus-designed golf course and lakeside lodge would draw a stream of tourists from Washington and Baltimore and that the resort itself would become a magnet for other attractions.
"Rocky Gap will redefine what Western Maryland is all about," Taylor, a Democrat, said at the time it opened. He could not be reached Tuesday to comment.
It didn't work out the way Taylor hoped. Even though the resort won praise for its design and setting, it wasn't in the class of such luxury resorts as West Virginia's Greenbrier or Pennsylvania's Nemacolin Woodlands. The golf course's opening was delayed. Occupancy never reached the levels its backers envisioned, and by 2007 slots were seen as the resort's only path to prosperity.
Even then it appeared Rocky Gap was snakebit.
When the legislature passed a bill allowing slot machine gambling in 2007, Rocky Gap was one of the sites to which lawmakers gave the green light. It wasn't because they viewed it as an optimal site for producing revenue. It simply appeared to be the only way to get the property off economic life support.
But when they wrote the bill, legislators imposed a 67 percent tax on slot machine revenues, one of the highest rates in the country. The terms were still attractive enough to draw bids to operate the state's other four designated sites — in Cecil County, in Anne Arundel County, in Baltimore and at Ocean Downs outside Ocean City — but there were no takers at that rate for relatively remote Rocky Gap.
It wasn't until the Assembly cut the slot tax rate to 50 percent for Rocky Gap in 2011 that the site received bids from prospective operators. After ruling one of the two bidders ineligible, the slots commission awarded the license to Evitts.
Evitts has said it expects to open its casino in mid-2014 with 850 slots at first and another 150 to be added in its second year. The commission has estimated that the Evitts site will produce $40 million in gross revenue in its first year, $17 million of which will go to the state for education. Brennan estimated that the casino will add 400-500 employees to the resort, which now has a full-time staff of about 100. Spokesmen for Evitts were traveling and could not be reached for comment.
While the state will have no ownership stake in the resort or casino, the Department of Natural Resources will collect rent for the use of its land under a 40-year lease, at least $150,000 a year. Eventually, the department will get a small share of the gambling revenue as well.
That stream of money might eventually offset some of the money the state has lost at Rocky Gap. In recent years, with annual losses as high as $3.8 million in 2010, MEDCO has had to lend it money to keep its doors open.
While the bondholders lost even more, Brennan said they were not the proverbial widows and orphans but sophisticated investment companies that took a calculated risk in return for what would have been a high yield if the project had paid off.
"They were nonrated bonds, so they knew what they were getting into," he said. "It was not investment-grade."
Despite MEDCO's struggles with Rocky Gap, Brennan is optimistic about its future under Evitts.
"The new, reborn Rocky Gap will be tremendously successful," he said. "With gaming there, you're no longer a one-trick pony."
Sen. George Edwards, a Republican who represents Allegany and Garrett counties, said Rocky Gap never developed the type of economic spinoff effect Western Marylanders were hoping to see. He said the Evitts deal appears to be the "best marriage" the state could get.
"It gets it off the state's books. The county will generate more revenue than they've generated in the past," he said.
Edwards said the Rocky Gap experience will make the state more reluctant to get involved in such deals. "Because of this, I don't think they're going to go this route in the future," he said.
While the board's action and subsequent settlement will mark an end to MEDCO's role in running Rocky Gap, it will not get the state out of the volatile hotel business entirely. MEDCO, which more typically invests in such lower-risk projects as college housing, also owns the waterfront Hyatt Regency resort, golf course and marina in Cambridge.
Brennan acknowledged that the opulent AAA 4-star resort isn't turning impressive profits, having taken a beating in the economic downturn. The property had an operating loss of more than $3.5 million for each of the past two years, but Brennan said the property is holding its own and paying its bills without being subsidized by MEDCO's other projects. In recent months, he said, the resort been "knocking the cover off the ball."
"All things considered, we're doing a lot better than Rocky Gap," he said. "I'm very bullish on our future."
Brennan said MEDCO has no interest in bringing a casino to the Cambridge project.
michael.dresser@baltsun.com
"Rocky Gap will redefine what Western Maryland is all about," Taylor, a Democrat, said at the time it opened. He could not be reached Tuesday to comment.
Even then it appeared Rocky Gap was snakebit.
When the legislature passed a bill allowing slot machine gambling in 2007, Rocky Gap was one of the sites to which lawmakers gave the green light. It wasn't because they viewed it as an optimal site for producing revenue. It simply appeared to be the only way to get the property off economic life support.
But when they wrote the bill, legislators imposed a 67 percent tax on slot machine revenues, one of the highest rates in the country. The terms were still attractive enough to draw bids to operate the state's other four designated sites — in Cecil County, in Anne Arundel County, in Baltimore and at Ocean Downs outside Ocean City — but there were no takers at that rate for relatively remote Rocky Gap.
It wasn't until the Assembly cut the slot tax rate to 50 percent for Rocky Gap in 2011 that the site received bids from prospective operators. After ruling one of the two bidders ineligible, the slots commission awarded the license to Evitts.
Evitts has said it expects to open its casino in mid-2014 with 850 slots at first and another 150 to be added in its second year. The commission has estimated that the Evitts site will produce $40 million in gross revenue in its first year, $17 million of which will go to the state for education. Brennan estimated that the casino will add 400-500 employees to the resort, which now has a full-time staff of about 100. Spokesmen for Evitts were traveling and could not be reached for comment.
While the state will have no ownership stake in the resort or casino, the Department of Natural Resources will collect rent for the use of its land under a 40-year lease, at least $150,000 a year. Eventually, the department will get a small share of the gambling revenue as well.
That stream of money might eventually offset some of the money the state has lost at Rocky Gap. In recent years, with annual losses as high as $3.8 million in 2010, MEDCO has had to lend it money to keep its doors open.
While the bondholders lost even more, Brennan said they were not the proverbial widows and orphans but sophisticated investment companies that took a calculated risk in return for what would have been a high yield if the project had paid off.
"They were nonrated bonds, so they knew what they were getting into," he said. "It was not investment-grade."
Despite MEDCO's struggles with Rocky Gap, Brennan is optimistic about its future under Evitts.
"The new, reborn Rocky Gap will be tremendously successful," he said. "With gaming there, you're no longer a one-trick pony."
Sen. George Edwards, a Republican who represents Allegany and Garrett counties, said Rocky Gap never developed the type of economic spinoff effect Western Marylanders were hoping to see. He said the Evitts deal appears to be the "best marriage" the state could get.
"It gets it off the state's books. The county will generate more revenue than they've generated in the past," he said.
Edwards said the Rocky Gap experience will make the state more reluctant to get involved in such deals. "Because of this, I don't think they're going to go this route in the future," he said.
While the board's action and subsequent settlement will mark an end to MEDCO's role in running Rocky Gap, it will not get the state out of the volatile hotel business entirely. MEDCO, which more typically invests in such lower-risk projects as college housing, also owns the waterfront Hyatt Regency resort, golf course and marina in Cambridge.
Brennan acknowledged that the opulent AAA 4-star resort isn't turning impressive profits, having taken a beating in the economic downturn. The property had an operating loss of more than $3.5 million for each of the past two years, but Brennan said the property is holding its own and paying its bills without being subsidized by MEDCO's other projects. In recent months, he said, the resort been "knocking the cover off the ball."
"All things considered, we're doing a lot better than Rocky Gap," he said. "I'm very bullish on our future."
Brennan said MEDCO has no interest in bringing a casino to the Cambridge project.
michael.dresser@baltsun.com
