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Big Slots ‘Win’ in Maryland

Posted by jkarmel on June 2, 2010

[Originally published on GA on November 5, 2008]

Maryland voters made their point decisively yesterday, passing the VLT referendum by 59-41%. Support for the amendment was clear across the state, including in the Ocean City area, which had been the epicenter for opposition.

The result was no surprise, as polling has shown popular support for slots in Maryland since the subject first drew political scrutiny over a decade ago. My prediction (55% for, 45% against) was off by just a few points, though I knew that opponents had closed the gap some since the Washington Post’s last poll. Now is where it gets really interesting, as gaming firms begin the process leading to the opening of Maryland casinos, projected by GA for 18 months to 30 months from this date: approximately April 2010 – April 2011.

What’s next? The following is GA’s brief analysis of what’s to come over the next few months as gaming comes to Maryland:

* VLT commission: according to the Maryland legislation, the MD legislature will set up a commission with appointments from the Governor (3), state Senate president (2) and speaker of the state House of Delegates (2). I’ll speculate that this won’t take place until January, at least, when the legislature opens its 2009 session.

* License bidding: this is going to be fun. Of the five licenses, the spotlight will clearly be on the three along the extremely lucrative I-95 corridor: in Laurel, in Baltimore and in Cecil County. While Magna Entertainment clearly has an inside track for the biggest facility (Laurel- 4,750), the license is not yet a done deal for Magna & the Maryland Jockey Club despite the company’s $2 million contribution to the pro-slots effort. Other firms may see a great opportunity for a facility that could bring in $600-700 million in gross revenues. Baltimore is even more wide open. To date, the Cordish Company has expressed interest, but other major players may get in, including a group led by wealthy lawyer and Orioles owner Peter Angelos. Along with a few associates, Angelos contributed lots of money towards the end for the pro-slots effort. For Cecil, Penn National is more advanced with an option to some prime property in Perryville, MD for a facility. PN Gaming also has an impact study underway and plans for another of its ‘Hollywood’ casinos already in place. However, Cordish has also expressed interest in the Cecil license and may be in a very good competitive position, as may also be the case with the Angelos group.

* Legal action and/or zoning plays by the anti- side: This may still occur as more zealous slots opposition forces may just not be ready to concede defeat. They already employed the courts in trying to thwart the referendum. They may keep going with local legal challenges to new properties similar to Philadelphia casino opponents who have managed to delay that city’s casinos for two years.

* OK — this is just a start– GA will have much more on this in coming days, weeks, months….

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Election Day Special

Posted by jkarmel on June 2, 2010

[Originally published on GA on November 4, 2008]

I’ve been so busy with the Maryland situation for this blog that I’ve barely mentioned the national election. Both candidates have some interesting connections to gaming. As an Illinois legislator, Barack Obama came to be viewed as a gaming critic although he was somewhat ambiguous on gaming expansion when specifically asked questions about it for Illinois on questionnaires. Yet, he also played poker regularly with a group of fellow legislators whilst he served at Springfield.

John McCain is a well-known craps player with fundraising ties to Terry Lanni (MGM Mirage) & Sheldon Adelson (Las Vegas Sands). He also supported tribal gaming expansion as a former chairman of the Senate’s Indian Affairs committee, as the New York Times reported in September.

The president is relatively inconsequential on matters such as gaming legalization in a state like Maryland and casino expansion. Yet, in other ares the federal government plays a role & that brings up questions to address in the future. For example, one wonders how a new political climate and president may deal with any challenge to the Unlawful Internet Gambling Enforcement Act (UIGEA) rammed through Congress just before the 2006 election? That messy act virtually shut down American involvement in online gambling by restricting financial transfers to large online gambling operations……we’ll see (and report, of course, as it happens).

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MD Slots Referendum Today!

Posted by jkarmel on June 2, 2010

[Originally published on November 4, 2008]

OK — today’s the big day: 14 years of debate culminating in a vote for legalized gaming in Maryland. Both sides have been active over the weekend, but the clear edge must go to the pro- side with signs everywhere, numerous commercials, a compelling budgetary argument and favorable recent polling (even if the gross revenue numbers are somewhat speculative).

Yet, in conversations with friends, colleagues, students and others, there are clearly still many concerns over bringing VLTs to Maryland via this referendum- both from a pro-gaming and anti-gaming perspective. Plus, there’s lots of political baggage left over from the long process in Maryland. Here’s a prediction: 55% for vs. 45% against for the final vote. But this is really just a step in the beginning of the process for Maryland gaming, regardless of what happens today. Much more to come in future postings…

(FYI — I’ve been invited to discuss the referendum on a Baltimore news channel tonight, somewhere between 9 & 9:30PM, webcast here: WMAR ch. 2 Baltimore. – jk)

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Casinos and Crime

Posted by jkarmel on June 2, 2010

[Originally published on November 3, 2008]

What’s wrong with this picture?

If nothing else, the Maryland referendum battle has brought forth some interesting ideas and popular notions about casino gaming. One of the most prominent is the idea oft-repeated by slots opponents that casinos lead to crime. An anti-slots ad in an Ocean City, MD newspaper highlighted a supposed connection between casinos and crime in West Virginia and Mississippi. Another opposition ad pointed out that “In the first three years of gambling in Atlantic City, New Jersey went from 50th in nation in per capita crime to 1st in the nation” – a dubious stat, lacking context and sufficient analysis.

There really is very little evidence to support this idea, and in fact, the National Gambling Impact Study Commission (1999) reported no direct connection between the two. Sure, petty crimes increase whenever you have large gatherings of people such as around stadiums, but the idea that bringing a casino into your community will inevitably lead to a crime wave just doesn’t hold up to research-based scrutiny.

So, why is this such a widely-held belief? I speculate that it may have something to do with the widely-held perceptions of the Atlantic City experience of the 1980s, when the city quadrupled its number of visitors within 3 years of Resorts’ opening and was completely unprepared for the onslaught. So AC crime spiked as the national spotlight turned to the city when it came to casino culture – before Las Vegas took off after the Mirage opened in 1989 and casinos sprouted all over the nation in the 1990s. As well, the crack epidemic hit & by the end of the 1980s AC had developed a nasty reputation as a bi-polar sort of place with glitzy casinos for tourists & desolate crime-ridden poverty for the locals.

The intense media focus on AC in the late 1970s & 1980s (its eastern monopoly years) planted a popular attitude that hasn’t faded much, despite the reality of AC’s progress in the 1990s and 2000s.

So, the connection took hold in the popular milieu– at least to many on the east coast: casinos = crime. Of course, this perception missed the reality that pre-casino AC was much worse in the 1970s. Yet, while crime spiked in Atlantic City (as it did in cities across the country), it actually went down in Atlantic County measured proportionately according to population, where most of the casino employees lived and which experienced a terrific casino-fueled boom from 1978 to 1990.

Yet, still…the perception holds and is exploited by gaming forces…alas…in politics, in life, perception is reality.

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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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