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The new Horseshoe Casino, as seen from Russell Street near downtown Baltimore.
The new Horseshoe Casino, as seen from Russell Street near downtown Baltimore. (Al Drago / Baltimore Sun)

Three months after Horseshoe Casino Baltimore opened to big crowds, its revenues are substantially lower than state consultants projected — even as its chief competitor is thriving a dozen miles away.

The $442 million casino has averaged monthly revenue of $22.8 million, about a third less than forecast in November 2013 by a pair of state-funded consulting firms, which projected it would average about $32 million to $35 million a month in its first 10 months of operation.

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Horseshoe general manager Chad Barnhill said the casino is still gaining a foothold. Its revenue rose from $22.5 million in October to $23.4 million in November, which he called "a very positive sign."

"It just takes time. We'll get there," Barnhill said.

If the casino's revenue continues to fall short of expectations, it would have adverse consequences for the city, which has embraced Horseshoe as an economic partner.

"I'm concerned, but we want to see a few more months of data," city budget director Andrew Kleine said. "If that trend continued through the year, then the revenues would be coming in well below the state's estimate."

Under state law, 5.5 percent of slots profits must go to "community impact grants" — for such projects as a streets study and employment center — mostly in Baltimore neighborhoods such as Westport and Pigtown near the casino. A shortfall in the casino's take would mean less funding than community leaders had anticipated for local improvement projects.

City and local leaders had expected $7 million to $10 million to become available for such projects during the fiscal year ending June 30. They are now looking at a number — $6.9 million — just below the low end of the range.

"I was hopeful that we'd be closer to $10 million," said state Sen. Bill Ferguson, who chairs the Baltimore Casino Local Development Council, which advises the city on how best to use the funds derived from casino revenue. "But I think there is so much flux with a new operator."

Meanwhile, Maryland Live casino appears to have shrugged off Horseshoe's opening despite consultants' projections that revenue there would drop about 20 percent.

The casino, which opened in 2012 at Arundel Mills mall, reported revenue of $53.4 million last month, up 0.7 percent from the previous November, according to the Maryland Lottery and Gaming Control Agency. After Horseshoe opened Aug. 26, Maryland Live's revenue did slip initially, off 9.8 percent in September and 3 percent in October.

"Maryland Live is located in the midst of a very dense suburban population, and Horseshoe has its own dense population base in Baltimore City," said David Cordish, chairman of the Cordish Cos., which owns Maryland Live, now one of the East Coast's largest casinos. "Our November performance demonstrates we can and are growing the market."

Overall, November revenue from Maryland's five casinos reached $90.2 million, topping the previous month's record of $86.8 million, according to the lottery agency.

The gaming agency commissioned the studies that projected Horseshoe's revenue. One estimated the casino would generate $328.2 million between its opening and June 30, while the other predicted $354.1 million.

New casinos typically take a few months to "ramp up," said Alan Woinski, president of Gaming USA Corp., which publishes industry newsletters. "You get this big initial rush and then it starts to moderate, and then you see what you need to do and start a new marketing push."

Woinski also credits Maryland Live as a strong competitor. And he believes the projections of Horseshoe's revenue "were extremely optimistic," given its urban location.

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"It's the psychology of the gambler," he said. "They don't want to sit in traffic, they don't want to hassle with parking. Face it, there are other things to do in the city."

The Horseshoe, which features a Baltimore-themed restaurant "marketplace" and the city's only 24-7 liquor license, is owned by the financially troubled Caesars Entertainment Corp., which is struggling to restructure its debt.

Barnhill said Horseshoe is still becoming accustomed to the market, and vice versa.

"Even though there has been gaming in the state of Maryland, it's really brand-new in Baltimore," said Barnhill. "It takes time to learn all the special intricacies associated with the market. There are other casinos that have been open significantly longer. Once you're in a habit of going to a favorite grocery store, favorite restaurant or favorite casino, whenever a new one opens up, not everybody flocks to the next one."

After a glitzy weeknight opening that included aerial acrobats, Las Vegas-style showgirls and a surprise performance by pop star Iggy Azalea, the casino's first weekend was tainted when a fight broke out in the food court. A video of the incident shows security guards wearing yellow shirts rushing to break up the fight, which occurred in the line for a pizza restaurant around 3 a.m.

Roadwork on Interstate 95 and Interstate 295 during the casino's opening weeks had a bigger impact, Ferguson said. "How much, I don't know."

Maryland now has five casinos and a sixth is planned — the $925 million MGM — scheduled to open at National Harbor in Prince George's County in 2016. Lawmakers in Annapolis debated whether to legalize casino gambling for years before voters endorsed slots in a 2008 referendum. The lure of increased jobs and property taxes, and local impact funds, made the casinos more palatable to opponents of gambling.

Mayor Stephanie Rawlings-Blake pledged in 2013 to use gambling revenue to lower property taxes, saying Horseshoe "brings with it the promise of a new day."

About 1,250 members of the casino's staff — nearly 51 percent — live in the city. Under Baltimore's deal with Horseshoe, the casino is to pay the city in the range of $8 million to $11 million in lease and profit-sharing agreements and property taxes during the first year.

"Certainly we're in a competitive market," said Del. Luke Clippinger, also a member of the casino community council. "Maryland Live was rather robust in keeping people from coming down the road."

As Horseshoe seeks its niche, the council now anticipates $9 million to $12.5 million to be available in impact funds during the casino's second year. That estimate has been scaled down from about $15 million a year ago, Ferguson said.

"I'm concerned that projects that are long overdue will get put on the back burner because of the lack of ... funding," said Keisha Allen, president of the Westport Neighborhood Association. "Our roads infrastructure is awful. I need as many people as possible to go to the casino and play the slots. If I see a bunch of buses going to the casino, I'm happy. I might be stuck in traffic on Russell Street, but I'm happy."

Allen and Clippinger are among a group of community leaders who recently opposed the city's use of $3 million in the community improvement funds to replace a major underground steam pipe near the casino. City officials characterized it as a one-time expenditure necessary for safety.

Local impact funds also are being used to help pay for increased police coverage near the casino, Local Development Council documents show. Tens of thousands of dollars have been spent so far, and recommendations call for at least $1.5 million to be allocated in the casino's first year. In addition, Police Department funds are being used to pay off-duty officers to provide additional staffing.

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The city is trying to maximize the funds it derives from the casino. But the lower-than-expected slots revenue means the city probably won't be able to fund a number of projects this fiscal year — such as tree plantings and a youth jobs and internship program — that weren't at the top of the list.

"We're looking at ways that the money can be leveraged, maybe for federal grants or to seed programs or projects that can attract other funding over time," said Ethan Cohen, senior project coordinator in the mayor's Office for Economic and Neighborhood Development. "It will be money for these communities not otherwise available."

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