Maryland’s Gambling Armageddon…

In 2008, Maryland voters, largely pushed by union support and the promise of improved education and more police and fire support, passed a constitutional amendment legalizing gambling at 5 specific slots.  Since then, Maryland has opened 2 casinos in 2010 and 2011 in Perryville and in Ocean City.  The hope was that slots would help Maryland with its budget deficits due to increased spending.  The returns on these casinos has been less than anticipated, largely because these casinos only have slots in an area of the country where table games are in states that are close by.  Perryville and Ocean City are also in locations that are not near the cities of Baltimore and DC, and you have to pay tolls to get to either place.  The true test will come when a casino opens in or near Baltimore, and that time is fast approaching.  On June 6, the Casino at Arundel Mills will open its doors, and the fate of Maryland Gambling, future Maryland budgets, and even a 2016 Presidential candidacy hang in the balance.  This is gamble that has so much risk, and I believe it will ultimately fail without modifications…

For over a decade prior to 2008, Maryland horse racing watched its own decline as horses and ultimately horse farms left Maryland to pursue racing in West Virginia, Delaware, and Pennsylvania.  They pleaded with Maryland lawmakers to pass legislation legalizing slots in Maryland.  Until 2007, their pleas had met with failure as lawmakers showed no interest in saving the industry.  Finally, in 2007, a constitutional amendment was proposed to legalize slots.  It did not give the horse racing industry what it completely wanted, because in order to legalize slots, the Maryland legislature decided to also fund education, police and fire fighters.  Also, it mandated the gambling places be placed in five specific locations:  Perryville, Ocean City, Rocky Gap, Baltimore City, and off 295 in Anne Arundel County.  The amendment passed in 2008 along a 60-40 percent margin.

Perryville and Ocean City were ready to go immediately.  Everyone assumed the Anne Arundel location would be Laurel Horse Park.  But Laurel’s owners botched their chance at the bid, and opened the way for the Cordish group to propose building a slot palace at the family friendly Arundel Mills Mall area.  Immediately, home owners in the area protested, correctly realizing that a slot palace near their homes would destroy property values and make the once safe Arundel Mills an increasingly hazardous area.  The slots at Arundel Mills was put to a vote again by Anne Arundel County in 2010, and it passed by the same margins as it had in 2008 at the state level. 

Over the last 18 months, construction has proceeded at a feverish pace.  Roads have been ripped up and modified to handle the anticipated increase of traffic at an already crowded mall.  New restaurants have sprung up, a new parking garage has been added, and the hope is that the increase of traffic will only help an already busy mall.  With the Baltimore casino allocation still in limbo, this may be the dominant casino in Maryland for years to come.

But has the Cordish Group anticipated every possible scenario?  Have they considered that the prostitution and crime syndicate nearby along Route 1 and I-95 in Howard County is so close to Arundel Mills Mall that once they smell the money flowing they will move east into the Arundel Mills Area?  And like their counterparts in Perryville and Ocean City, the casino is slots only.  Will that be enough to get people to keep their money in Maryland?

Also, the legislature have set the bar high on these casino to produce a higher rate of return than other casinos, trying to game the system into giving players less odds of winning.  Will players willingly come to the casino knowing they have less of a chance of being a winner?  And, there has come to light recently that Maryland did not factor in the life cycle costs of slot machine, which could cost the taxpayers perhaps millions of dollars when these machines need to be replaced?  What happens at the end of the machine’s life cycles?

The slot machines by themselves seem destined produce a return less than desired in Maryland with higher cost than expected.  And the slots profits will only hurt a Maryland budget that’s already experiencing strain.  Just two weeks ago, Maryland legislatures raised taxes of singles making over $100,000 and families making over $150,000.  In this state, that’s the middle class.  More families are beginning to head for the exits to Virginia and Pennsylvania.  The slots will be needed to close the gap, and they will likely be a tax on the poor, trying to get rich quick.

A second special session will be called with the idea of expanding gambling to include table games could level the playing field with other states.  But is it too little, too late?  And how will the success or failure of slots impact Maryland Governor Martin O’Malley’s aspirations to run for President in 2016?  You’d have to be a fool to think the Democrat from Baltimore isn’t laying the groundwork for a run at the White House the way he has raised his profile in recent years.  Would the failure of slots at Arundel Mills hurt his chances to win the Nation’s highest office?

I believe slots are doomed to fail as is in Maryland.  Table gaming might help, but has everyone thought about all the potential negative impacts?  This is one gamble Maryland can’t afford to lose.  The one-armed bandit levers on this venture begin to turn June 6.