The state Board of Public Works voted 2-1 to purchase the last 438 slot machines for the Cecil County casino from a single manufacturer, again overriding the protests of Comptroller Peter Franchot.
Franchot had raised objections to the $15.8 million purchase, saying that the state's inexperience with slots makes it ill-equipped to negotiate with the gambling industry. He said taxpayers probably have been "taken to the cleaners" and suggested asking the General Assembly to change the law so that casino operators would have responsibility for buying slot machines.
Gov. Martin O'Malley and Treasurer Nancy K. Kopp did not share Franchot's concerns, but both scolded the Maryland Lottery Agency for failing to provide detailed information about the cost of the machines at an earlier meeting.
The contract approval Wednesday means the state has committed about $65.3 million to buy slot machines for the Hollywood Casino Perryville, which is to open in late September. Maryland's gambling law is one of the few in the nation that requires the state, not the casino operator, to acquire the machines.
Maryland Lottery Agency Director Stephen Martino defended the purchase, stressing that the deal includes five years of maintenance. The maintenance part of the contract requires, for example, that a technician respond within 90 minutes of a malfunction, and it gives the state the right to swap an underperforming game.
Martino said his agency was tough on Spielo Manufacturing, which will provide the 438 machines, wringing a reduction of $1,000 per machine in the final days of negotiations. Earlier, the state awarded Spielo a $10.3 million contract to supply and maintain 290 machines for the Cecil Casino.
The Maryland Lottery Agency drew criticism this month for spending $49.5 million for the first 1,062 machines for the casino, or about $46,542 per machine. If the agency continues to spend at that rate, it would cost the state nearly $700 million to outfit all five casinos over five years. When fully operational, the slots program is projected to net $600 million a year.
Martino called it "inaccurate" and an "oversimplification" to calculate an average cost per machine without differentiating between the purchase price and the maintenance contract. Depending on the manufacturer, maintenance costs can be 30 percent to 50 percent of the price per machine.
The market rate for slots machines is $13,000 to $21,000, according to the investment firm Stifel Nicolaus. Using figures provided by the lottery, the investment firm estimated that the state is paying $20,000 to $25,000 per machine without maintenance, an amount the firm described as a "slight premium."
Stifel Nicolaus did not examine the cost of the maintenance part of the contract in its report and speculated that the state would get a better deal if it were buying in bulk.