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Slots panel wants to make Rocky Gap more attractive

Lawmakers asked to sweeten the deal for would-be developer

By Julie Bykowicz, The Baltimore Sun

10:20 PM EST, January 11, 2011

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State slots commissioners are urging lawmakers to loosen the requirements for prospective developers of a casino at Rocky Gap in Western Maryland, which has proved the least attractive of the five sites approved for slot-machine gambling.

Two requests for proposals over the past two years have drawn not a single qualified applicant for the site, even after Maryland lawmakers offered a tax break last year to any developer who also purchased the financially troubled, state-supported golf resort at the state park.

The slots commission's chairman, Donald C. Fry, said Tuesday that more must be done this year if the state hopes to entice a developer. The panel plans to recommend several changes in a letter to legislative leaders as the General Assembly begins its session Wednesday.

Among the proposals: Allow the developer to install slots at Rocky Gap without having to build a separate facility; apply the purchase of the resort to the capital investment requirement of $25 million per 500 machines; waive $3 million of the initial licensing fee; and drop the prohibition on owners having a second Maryland casino.

The changes, all of which would require the passage of legislation, would "meet many of the concerns," Fry said, about the financial viability of a slots project in rural Allegany County, not far from West Virginia and its array of gambling options. Fry and slots commission member David L. Murray say they have spoken with several groups that were interested in bidding on the site but never submitted a proposal.

The commission also plans to recommend that lawmakers consider streamlining the appeals process for rejected slots bidders — a suggestion that comes as the state and Baltimore are mired in litigation with a failed applicant over a casino near the city's sports stadiums.

The sole bidder, Baltimore City Entertainment Group, was denied a license because it never submitted the full fee or plans for the large-scale casino that officials have in mind. The group sued, making it tricky for the state to seek new bids for the license, Fry said.

Fry said it is a matter of "public interest" for the state to issue the licenses as quickly as possible.

More broadly, the slots panel will point out to lawmakers that conditions have changed since the slots program was crafted more than three years ago.

Revenue forecasts had initially projected that with the 67 percent tax on slots revenue, the state would take in about $600 million per year from the five sites. But West Virginia, Delaware and Pennsylvania have expanded their gambling programs to include table games and more slots terminals, potentially eroding Maryland profits.

Just two of Maryland's five planned casinos are in operation: The 1,500-machine Hollywood Casino Perryville in Cecil County got rolling last fall, and the 750-machine slots parlor at Ocean Downs racetrack near Ocean City opened last week.

A temporary slots facility with 2,000 terminals is expected to open at Arundel Mills mall in Anne Arundel County by the end of the year, with the full 4,750-machine project up and running a year later, Baltimore developer David Cordish has told state officials in recent weeks.

A planned Baltimore slots facility is authorized to receive 3,750 terminals, but the slots panel could shift 1,000 more machines there if they were not being used at other casinos.

Lawmakers are particularly eager to strike a deal on Rocky Gap, a state-financed resort that opened in 1998 and was expanded in 2004 but has struggled financially for years. It was built by the Maryland Economic Development Corp. and sits in a 3,000-acre state park in a town called Flintstone.

"The project has been unable to pay its debt to its bondholders and to the state," a legislative auditor wrote in a report released in March. "Amounts owed continued to accrue and the future of the project is unclear."

As of June 30, 2009, the cumulative operating deficit for Rocky Gap was $42.4 million, according to the report.

Rocky Gap is authorized for up to 1,500 slot machines.

Sen. George C. Edwards, a Republican whose district includes Rocky Gap, said in November that he is prepared to work on legislation that will get the slots parlor moving. At the time, he said he could envision dropping the state's take to 50 percent, though the slots panel is not recommending that. Lawmakers have already reduced the tax by a few percentage points on condition that the slots owner buy the resort.

Edwards could not be reached for comment Tuesday night.

When the state first sought bids, a group called Empire Rocky Gap LLC submitted a proposal for a 750-machine slots parlor. But it did not submit the required $4.5 million licensing fee, making its application incomplete.

An attorney for the group said at the time that Empire did not submit the licensing fee because its proposal was contingent upon changes to state law, including a reduction in the tax burden.

Also at the meeting Tuesday, Fry announced that slots commissioner James H. Taylor, a retired judge, is stepping down. He had been appointed by Senate President Thomas V. Mike Miller, who will select his replacement.

julie.bykowicz@baltsun.com

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