By By Gadi Dechter and Julie Bykowicz and Laura Smitherman
Feb 04, 2009 | 3:00 AM
Prospects for a near-term gambling windfall in Maryland fizzled yesterday as state officials acknowledged that two of six bidders for gambling licenses failed to submit millions of dollars in legally required fees and that Baltimore's applicant is proposing a small, 500-machine parlor, not a 3,750-machine one.
After accounting for the incomplete proposals for casinos at Laurel Park racetrack and Rocky Gap State Park - which could doom those applications - and the shrunken bid for Baltimore, the total number of slot machines proposed this week was just 6,550, out of 15,000 authorized.
Lawmakers in Annapolis reacted with disappointment as bad news trickled out during the day. After years of debate, Maryland voters approved a constitutional amendment in November legalizing slot machine gambling, and state officials have been counting on an estimated $600million in annual slots-related tax revenue to support schools and close a yawning budget gap.
Senate President Thomas V. Mike Miller denounced the "egregious" behavior of companies that neglected to submit $22.5 million in required license fees, or $3 million per 500 machines proposed. State officials were counting on the money this year.
But he also blamed the lackluster bidding on the poor economy, high capital investments required under state law and a 67 percent tax rate, which combine to give gambling operators what he called "the smallest amount of return in the U.S."
On Monday, the state received six bids for five eligible gambling sites in Baltimore and in Anne Arundel, Cecil, Worcester and Allegany counties. The incomplete bids were made by the Maryland Jockey Club, which proposed a 3,000-machine casino at its Laurel Park racetrack, and by Empire Rocky Gap LLC, which envisions a 750-machine casino at the state park in Western Maryland.
The two entities reiterated their interest yesterday in having their bids considered by a slots commission that will award licenses. Donald C. Fry, the panel's chairman, said "it appears that these do not meet basic requirements" and that the full panel will decide whether the bids would be disqualified.
Maryland Jockey Club spokesman Mike Gathagan said its corporate owner, Magna Entertainment Corp., had filed "additional submissions" yesterday, and expressed hope that its application would be reviewed. "Our feelings are that Laurel Park will generate the most revenue to the state," Gathagan said.
Buddy Roogow, director of the state lottery, which regulates state gambling, said he was unaware of any payment from Magna as of late yesterday.
Meanwhile, the president of The Cordish Cos. of Baltimore, which has submitted a completed bid for an Anne Arundel site, told The Baltimore Sun that the slots commission should disqualify the submission by Magna. "As the application by [Magna] is clearly defective and incomplete ... the application must be immediately rejected as inadequate under the law," David Cordish wrote in an e-mail. "There is no flexibility legally to extend the deadline," he said, and to do so "would make a mockery of the selection process."
Michael Leahy, an attorney for New York-based Empire Resorts, which proposed a 750-machine casino at Rocky Gap, said his client did not pay an application fee because the proposal is contingent on both a change in the tax structure and on the state's willingness to sell an adjacent resort hotel to the bidder. Empire wants the General Assembly to reduce the operator's tax burden for the first $100 million in annual sales, Leahy said.
Magna Chairman Frank Stronach was in Laurel yesterday for a meeting with state racing commissioners, who were alarmed that a slots parlor might not be built at a major racetrack as has long been envisioned by slots boosters. According to a person with direct knowledge, Stronach told the commissioners in closed session that he did not pay millions of dollars in licensing fees Monday because of uncertainty about whether the money would be refunded if local officials block his casino through zoning laws.
Anne Arundel County Council members opposed to slots have suggested that a zoning battle lies ahead for any casino operator. But yesterday, County Executive John R. Leopold, a Republican who opposes slots, said he was drafting zoning legislation and would begin to prepare the county for a casino. "The people have spoken," he said.
Councilman Jamie Benoit, a Democrat, said he still opposes slots, but having reviewed a summary of the Laurel proposal, he thought that Arundel Mills might be a better location.
"I'm puzzled in some respects by Laurel Park," he said. "It seems to me to be totally nonresponsive, and it doesn't look like they have any money."
Benoit characterized Cordish as more "qualified and experienced."
But the Senate president opposes the idea of a casino at a mall, saying it is contrary to the original intent, which was to put slots at racetracks. "I really can't envision a slots parlor casino at Arundel Mills," Miller said. "The public doesn't want casinos ... in neighborhoods, nothing kids would see."
Gov. Martin O'Malley said yesterday that he would have preferred to see all casinos at racetracks. He was counting on $90 million in licensing fees to help close a projected $2 billion budget gap for the next fiscal year, but appears to have received far less.
At a news conference, Fry confirmed William M. Rickman Jr.'s bid to place slots at Ocean Downs in Worcester County. Fry said the Baltimore bidder, the newly formed Baltimore City Entertainment Group, proposed 500 slots - not 3,750 machines, as officials believed Monday. He attributed the revised total to "inconsistent" information included in the group's voluminous application.
More details emerged yesterday about the Baltimore group, which is headed by two Canadians who days ago received a license to operate a 600-slot casino and racetrack in New Mexico. Michael Moldenhauer, president of the Baltimore group, is a Toronto-based developer with no previous casino experience. Paul Micucci, a former Magna executive from Toronto, is president of Gaming Entertainment Management Corp. in Florida.
A local minority marketing firm and Baltimore attorney also are listed as principals in the group.
Baltimore Sun reporters Tyeesha Dixon and Bill Ordine contributed to this article.
•Baltimore City Entertainment Group
Proposed 500 slots south of Inner Harbor; paid $3 million fee
Principal: Michael Moldenhauer, Toronto-based developer who days ago won a casino and racetrack license in New Mexico
Operator: Gaming Entertainment Management Corp., a Florida-based company headed by Paul Micucci, a former Magna Entertainment executive
ANNE ARUNDEL COUNTY
•Laurel Racing Association/Maryland Jockey Club
Proposed 3,000 slots at Laurel Park; did not pay fee
Principal: Frank Stronach, president of Magna Entertainment
•Power Plant Entertainment Casino Resorts Maryland
Proposed 4,750 slots at Arundel Mills Mall; paid $28.5 million fee
Operator: The Cordish Cos. of Baltimore
•Empire Rocky Gap LLC
Proposed 750 slots at Rocky Gap; did not pay fee
Operator: New York-based Empire Resorts
•Penn Cecil Maryland Inc.
Proposed 500 slots at Interstate 95 and Route 222 in Perryville; paid $3 million fee
Operator: Penn National Gaming of Pennsylvania
•Ocean Enterprises LLC
Proposed 800 slots at Ocean Downs; paid $4.8 million fee
Principal: William M. Rickman Jr., Montgomery County developer and owner of Delaware Park racetrack and casino