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State to spend $168.5M for Arundel slots

ANNAPOLIS — Maryland will spend $168.5 million to outfit what will be the largest casino in the state with more than 4,700 slot machines.

The Board of Public Works approved the measure Wednesday in a 2-1 vote with Comptroller Peter Franchot maintaining his opposition to the program.

“I remain disgusted by the fact we as a state are holding on to this idea that slots are a solution to our fiscal challenges and not just another predatory scheme to separate working people from money they cannot afford to lose,” Franchot said.

The state faces a $1 billion budget deficit in fiscal 2013, and on Dec. 9, revised downward its revenue forecasts for this year and next by $120 million.

The contracts approved by the board on Wednesday will lease 4,719 slot machines for Maryland Live! Casino from eight suppliers through March 2015.

Thirty-one more machines will be relocated from other casinos in the state to fill out the full allotment of 4,750.

Maryland Live!, owned and developed by The Cordish Cos., is under construction next to the Arundel Mills shopping mall in Hanover. It is scheduled to open in June.

The all-lease arrangement is new for the Maryland State Lottery Agency, which oversees the state’s nascent gambling industry. Hollywood Casino Perryville and Casino at Ocean Downs were outfitted for $99 million with a mix of 2,300 leased and purchased machines.

Leases give “us the opportunity to move machines that are not productive off of the floor,” said lottery Director Stephen L. Martino.

He said the lottery will have 18 months to evaluate the slot machines at the Cordish casino. Those that bring in less than 85 percent of the average revenue on the casino floor could be pulled in favor of slot machines from other manufacturers.

“We’re going to try to make this a competitive situation,” Martino said.

State analysts estimated the Anne Arundel County casino would average $315 in revenue per machine per day when the General Assembly passed gambling legislation in 2007.

Martino said the slot machine order for Maryland Live! will also allow the lottery to shuffle new machines into Perryville and Ocean Downs, where the slots mix suffered from too many of some types of machines and not enough of others.

Franchot, who co-sponsored a bill in 2001 to legalize slot machines, praised the all-lease approach for its flexibility and lower cost. The 4,719 will be leased at an average of at an average of $35,717 per terminal. The machines bought and leased for the other two casinos averaged $43,057.

The comptroller did, however, criticize the two biggest beneficiaries of the slot machine contract for their efforts to boost minority business participation.

“The two firms that are getting the largest slice of the pie, they are the firms that drag down the average for the entire contract,” Franchot said.

Indeed, 18.9 percent of IGT’s $52.5 million contract and 15 percent of Spielo Manufacturing’s $56.6 million will go to minority firms.

Five of the slots suppliers hit or exceeded the 25 percent minority participation goal. Shuffle Master Inc., with only a $5.7 million slice of the slots pie, reported only 15 percent participation.

Martino said the minority participation in the Spielo and IGT contracts is “considerably higher” after “intense conversations” between the lottery agency and the companies.

But, he said, the size of the contracts work against the companies in that regard. IGT is supplying 1,700 slot machines and Spielo, 1,348.

“Most of the MBE participation is coming on the maintenance side, and the more machines you have, the more efficient it is to maintain them,” Martino said.

The Video Lottery Facility Location Commission expects to rule on proposals for the state’s final two casino licenses next year, with a decision on the Casears Entertainment Corp. bid for the Baltimore city license anticipated for the spring.