The false promise of a gambling expansion

Backers of a new casino inPrince George's Countyhave been emboldened by a report from the Department of Legislative Services that estimates such a facility and the addition of table games statewide could add as much as $161 million a year to the state's coffers. The analysts, who worked with PriceWaterhouseCoopers to develop their report, flatly conclude that Maryland's market is large enough to accommodate six casinos and that any loss in revenues at the existing Maryland Live slots parlor and the one yet to be constructed in Baltimore would be offset by new revenues from blackjack, roulette and the like.

That sounds good, but it doesn't really settle anything. Even if we assume the estimates are correct — no sure thing since we have no data about how a Baltimore casino would perform and all of a week's worth of information about Maryland Live — it leaves open significant questions about how tax rates for the state's casinos should be structured, as well as ancillary issues such as whether the state should continue purchasing the slot machines and whether restrictions on free food and drink and entertainment should be relaxed. Rather than paving the way for a special session of the legislature on July 9, as Gov.Martin O'Malleysuggested, it underscores the need for more deliberation before the state considers adding a sixth casino. That can't realistically be accomplished in time to put the matter before voters in November.


The key problem with the DLS analysis is that it considers a scenario that nobody wants: the addition of a sixth casino at National Harbor in Prince George's County under the same 67 percent tax rate that is currently in effect for four of the state's five casinos, plus the legalization of table games at a 20 percent tax rate.

That's not what the National Harbor developers are asking for; they say they need a lower tax rate on slots in order to build a high-end "destination casino" on the banks of the Potomac. They have said they are not interested in the "regular casino" that DLS envisioned in making its estimate.


It's not what Caesars Entertainment wants either. The prospective developer of the Baltimore casino is eager for the legalization of table games — it says it would be able to build a higher-class facility and market the casino better to its worldwide network of frequent gamblers if it had them. But Caesars has said it, too, would need a lower tax rate on slots to make the economics work in a market with competition from National Harbor.

And it's most certainly not whatCordish Cos.want. The developer of the Maryland Live casino at Arundel Mills has been steadfastly opposed to the addition of a Prince George's site, even if it gets a lower tax rate on slots in return.

The desires of casino developers are not, of course, the state's primary concern. Maryland's interest lies in maximizing tax revenue, which supports K-12 education and other programs. But if the state pursues a gambling expansion at a tax rate that doesn't actually entice National Harbor's developers to build a casino, or that makes the existing sites less attractive to gamblers, the entire exercise will have been a waste.

Complicating matters are some tricky political cross-currents. Senate President Thomas V. Mike Miller is eager to see a casino in his home county, Prince George's, as is the county executive, Rushern Baker, who wants the local share of revenue that such a facility would generate to help balance his books. At his urging, a significant portion of Prince George's previously anti-slots delegation is now pushing for a casino. However, lowering the tax rate on casinos would be politically difficult at a time when the state is raising income taxes on hundreds of thousands of families. And although the DLS analysis showed that the state treasury could gain as much as $161 million a year from a gambling expansion, it also shows that the real winners would be casino owners, who would come out more than $300 million ahead.

Once Maryland allowed slots, it was perhaps inevitable that it would come under continual pressure to expand gambling further. The eventual legalization of table games is likely inevitable — and probably desirable, given the increased economic development they foster. The day may come when adding another casino makes sense, too, but such a change must be made deliberately, and the rush to a special session this summer doesn't afford that possibility.