Maryland Slot Reductions OK’s by Commission

State senators in Maryland were delaying any decision on requests from Horseshoe Baltimore (l.) and Maryland Live! to reduce their numbers of slot machines in favor of more table games but late last week the Maryland Lottery and Gaming Control Commission voted unanimously to approve the reductions.

Requests for permission to remove money-losing video lottery terminals in favor of more table games by two Maryland casinos were being scrutinized heavily by the state Senate, which was delaying a decision on granting the requests.

Requests were made several weeks ago by Maryland Live! and Horseshoe Casino Baltimore, the state’s two largest casinos, to remove “underperforming video lottery terminals” and use the space to install more table games. Each casino requested permission to remove 300 slots in favor of the tables. The state approved a similar 300-machine reduction last month for Hollywood Casino Perryville.

But late last week, the Maryland Lottery and Gaming Control Commission unanimously approved the removal of hundreds of slot machines in favor or more table games.

Senators said they were hesitant to remove the heavily taxed slots for table games, from which the state receives a lower cut of revenues.

“As you know, any reduction in the number of video lottery terminals will have a significant impact on state revenues,” wrote state Senator Edward Kasemeyer, chairman of the Senate Budget and Taxation Committee, in a letter to Maryland Lottery and Gaming Control Commission Chairwoman Kimberly Robertson. “As such, I request that the commission delay any decisions on these requests until the Senate Budget and Taxation Committee has had an opportunity to receive an briefing on the impact the reductions may have on state revenues.”

Slot revenues are taxed at an effective 67 percent in Maryland, while table-game revenues are taxed at 20 percent.

An emergency hearing was called by the budget committee to hear testimony from casino officials on the impact of the slot-to-table switches. Casino consultant Will Cummings testified that the change will ultimately have a positive impact on overall state revenue.

“The table market here is so strong and the amount of money that each table brings in is so high that you will make more money—in the Horseshoe’s case, immediately, and in my analysis of Maryland Live!, over the longer term,” he said.

Initial projections by the casino estimate that removal of 300 slots from the Horseshoe would result in an initial decrease of revenue of $518,000, but adding 30 table games would boost tax revenue by $778,000—a net annual gain of $260,000. The Maryland Live! reduction would result in a similar slot revenue loss, but the casino did not specify the number of table games it would add.

“Casinos are not static businesses; there are many moving parts,” Cummins testified. “If you leave them be, if you just let them sit, your current revenues will not be sustainable. You continually have to reinvest and reinvent your facilities to maintain revenues, let alone grow them in the future. The operators will be able to do a better job of that with 300 fewer machines than they have today.”

Horseshoe Casino Baltimore and Maryland Live! Casino at Arundel Mills Mall will each reduce their count of slot machines by 300, bringing the number of slots at the Baltimore facility down to 2,200, and the pool of machines at Maryland Live! to 3,922. The reductions will be completed by April 1.

“The big question in Maryland was, is Maryland going to be more like the top facilities in the East—which would be an exceptional situation as it appeared at the time—or would it be more like the rest of the country with 10 to 20 percent of the total business coming from the tables?” Cummings told the Washington Business Journal. “The market here has turned out to be stronger than independent analysts and I’m sure the casino operators when they made their plans envisioned.”