A bad bet for Maryland

The Department of Legislative Services is out with its analysis of Gov. Martin O'Malley's proposal to expand and overhaul Maryland's gambling program, with the key element, politically anyway, the addition of a sixth casino in Prince George's County. Based on what DLS found, it is now quite clear why Prince George's County Executive Rushern Baker is in favor of this effort. It's obvious why the developer of National Harbor, the preferred site for a new casino, wants it, and why MGM is lined up to operate that facility if it opens. It's a great deal for them.

Prince George's County, which currently gets no direct aid from the state's slots program, would see a $16 million boost once a casino opens there, in mid-2016. And the casino in Prince George's County would make $453 million in the first year, with the numbers ramping up significantly, by DLS' estimates, within two years.


But what's in it for the rest of us? Not nearly as much. DLS confirms what Governor O'Malley has been saying: His bill as a whole would net the state an extra $201 million a year when the Prince George's casino comes on line. But DLS' analysis shows that only about a third of the projected increase in state revenue is attributable to the addition of the sixth casino, and in reality, the impact may be even lower than that.

Some elements of the governor's proposal are relatively non-controversial and wouldn't even require a voter referendum, which is the reason lawmakers are back in Annapolis for a special session in the first place.


Under current law, the state buys the slot machines used in its casinos, but it isn't doing a very good job of it. The cost has been much higher than the state originally anticipated, and the general consensus is that the casino operators would be able to do it for less. Mr. O'Malley's bill calls for a transition to casino-ownership of the slots starting in fiscal 2015, and even allowing compensation for the slots operators, the state comes out far ahead. DLS estimates that the year before a Prince George's casino came on line, the state would save $45.4 million.

Another change proposed in the bill is to allow Maryland's casinos to stay open 24 hours a day. Presently, they are allowed to be open from 8 a.m. to 2 a.m. and may stay open until 4 a.m. on Saturday and Sunday. DLS estimates that 24-hour operation would increase state revenues by 5 percent, or about $37.5 million in fiscal 2016.

In all, the state could increase its take by about $83 million a year with no controversy and no referendum.

The governor's bill also proposes the legalization of table games like blackjack and roulette. That would require a referendum, but it is also largely non-controversial. Although Maryland lawmakers didn't seriously consider table games when crafting the state's initial gambling program in 2007, the advent of those forms of gambling in three neighboring states since then has changed the thinking. A simple table games bill would almost certainly fly through the legislature, if not for Senate President Thomas V. Mike Miller's insistence that a Prince George's casino be part of any bill. However, table games at the five existing casinos would provide an extra $49.8 million in state revenue in fiscal 2016.

DLS estimates that the state's bottom line would increase by about $132 million even before the Prince George's casino opens in fiscal 2017. When it does, DLS says the state's revenues bump up to about $201 million. That is, a Prince George's casino adds $69 million.

But that's not the whole story. What DLS didn't factor in is the fact that the governor's bill allows the owners of the Baltimore City and Maryland Live casinos to ask for additional slots tax breaks to compensate them for the new competition from Prince George's, up to another 5 percent off, subject to approval by a new lottery and gambling commission and possible veto by the legislature. DLS hasn't yet crunched the numbers to figure out what that could amount to, but it could easily cut the net $69 million benefit of a Prince George's casino by tens of millions of dollars.

And all that is assuming that Maryland's gambling program develops smoothly and performs as well as DLS expects, which has so far not been the case. By moving forward with a gambling expansion now, before all of the state's existing casinos are online and before we have reliable data on their performance, we could wind up over-saturating the market and making one or more of our casinos fail. The projected reward simply isn't worth the risk.