Marta Mossberg article – Continued O’Malley Failures
Taxpayers are always told catastrophic things will happen if certain taxes or spending measures are not passed immediately.
Schools will shut down, police will be laid off or children will starve are some of the excuses local and national politicians use to increase the reach and expense of government.
Most recently the “it’s an emergency” argument was used by some members of the Board of Public Works and lottery officials to justify passing a $50 million contract earlier this month to buy and lease about 1,000 slot machines for the planned Cecil County casino.
Gov. Martin O’Malley, one of the three BPW members, said the recession has already caused major delays in building the planned five facilities and that “I would like to see this.” At one point he estimated slots would generate $800 million for the state each year. The official figure now used is $600 million, but it’s dubious if or when the state treasury will start seeing the money because court cases have tied up two venues, one can’t attract bids even after the legislature sweetened the licensing deal and two are under construction.
So, this alleged panacea for state financial woe is not only not making any money, it is costing taxpayers about $47,000 per machine.
Marcus Prater, the executive director of the Association of Gaming Equipment Manufacturers, said slot machines generally cost from $13,000 to $17,000 each. He had not seen the contracts with the vendors, but said, “I don’t have any idea why they are so much.”
The contracts call for the manufacturers to “install, implement, support and maintain VLTs (Video Lottery Terminals) at the facilities specified in the VLT Law” through March 31, 2015. Maintenance may be expensive, but is it the equivalent of purchasing three new sets of machines over five years?
Comptroller Peter Franchot, another member of the BPW, did not think so. He voted against the measure, calling it a “windfall” for manufacturers. The companies should not be blamed for negotiating the highest bid for their products. But bureaucrats should be held accountable for slapping taxpayers in the face when they are already overburdened by some of the highest taxes in the nation and huge unfunded bills for state employee pensions and health care.
What’s worse is that this contract is likely only the first of many huge bills to come.
Industry analyst Eugene Christiansen said casinos are a capital-intensive business and that Maryland’s high tax rate on operators means they will not have the money to buy new machines. “Taxpayers will pay for it.”
He cited the lack of bids for Rocky Gap Lodge as an example of how the tax rate has already crippled the state and said it should be closer to 25 percent to attract business instead of the over 60 percent rate in effect for all five proposed locations.
As Jeffrey Hooke and Thomas Firey wrote in a 2003 paper for the Maryland Public Policy Institute, “Legalizing Video Slot Gaming in Maryland: A Business Analysis,” the best way to raise money for the state would have been to auction slots licenses to those willing to give the highest take to the state. It would have opened up the bidding process to a wider range of people and made operators responsible for buying and maintaining their facilities and equipment.
It’s not clear who wins under current law, but taxpayers are guaranteed to lose.
Marta Mossburg is a senior fellow at the Maryland Public Policy Institute.
David “Augie” Aughenbaugh
Candidate – MD House of Delegates – 12A


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