O'Malley unveils gambling expansion legislation

Gov. Martin O'Malley unveiled legislation Tuesday night that would expand gambling in Maryland, limit the influence of gambling interests in state politics and extend tax breaks to casino operators who would face increased competition if the plan is approved.

The legislation would allow a sixth casino in Maryland, to be located in Prince George's County, and authorize table games such as blackjack and poker at all of the state's gambling sites. The bill would also allow all of the state's casinos to operate 24 hours a day, seven days a week.

Joseph C. Bryce, O'Malley's chief legislative officer, said the administration "spent a lot of time understanding the ins and outs of this issue" before crafting the bill. Meanwhile, the governor and his staff are still working to line up the votes needed for passage. Bryce said he is "optimistic" there is enough support.

Maryland's General Assembly is set to return to Annapolis for a short special session to debate the bill, beginning Thursday. Should the legislation pass, voters would still have to ratify major portions of it during the November election.

O'Malley released a statement about the bill, saying, "The legislation we are sending to the members of the General Assembly will create predictability in the marketplace, protect local and city aid being generated at existing sites, ensure authorized facilities are able to be built, and allow the people of Prince George's County the opportunity to decide whether they want a sixth site for the benefit of their county and revenue base."

The 55-page legislation could be heavily amended during the special session, which is expected to be a whirlwind event that's heavily lobbied. Sticking points between the legislature's two chambers have stalled past gambling proposals.

House Speaker Michael E. Busch, who had been cool to expanding gambling in years past, put out a statement Tuesday saying that the governor's bill "reflects our principles."

"The work of the House is not done," Busch said. "We will continue to provide input throughout the special session in order to put the best product possible before the voters in November."

Sen. Rich Madaleno, a Montgomery County Democrat who has taken a leading role on the issue, called the bill a "fair proposal" that is "very much" like the bill the Senate passed earlier this year and also tracks a proposal from a work group convened by the governor to study the issue this June.

"It balances our opportunity to increase revenues with safeguards for the current license holders," Madaleno said.

The legislation represents a significant shift in thinking for O'Malley, who just four months ago had a dismissive attitude toward adding a new casino. "The republic was not built on gambling gimmicks, bingo or bake sales," he said at a 1 a.m. news conference after a budget deal collapsed amid disagreements on gambling expansion.

The governor has said more recently that he wants the state to "move past" the issue of gambling, which has long dominated legislative debates in Maryland.

The state's fledgling gambling program is still getting off the ground. Only three of the five casinos authorized in 2007 have opened.

One in Cecil County, Hollywood Casino Perryville, has asked to return up to 500 slot machines to the state after business fell off following the opening in June of the Maryland Live Casino at Arundel Mills. A planned casino at the Rocky Gap resort in Western Maryland has also scaled back the size of its gambling floor.

It was still unclear Tuesday exactly how much new revenue the proposed gambling expansion would generate for the state. Bryce said that when fully implemented, the changes would bring in an additional $200 million. But for next year's budget, the revenue figure is closer to $60 million.

The bill would reduce the effective tax rate for the state's two largest casinos from 67 percent to 56 percent — though strings would be attached. The Maryland Live casino in Anne Arundel County and the planned casino in Baltimore to be run by Caesars Entertainment Corp. would have to use about half of the tax savings for capital investments and marketing.

Those two facilities would also have to buy their own slot machines under the bill. The state currently owns or leases the slot machines used by casinos.

Administration officials stressed Tuesday that the state will achieve significant savings by partially unloading the responsibility of buying slot machines.

The governor's proposal would allow a 3,000-slot machine casino in Prince George's County, making it the state's third-largest. The bill defines a geographic area where the casino could be located that includes National Harbor, which Prince George's County Executive Rushern L. Baker III favors, or Rosecroft Raceways, owned by gambling giant Penn National Gaming Inc.

In a nod to Prince George's County lawmakers who are skeptical of the proposal, the slots location commission would be directed not to award a casino license in the county if a majority of residents vote against the measure at the ballot box.

The tax rate there also could be as low as 56 percent, if the casino operator meets certain requirements. And the new facility would not be able to open before July 2016, a provision intended to give the state's existing casinos time to get up and running.

The tax rate is a controversial part of the debate, with National Harbor opponents taking to the airwaves to accuse the state of giving billionaire casino owners a tax break the same year that the legislature increased income taxes on Marylanders making more than $100,000 a year. National Harbor's developer is working with casino giant MGM Resorts International on a casino deal.

The legislation sets apart the casino at Ocean Downs and the planned Rocky Gap facility in Allegheny County. Those two — expected to be the smallest — would not have to buy their own slot machines. Ocean Downs, which has reported that it is not making a profit, would have its tax rate cut from 67 percent to 57 percent. The planned Allegheny casino would eventually pay that rate, too.

The state would not set the number of table games allowed — based on the belief that staffing poker and blackjack pits is labor-intensive and expensive, providing a natural limit to those games. Revenues from table games would be taxed at 20 percent.

"It is certainly in the taxpayers' interests to have healthy, well-preforming facilities," said Bryce. "We know from the analysis of our consultant that a new competitor will have an impact on them, and it's in our interests to make sure they can remain competitive and reinvest in their facilities."

O'Malley also incorporated into the bill a prohibition of contributions by gambling interests and certain casino executives to state and local political campaigns. In addition, the bill calls for increased disclosure of donations to political committees that want to spend money to support or oppose the anticipated referendum on the gambling bill this year.

According to the administration, the donation ban is broadly drawn to cover supervisory employees, key executives and the companies themselves. The disclosure provision, on the other hand, is narrowly tailored to affect spending related to the gambling referendum and not other issues on the ballot, such as same-sex marriage.

The Baltimore Sun found that in the past eight weeks various newly created tax-exempt organizations have poured $1.1 million into television and radio ads. None of the groups are required to disclose their funding sources.

Bryce acknowledged that the disclosure language would not extend to certain committees set up under federal statutes and beyond the reach of state law.

"If you can't get it, you can't get it," he said.

The administration said the donation ban was derived from language that has long been proposed by Del. Luiz Simmons, a Montgomery County Democrat.

Simmons, a longtime gambling opponent, said Tuesday that while he's pleased to see the governor adopt his idea, he won't support the overall expansion bill.

"He should have adopted the idea years ago so we could have attenuated the influence of organized gambling in Maryland," Simmons said.

The governor decided not to include provisions in the bill to allow Internet gambling, a subject Busch suggested for consideration last week after Maryland Live casino developer David Cordish pressed for it. After discussion with State Lottery Agency chief Stephen L. Martino, Busch said he decided lawmakers didn't have enough information to address the subject.

Also under the bill, the State Lottery Agency would be re-constituted as the State Lottery and Gaming Control Agency.