Maryland Video Lottery: If It Seems Too Good to Be True, It Probably Is

December 4, 2009

So many people thought it was the perfect plan: heaps of new revenue for the state, fun games for everyone, more jobs for Marylanders, and a way to save the struggling horse racing industry, all rolled into one. What could possibly go wrong?

I was certainly no fan of the Maryland slots plan—or of any state-run lottery for that matter—but even I didn’t foresee the fiasco that would ensue.

Aside from tax policy concerns (as if we could ever really put those aside!), here’s what went wrong, in a nutshell, courtesy of the Washington Examiner:

Pitching the referendum, Maryland’s political brass-from Gov. Martin O’Malley to Montgomery County Executive Ike Leggett-said gambling companies would flock to the state, paying tens of millions of dollars for licenses and uncorking torrents of money once the slots were up and running. In addition to fattening up the state’s treasury, gambling was supposed to cure Maryland’s storied but ailing horse-racing industry

But a year later, only two licenses have been granted. Not a slot machine arm has been pulled. An effort to put slots in Anne Arundel County is stalled by a zoning battle. A proposed casino in Baltimore is still waiting for the $20 million licensing fees and the proper paperwork. There have been no bids for a license in Allegany County in Western Maryland.

Magna Entertainment Corp., which owns Pimlico and Laurel Park racetracks, botched its applications for slot machines and has since filed for bankruptcy.

“The voters were duped,” said Barbara Knickelbein, a citizen activist who led opposition to last year’s referendum. “The governor has egg on his face. He thought this was going to be God’s answer.”

. . .

Anne Arundel resident Rob Annicelli, who is leading local opposition to put slots at the huge Arundel Mills mall just south of Baltimore/Washington International Thurgood Marshall Airport, said political leaders let themselves be dazzled by rapacious gambling interests.

“To think that the big, friendly gaming industry is coming in to care about you as a resident? No way,” he said.

As if that were not enough, the Baltimore Sun reported this on Wednesday:

Adding another dimension to the slots debate days before the Anne Arundel County Council is set to vote on zoning for a casino at Arundel Mills mall, a state delegate has filed a bill that would restrict the location of video lottery terminals.

Del. Ron George, an Annapolis Republican, drafted a bill that would prevent the terminals from being located within 1,000 feet of a shopping center, church community center, playground or school unless the facility is at an existing horse racetrack.

Both the County Council and the State Lottery Commission will have acted on the Arundel Mills proposal by the time George’s bill is considered in next year’s legislative session, so it would likely have little or no effect on the state’s largest slots proposal. But it’s unclear the effect it might have on the two remaining sites in Baltimore and Rocky Gap.

George said he introduced the bill now to “send a message to the County Council” before its anticipated vote on slots zoning set for Monday night.

“I believe it’s a genie you’re not going to get back in the bottle, and it’s better to get it right first,” said George.

On top of it all, County Councilman Ed Middlebrooks announced he would recuse himself from votes related to slot machines “because his financial dealings could create the appearance of an ethics breach.” Everythign seems to be up in the air now, and I wonder how many pro-slots policymakers wish they could turn back the clock and never have gotten into this mess. Probably not as many as we’d like, or at least they are not likely to admit it.

What lesson should other states take from this? Yes, video lottery terminals have been prodigious revenue raisers in a number of states, but they also have vocal critics, for good reason. And even those who can overlook the tax policy problems with state-run video lottery can’t reasonably overlook the debacle in Maryland. Starting a state-run enterprise to save another industry or to raise revenue in a less-transparent way than explicit tax increases is never a good idea. In other states, proponents of video lottery claim success (although revenue has dropped slightly in FY2009) but states that are considering starting a video slots plan should learn a thing or two from Maryland.


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