3:37 PM EDT, June 12, 2013
Henceforth, let there by a rule that nothing can be compared to Maryland's failed investment at Rocky Gap, located just outside Cumberland in Western Maryland, except for Rocky Gap and perhaps any other $55 million white elephant loss that comes along. We know Rocky Gap. Rocky Gap is an acquaintance of ours. Sorry, Hyatt Regency Chesapeake Bay resort in Cambridge, but you're no Rocky Gap.
Incidentally, let us insert a reminder here. Even the infamous Rocky Gap hotel and conference center isn't Rocky Gap anymore. The place was turned over to private investors last year and is now the Rocky Gap Casino Resort. With slot machines and table games (along with the lakeside hotel and Jack Nicklaus-designed golf course they picked up for a bargain price), they are unlikely to lose money. The state even lowered its share of slot machine revenue just to be certain.
The Rocky Gap legacy — its star-crossed history and cost to taxpayers — lives on, however, and naturally it came up with news that the state-owned Hyatt, another project financed by the Maryland Economic Development Corp., is having trouble paying the bills. The state recently withdrew $2 million from a reserve fund to meet debt service.
Admittedly, the situation isn't good — not for the 400-bedroom hotel, not for investors and not for Cambridge and Dorchester County. The resort hotel business in general has been on the rocks since the economic downturn and is only now showing signs of life across the country. The Hyatt is meeting its operating costs but operating in the red because of its bond payments. The reserve fund could be depleted later this year, and bond holders are likely taking a hit (but probably won't seek foreclosure).
That's nothing to celebrate. But it's also not something to call a disaster on the scale of Rocky Gap. And it's certainly not time to talk about underwriting the business with slot machines, table games, poker or any other form of expanded gambling. (Seriously, does every economic hardship now require that a casino be authorized in response?)
The fact is, the Hyatt was a success and arguably continues to be one despite the drop in revenue that's been eating away at reserves since 2010. Ask anyone who has been there. It's a first-class facility with a spa, golf course and marina on a gorgeous location convenient to both the Washington-Baltimore area and the Maryland-Delaware beach resorts. But more importantly, its presence has helped transform Dorchester County, not only by creating travel and tourism-related jobs but in changing how visitors perceive a part of the Eastern Shore that was once known as much for racial unrest as anything produced by its native farmers or watermen.
Cambridge in the summer of 1967 was where H. Rap Brown — a militant activist who would surely be seen as a terrorist today (were he not currently in jail serving a life sentence for an unrelated murder) — told his fellow African-Americans to riot and burn the place down. What ensued was four years of racial violence followed by decades of economic hardship and poverty. The county still has one of the highest unemployment rates in the state — even slightly higher than Baltimore's.
But the situation has unquestionably improved since the 2002 opening of the Hyatt, made possible by MEDCO's $120 million in tax-exempt revenue bonds. The Dorchester County of today may still be suffering, but it has potential. Indeed, in the pre-recession years after the hotel opened, county residents' big concern was the fast pace of construction and the volume of new arrivals to their communities. It was not until 2008 that the bottom fell out and bookings dropped by 30 percent. It might even have recovered by now except that sequestration has taken a huge bite out of hotel spending by the federal government and its contractors.
That was never the case in Cumberland, where the isolated Rocky Gap seemed a pie-in-the-sky concept even before it opened in 1998. The Hyatt, now the county's second-largest employer with as many as 700 jobs in the summer peak season, has survived most of its 11 years without teetering on default. That alone sets it apart from its politically motivated Western Maryland counterpart. It's hard to believe there's anything wrong with the Hyatt that can't be cured by an uptick in tourism, in its conference trade and in traffic on U.S. 50. The nonrated bonds aren't even the responsibility of state taxpayers.
Certainly, a case could be made that MEDCO might want to look at resort projects more skeptically in the future. But it would also be a mistake to evaluate the Hyatt in Cambridge solely on the recession-related red ink on its ledger and not on the benefits it has provided to the surrounding community for the past decade.
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