ANNAPOLIS — Requests to reduce the number of slot machines at two Maryland casinos will increase the revenue sent to the state, according to one gambling consultant.
Will E. Cummings, a consultant for the Maryland Lottery and Gaming Commission, told the Senate Budget and Taxation Committee that the requested slot reductions will help grow gaming in Maryland and ultimately result in additional revenue for schools.
“Casinos are not a static business. There are many moving parts and if you just let them sit, your current revenues will not be sustainable,” Cummings said. “You continually have to reinvest and reinvigorate these to maintain revenue and to grow them in the future. The casino operators will be able to do a better job of that with 300 fewer machines. The table market here is so strong and the amount that each table brings in are so high, you will make more money from 20 percent of the table games revenues than any possible loss from the 59 to 67 percent of the revenues that you would lose.”
But Cummings’ own initial estimates show Maryland Live would lose more than $1.4 million from the elimination of 300 slot machines. The addition of 13 table games would offset that loss with earnings of $944,000, resulting in a net loss of nearly $500,000 in revenue to the state in the next 12 months.
Horseshoe Casino would see a near-term decrease of $518,000 in revenue from the reduction of slot machines but that loss would be offset by $778,000 from more than two-dozen new table games. The result would add $260,000 to state coffers over the same 12-month period.
The Senate committee is concerned that the state, which imposes a 67 percent tax on the gross slots revenue, will lose money that is earmarked for the Education Trust Fund when casinos shift the balance to table games. Those games are taxed at a rate of 20 percent.
Cummings said the elimination of underperforming machines will benefit casinos and the state.
“You are not removing 300 machines that do $260 per day,” Cummings said. “You are removing machines that do much, much less than that.”
Maryland Live, which has 4,222 slot machines, has asked the commission for permission to remove 300 “underperforming video lottery terminals” and replace them with 13 table games in a reconfigured casino.
Horseshoe Casino, which opened in August, is requesting permission to eliminate 300 of its 2,500 slot machines and replace them with about 30 table games.
The requests represent the eighth and ninth time the Maryland Lottery and Gaming Control Agency has been asked to approve a reduction of slot machines at a casino.
Last month, the Maryland Lottery and Gaming Commission approved a reduction of 300 slot machines at Hollywood Casino in Perryville.
Maryland’s five casinos, especially the three that already exist along the I-95 corridor, are looking at ways to increase revenue amid growing competition, including the opening of MGM National Harbor.
Additionally, Horseshoe and Maryland Live will have to purchase slot machines from the state that previously were not part of their business model. Casino operators acknowledge that they would like to eliminate underperforming machines from their portfolio rather than purchase those machines later this year.
Cummings said that his estimates, while more conservative than those of the two casinos, show that both will make more money “in the long term” by eliminating slot machines and adding table games
The commission was expected to decide the Maryland Live and Horseshoe requests Thursday. Those decisions were delayed after receiving a request from Sen. Edward J. Kasemeyer, chairman of the Senate Budget and Taxation Committee.
Kasemeyer said the committee wanted to know more about the changes in the industry in Maryland and how altering the mix of slot machines to table games could affect state revenue.
Stephen L. Martino, director of the Maryland Lottery and Gaming Control Agency, said that changes are necessary to help the casinos keep pace with customer preference for table games and also weed out underperforming slot machines.
“Basically it’s a supply and demand issue,” Martino said. “They’re over-supplied in slot machines — particularly Horseshoe Casino in Baltimore — and they’re under-supplied in table games. Maryland maybe the most robust jurisdiction in the country on a table game basis. They’re able to do more business in table games.”