Baltimore Mayor Stephanie Rawlings-Blake said during her 2011 election campaign that under her “Fiscal Responsible Plan,” 90 percent of a proposed casino’s lease payments, or .8 million projected for 2015, would provide property tax relief into the future–“20 cents by 2020″.
Caesars Entertainment gave Rawlings-Blake a $4,000 campaign contribution, the maximum allowed, and later won a bid to build Horseshoe Casino on an unused, city-owned part of Russell Street, previously occupied by a chemical company. The facility opened last August.
Today Caesars Entertainment is in bankruptcy court and no property tax relief is in sight. The casino has not met expectations and in fact is generating one-third less revenues than projected, triggering a clause in the ground lease requiring a “minimum payment” of $8 million in “year one” if the city’s 2.99 percent share of gambling revenues doesn’t reach that threshold. However, the casino has been allowed to delay paying part $4 million of the $8 million of the required minimum payment, under an arrangement structured by the Baltimore Development Corporation last year.
Budget Director Andrew Kleine explained since Horseshoe didn’t open until August 26, 2014, seven weeks after the start of the current fiscal year, the casino’s second installment of $4 million for “year one” will not be due until fiscal 2016, leaving a $10 million gap in the current Baltimore city budget, with taxes remaining at their current $2.13 per $100 of assessed value in 2016. That’s double the rate of Baltimore County, Anne Arundel County and other surrounding jurisdictions. As a result, Rawlings-Blake recently wrote in the Baltimore Sun that because her “20 cents by 2020″ tax reduction plan is ahead of schedule, “my finance department recommends” in property tax cuts in 2016. She added the one-year “pause” will not be permanent.
However, in order to meet the lease agreement, Horseshoe is expected to pay Baltimore a guaranteed minimum of $10 million in “year two” of operations, $12 million in year three, $13 million in year four (fiscal 2018) and $14 million in year five and thereafter. The final scheduled amount is about twice the amount the casino is having difficulty paying.
Adding to the challenges, Horseshoe’s nearest competitor, Maryland Live at Arundel Mills, consistently has earned higher revenues than Horseshoe. Last month, Maryland Live grossed $52 million compared to Horseshoe’s $24.7 million.
In addition, the $1.2 billion MGM National Harbor casino-hotel-mall-spa in Prince George’s County will open next year and is sure to lure players in the D.C.-Virginia market who now patronize Horseshoe.
Slots are earning revenue, but the casino’s recently added table games have not produced the expected gains, based on Maryland Gaming Board figures. Officials hope as the weather warms up, more customers will come out and that Caesars’ Total Awards customer loyalty program also might help the bottom line.
Caesars still owes Baltimore about $4.7 million the group owes for the land on Warner Street used for Horseshoe’s parking garage. That lump-sum payment is due on October 31, 2017.
