Western Maryland slots proponents came to Annapolis on Tuesday with a dire message: Sweeten the deal for Rocky Gap or nobody will want to build a casino there. Without a slots casino, the state-owned facility will go belly up and millions of dollars will have been wasted, they warned.
"Take it off our hands," said state Sen. George C. Edwards, whose district includes the money-losing Rocky Gap Lodge and Golf Course.
The state is rebidding the Rocky Gap license after receiving no qualified proposals during the initial round.
Investors, Edwards said, want to change the 67 percent state tax rate on gross gambling revenues there and lower the required capital investment to entice a potential casino owner to buy the lodge. "We think it should get some preferential treatment," Edwards said, saying the rural location makes it different from the other four parts of the state where gambling is permitted.
Edwards spoke at a hearing that included a raft of slots proposals, and he acknowledged that the tax reductions will be hard to sell. When he suggested it to slots commissioners, "they weren't that darned receptive," he said.
But former House Speaker Casper R. Taylor Jr., who is lobbying on behalf of Davidson Kemper Capital Management and Calvert Investments, two private firms that own Rocky Gap bonds, reminded the Budget and Taxation Committee that the legislature already poured $30 million in public money into the faltering project.
Using an age-old tactic, he informed lawmakers that the money they've spent would be wasted if the project dies. "There is no question in our minds ... after all of this investment that has already been made, that the prospect of [Rocky Gap] lasting permanently going into the future is absurd," he told the committee.
He also sent them a letter from Davidson Kemper that draws a gloomy picture of Rocky Gap's finances. The project has not been able to make a full interest payment since October 2003. It lost $1.6 million in 2007 and is expected to lose $132,000 this year. Also, the facility needs a face-lift, requiring a new capital investment.
"You are very direct about what is happening here," observed Sen. Edward J. Kasemeyer, a Baltimore Democrat on the committee. "The project is insolvent; you make that very clear."
Kasemeyer and his colleagues did not vote on any of the measures. But a shift in the tax rate would be a major change to the state's fledgling gambling program. The panel also heard less drastic enhancements to the Rocky Gap proposal that have been endorsed by the state slots commission, including a rule change to allow an owner of one facility to operate another one.
In November 2008, voters approved gambling in five parts of the state, creating a revenue source that was supposed to generate hundreds of millions of dollars.
Now, as the state struggles with a $2 billion budget hole, not a single casino has opened and only the two smallest facilities, in Ocean Downs and Cecil County, are on track to begin operations. A third planned facility in Anne Arundel County is mired in a local zoning fight. The sole bidder for the Baltimore City casino was tossed out and is now appealing that decision.
The state slots commissioners did not endorse the proposed changes to the state tax rate or capital investment for Rocky Gap. Instead, they want to allow investors to count the purchase of the state-built lodge toward the required $75 million capital investment required by state law.
As the legislature mulls over these changes, surrounding states have expanded their gambling programs to include card games such as poker and blackjack, raising fears among many observers that the Maryland program will be out of date by the time it is running.
The committee briefly heard two ideas put forward by Sen. Catherine E. Pugh to address out-of-state competition. The first, requested by the slots commission, requires the panel to study the effect of table games in the surrounding states. The second approves the table games at the Maryland sites, which would also have to be approved by voters.
Similar legislation allowing tables games will be heard in the House on Thursday, but it faces opposition from House Speaker Michael E. Busch.