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Nearly $50M Approved By Maryland Board To Buy Slot Machines For State’s First Casino

Posted on June 11th, 2010

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The Board of Public Works, in a 2-1 vote Wednesday, gave its approval to a contract worth $49 million to buy 1,062 slot machines from six different manufacturers for a casino that’s going to be the first in Maryland. The amount covers the price of the machines and the installation and maintenance. The proposed Hollywood Casino Perryville, near Interstate 95 in Perryville in Cecil County, developed by Penn National Gaming, is slated for an unveiling on Oct. 24.

The casino is allowed to operate up to 1,500 machines. State lottery officials say the state will need to buy 438 more machines for the casino to be fully operational. They said they will again ask approval this month for the additional $20 million.

In most states, the licensed casino operators are the ones who choose and buy the assortment of machines they want to offer in their facilities. When Maryland lawmakers crafted the regulatory guidelines in 2007, they agreed to let the state purchase the machines in order to allow a more thorough and complete oversight. The two consenting votes to approve the contract came from Treasurer Nancy Kopp and Gov. Martin O’Malley, while the lone opposing vote belonged to Comptroller Peter Franchot. Franchot asked why the board was given only a short time to go over a contract with such a large amount.

He said he was provided information about the deal late Tuesday afternoon, which did not give him ample time to examine the contract before the board meeting Wednesday morning.

He said he was not also satisfied that the contract specified only a 20 percent participation of minority and women-owned businesses instead of the 25 percent target. The director of the Maryland State Lottery Agency, Stephen Martino, explained that the state tried to get hold of the best price and increase minority business participation with manufacturers, but the final offers came only Tuesday morning.

Martino also stressed the urgency to place the orders for the machines at an early time to make it to the casino’s launching in October. The cost of the machines in the contract was also criticized for being too high. Franchot called it a “windfall” for the gaming industry. Jeffrey Hooke, an industry analyst said the cost per machines should only be around $10,000, but with the contract, the cost per machine would average about $46,542. Hooke said he has never heard of a price that high for a video lottery terminal.

O’Malley said he wanted to see the casino running as soon as possible so that it could already generate the needed revenue for the state. He also said his administration is in the right direction to comply with the 25 percent objective for minority and women-owned business participation in state contracts in general. Kopp admitted she is not a keen endorser of gambling, but she said the constitutional amendment authorizing 15,000 slot machines in five sites in the state was approved by voters in November 2008. She also said the machines may be expensive, but they would also yield higher earnings for the state.

Only 33 percent of the proceeds would be received by the operators, which is lower than most slot machine operators in other states. A proposal for a large casino near a popular mall in Anne Arundel County is still being settled in court because local residents objected to its location. Another casino near Ocean City at the Ocean Downs horse racing track might open late this year after clearing up asbestos problems in a building.

The state is expected to purchase 1,500 machines for this facility in the summer. Baltimore and Western Maryland sites still have no licensed operators. The board approved in April $600 million to purchase slot machines during the next five years. The contract approved by the board Wednesday represents the first payment for the initial purchase.