Thursday, November 01, 2007

Todays Sound Bites (on slots in Maryland)

Todays Baltimore Sun reports that the States share of slot machine profits will be 70%. One analyst says the profit margin will be so tight that gambling interests will shy away. On the other hand, another says this is among the most public-friendly gambling proposals around. Here are a bunch of quotes from the article
Maryland slot machine operators will pay one of the nation's highest casino tax rates - effectively 70 percent - if voters approve Gov. Martin O'Malley's plan to legalize the devices, and some industry analysts say that would mean low-end facilities catering mostly to the local population.

"It's going to limit how much you can give away to customers because the margin is so thin, and it will limit how much you can invest in the enterprise," said Lawrence Klatzkin, a gambling industry analyst and managing director of Jefferies Equity Research.

The margin is so tight, Klatzkin said, that Maryland would end up with "a lower-cost product with much more limited offerings" than slots casinos in surrounding states provide to their patrons.

"It doesn't mean that they won't make money," Klatzkin said, "but some of the richer, higher-quality customers will likely go to Dover, Del., or to West Virginia for more comps and giveaways and much better amenities."

Other analysts said the high tax rate is appropriate given how lucrative a slots license can be.

"This is by far the most innovative and taxpayer-friendly proposal set forth in the 50 states," said Jeffery C. Hooke, a Chevy Chase investment banker who studies the gambling industry nationally.

Hooke, who has criticized previous slots proposals in Maryland as a giveaway to racetrack owners, said the O'Malley administration "did a good job of addressing the enrichment problems that have bedeviled other states."
More than half of that revenue, $767 million, would go into an education trust fund. Operators of the slots casinos would get $451 million, and the horseracing industry would get $128 million a year to increase purses ($128 million, WOW)

It looks like the DeFrancis' are the biggest winners.
DeFrancis and minority owners of the Maryland Jockey Club sold their stake in Laurel Park and Pimlico Race Course and other racing enterprises to Toronto-based Magna Entertainment Corp. in September. They stand to collect 65 percent of the net profits from slots, after expenses, during the first five years, however, then 50 percent for the next five years and 40 percent in the next decade, according to Securities and Exchange Commission filings.

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