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Archive for May, 2010

Archive: Markets, Taxes & Maryland Casinos

Posted by jkarmel on May 27, 2010

[Note:  This is an archive version of GA’s original post-  published November 1, 2010]

In recent days, there’s been some discussion about the possibility that Maryland’s tax rate (67%) may be too much to attract desirable gaming operators. I think there’s some validity to these concerns, having spoken with various people in the know and having studied this a lot over the past year. This is especially the case if major gaming firms remain in constriction mode for a while if the market stays soft.

In an article from the Oct. 31 Baltimore Sun, an MGM Mirage executive underscored the potential difficulties facing the problematic market timing of Maryland’s nascent gaming industry:

Alan M. Feldman, senior vice president for public affairs with MGM Mirage, scoffed at Maryland’s proposed tax rate as incompatible with the type of high-end developments civic leaders are hoping for. “Clearly, the state of Maryland has decided … they want boxes with slots in them,” he said. “That’s all you could do at that tax rate.” A national crunch has “tightened up credit incredibly,” Feldman said, causing MGM to suspend two $5 billion projects in Atlantic City and Las Vegas.

Now, the likes of MGM Mirage, Las Vegas Sands or Wynn Resorts were very unlikely to bid on one of the projects anyways, with only a few thousand VLTs allowed. More importantly, the high tax rate may limit the interest of mid-size players like Penn National or dynamic, expansion-oriented operations like Mohegan Sun and Foxwoods, both of which have now expanded to Pennsylvania. Remarkably, yesterday’s Sun piece quoted MD House of Delegates Speaker Michael Busch – a powerful gaming critic- on the potential for legislative flexibility with regard to the tax rate depending on the bids that do come in.

Yet, so far, the high tax rate hasn’t prevented interest in the Maryland facilities and its doubtful that Magna Entertainment owner of Laurel & Pimlico, would have kicked in $2 million for the pro-slots campaign if it didn’t see great revenue potential regardless of the high tax.

This may have to do with the great locations of at least 3 of the Maryland properties just off I-95 (Laurel, Baltimore & Cecil County) AND the reality that Maryland will be creating a closed market, so that once-established firms need not be concerned about competitors moving in to carve up the market share — at least in the short term, maybe 3-5 years.  As of this writing, I’m aware of at least two potential bids for the Baltimore site from solid players and one for the Cecil site (Penn National). And this is what will be good for the state and the industry: a genuinely competitive bidding process for the five licenses.

However, a big question mark is the extent to which the Rocky Gap site will attract good bids with its current limitation of 1,500 VLTs.  That’s a relatively small property and with the requirement of $25 million investment for every 500 VLTs may be viewed by firms as simply not worth the price.

What’s vital for Maryland voters to realize is that what’s good for the gaming firms that do invest in the state is also good for Marylanders. If voters decide to commit to gaming on Nov. 4, they should also be prepared to take measures to support the industry’s viability: the more succesful the companies are, the more revenues come in and the more money the state has for it’s budget- the entire point of the venture in the first place.

What’s clear amidst the ambiguity above is that Tuesday’s vote is really just the beginning of this process, even if it has a culminating feel given the many years it took Maryland to evevn get to this point.

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Archive: Welcome! Some Thoughts on Maryland’s slots referendum

Posted by jkarmel on May 27, 2010

[Note: This is archived from the original GA blog, first posted on October 28, 2008]

Welcome to the new Gaming Atlantic blog!  This blog exists to track the American east coast’s casino industry, with a special emphasis on mid-Atlantic casinos and racinos. Check in frequently to read gaming news and analysis. Feel free to comment on postings and engage in discussions to come on a variety of topics relevant to gaming, including:

  • politics of gaming
  • gaming finance/investment
  • individual casinos
  • gaming companies
  • gaming community impact
  • gaming regulation
  • compulsive gambling

On to Maryland: I’ve lived in the state for 11 years and legalized gaming has been an issue for that entire time.  In fact, discussions over bringing slot machines to the free state go back 14 years or so, in response to moves by Delaware & West Virginia in the 1990s.  So, finally, on November 4 we’ll know whether the state will have legal gaming.   The referendum will authorize an amendment to the state’s constitution to allow 15,000 Video Lottery Terminals (VLTs) at five different locations (Cecil County, Baltimore, Laurel, Ocean City and Rocky Gap State Park).  According to a recent Washington Post poll, Marylanders favor the proposal by 62 to 36%, a substantial margin.  Yet, polling on the referendum has been sparse of late, and a September poll from Gonzalez Research & Marketing showed a much closer margin: 49% for VLTs, 43% against VLTs.

So, should gaming advocates rest comfortably or not in these final days of the campaign?  Probably they should not, despite cause for optimism of late.  The lousy economic and budgetary situation in Maryland has probably helped build support for the amendment over the past month.  As well, the commercials flooding the airwaves from the pro-slots group For Maryland, For Our Future have likely increased support for the amendment.  However, local media gives lots of attention to gaming opponents and they will inevitably ratchet up their rhetoric over the next week, and possibly air some commercials with their remaining resources.

I’ll have more on the Maryland situation soon, on the referendum & its aftermath.  The big question of the moment is: will the 67% tax rate prove too high to attract desirable operators, even if the referendum passes on 11/4?

There are lots of other issues, topics and questions to address regardless of whether the referendum passes or fails. In the meantime, I would love to hear more from everybody on the MD referendum as election day nears- what do you think?

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Hello world!

Posted by jkarmel on May 21, 2010

Welcome to WordPress.com. This is your first post. Edit or delete it and start blogging!

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