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With Maryland’s 33% gaming tax, bidders may be hard to come by

Nov 11, 2008 5:04 PM

by Ray Poirier | It took several years of lobbying to get the Maryland legislature to finally approve slot machines at five locations and it may take several more years before the licenses become functional.

The state has slated Feb. 1, 2009, as the deadline for submitting bids for the licenses which must be sought for five specified locations. One, in Anne Arundel County is expected to go to Laurel Park, the thoroughbred facility owned by the Maryland Jockey Club, a subsidiary of Magna Entertainment Corp. (MECA).

The other locations are in Cecil and Worcester counties, the City of Baltimore and a state-owned property at Rocky Gab State Park in western Maryland.

Doubters now wonder whether there will be bidders for these licenses. Especially during this bidding period when most operating gaming companies are facing declining revenues because of the economic downtown.

Also, the state will be looking for initial license fees of $3 million for each 500 machines the companies plan to operate. And some companies have already indicated that the 33% share of the gambling revenue that the license holder will be permitted to retain is far below what will be necessary to have a successful operation.

Legislators have already reacted to the complaints by suggesting they might be willing to increase the revenue percentage for the license holders should there be fewer bidders than they expect.

Contrary to what happened in Pennsylvania two years ago when that state approved slots emporiums, their licenses were highly sought after. But so far, only the Maryland Jockey Club has indicated that it will pursue a license as soon as the regulatory body is established.

The current five-member Maryland Lottery Commission will be expanded by four new members to comply with the slots law. The commission will then own and lease the slot machines to the operators.

Reportedly considering applying for a license is Penn National Gaming Inc. (PENN), one of the few major gaming companies looking to expand their operations during the economic hard times. The company filled its coffers with cash when a prospective buyer had to back out of the deal.

Meanwhile the City of Baltimore is paying $4.1 million to acquire the parking lot that is used by fans of the Ravens football games. They hope to lease the site to developers interested in acquiring a slots license.