Gaming Program Charles LaBoy CPA Assistant Director for Gaming - - PowerPoint PPT Presentation

Overview of Maryland’s Gaming Program

Charles LaBoy CPA Assistant Director for Gaming Maryland Lottery and Gaming Control Agency April 24, 2014

History of Slot Machines in MD

 1937 – 1939: Slot machines authorized statewide  To provide revenues for the needy  Near the end of the Great Depression.  Original legislation set to expire on April 30, 1939  Several legislative attempts to continue slots in certain counties – Anne Arundel, Charles, Montgomery, and Prince George’s.  Governor Herbert O’Conor vetoed bills: “Using gaming devices to raise revenue was detrimental to the overall interests of the State.”  1941: Governor O’Conor vetoed legislation for slot machines in Anne Arundel and Garrett counties  1943: Governor O’Conor signed bill allowing slots in Anne Arundel County.

History of Slots Continued

 Late 1940s: legislation for slots in Calvert, Charles, and

• St. Mary’s counties

 By 1949, Southern Maryland was the only place in the continental United States outside of Nevada with slot machines.

 About 6,000 slot machines licensed licensed in the four counties.  Supporters: Revenues and jobs  Opponents: Political corruption

 1963: Governor J. Millard Tawes abolished slots

 Gradual reduction in the number of machines over 5 years  Complete prohibition by July 1, 1968

“Little Reno” Casino in Colonial Beach, VA A Nickel Slot Machine

History of Slots Continued

 Despite prohibition, many fraternal organizations continued to operate slots, using State laws permitting charitable activities as the legal rationale.

 1984: AG ruled operation of these slots illegal

 1987: legislation authorized slots in Eastern Shore counties

(except Worcester County – has since been added)

 Veterans’ organizations can operate no more than five machines, and 50% of the proceeds must go to charity.  Machines are licensed by the local jurisdiction  Annual audits by the Comptroller’s office.

 In the 2003 legislative session, there were a number of pieces of legislation considered by the General Assembly relating to video lottery terminals (VLTs).

2007 Legislation (Special Session) 2008 Referendum

 2007: General Assembly enacted legislation to allow Marylanders to vote on a limited number of slot machines in the State  Maximum of 15,000 slots statewide – Slots Only  Only one license per specified location in Anne Arundel, Cecil, Worcester, and Allegany Counties, and Baltimore City.  Any additional forms or expansion of commercial gaming in Maryland is prohibited, unless approved by a voter referendum.  On November 4, 2008, 58.7% of voters statewide approved the referendum.

 Voters in all 24 jurisdictions approved the referendum.

2012 Special Session 2 2012 Ballot Question

 Why is Prince George’s County being added now?

 Politics  New leadership  Realizing the lost potential in local revenue

 In 2012, some people wanted table games but not a 6th location;

• thers wanted both.

 Compromises were made

 Special Session 2, SB 1 added:

 A 6th location in Prince George’s County  Table Games  24-Hour Operations at all casinos  Ballot question had to pass statewide and in Prince George’s County.

2012 Ballot Question

Spent $44 million Spent $46 million

• Election Results:
• 51.9% voted for Question 7 statewide
• 59.4% Voted for Question 7 in Prince George’s County
• Only passed in 12 Counties

Vote YES on Question 7

Vote NO on Question 7

Purpose of the Gaming Program

 Raising Revenue for:

 education of children in public schools;  pre-kindergarten through grade 12;  public school construction and improvements; and  construction of capital projects at community colleges and higher education institutions.

 The majority of revenues go to the state’s Education Trust Fund (ETF)  Funds also go to:

 Horseracing Purse Dedication Account (PDA)  Racetrack Facility Renewal Account (RFRA)  Minority and Women-Owned Businesses Account  Maryland Lottery and Gaming Control Agency  Local Impact Aid

Current Casino Locations

Casino Jurisdictions

Anne Arundel County

Cecil County Perryville, MD Worcester County Allegany County Baltimore City

Distribution of Proceeds

Baltimore City (CBAC/Horseshoe) Maryland Live! Hollywood Casino at Perryville The Casino at Ocean Downs Rocky Gap Casino and Resort Prince George’s Casino (MGM)

Pre-July 2013 Operator’s Share

33% 33% 33% 33% 50%

• As of July 1, 2013

33% 33% 33% *43% 50%

• Machine

Ownership: April 2015*

6% 8% 6% 0% 0% 6%

Issuance of Prince George’s license (7/1/16)

**7% **8% 0% 0% 0% 38%

Addt’l adjustments allowed (7/1/19)****

Up to 3% Up to 2% Up to 5%** 0% 0% 0%

*Casinos with less than 1,000 VLTs – state will continue to own/lease; casino gets 43% operator’s share, provided they spend 2.5% of VLT proceeds on capital improvements each year; Horseshoe and Prince George’s get 6% upon opening. **To be used for marketing, advertising, and promotional costs and capital improvements. ****If Commission increases percentage in Anne Arundel County, the Commission shall increase the percentage for Baltimore City by at least the same percentage point increase as for Anne Arundel County.

**7% **8% 8% *43%

Distribution of VLT Proceeds (All casinos except Rocky Gap)

FY 14 7/1/14 – 3/31/15 4/1/15 – 6/30/15 FY 16 FY 17 Local Impact 5.50% 5.50% 5.50% 5.50% 5.50% PDA 7.00% 7.00% 7.00% 7.00% 6.00% RFRA 1.75% 1.00% 1.00% 1.00% 1.00% Small, Minority and Women-Owned Businesses Account 1.50% 1.50% 1.50% 1.50% 1.50% MLGCA Operations 2.00% 2.00% 1.00% 1.00% 1.00% 1.75% 1.00% 7.00% 6.00% 2.00% 1.00%

4/1/15 – 6/30/15

Rocky Gap Casino and Resort Distribution of Proceeds

FY 14 FY 23 Licensee 50.00% 43.00% Local Impact 2.75% 5.50% PDA 2.50% 6.00% RFRA 0.00% 1.00% Small, Minority and Women-Owned Businesses Account 0.75% 1.50% MLGCA Operations 2.00% 2.00% Education Trust Fund (ETF) 42.00% 41.00%

Table Games Distribution

FY 14 – FY 17 FY 17 - ongoing Licensee 80.00% 80.00% ETF 20.00% 15.00% Local 0.00% 5.00% Baltimore City Casino FY 17 - ongoing Division of the 5% 50% to fund school construction projects 50% to fund maintenance, operation, and construction of recreational facilities

GAMING PROGRAM CONTRIBUTIONS TO THE STATE OF MARYLAND

TOTAL $1,376,017,296

INSTITUTION TOTAL

Maryland Education Trust Fund $613,744,263 Casino Operators $500,923,076 Horse Racing Purse Dedication Account $81,921,154 Local Impact Grants $64,543,027 Racetracks Facility Renewal Accounts $22,836,610 Maryland Lottery $24,694,542 Small, Minority, and Women-Owned Business $17,603,616

*As of January 31, 2014

Local Development Councils (LDC)

 LDCs must be in each geographic area where a casino is located  15 members, appointed by the chief executive of the county in which the LDC is located (In consultation with the Senators and Delegates

who represent the communities surrounding the casino and the respective county councils, city councils, or county commissioners.)

 1 Senator who represents the casino’s district  2 Delegates who represent the districts where the communities surrounding the facility are located  1 representative of the casino  7 residents of the communities in immediate proximity to the casino; and  4 representatives of business or institutions located in immediate proximity to the casino

Use of Local Impact Grants

 Generally: Improvements primarily in the communities in immediate proximity to the casino and for the following purposes:

 Infrastructure improvements;  Facilities;  Public safety;  Sanitation;  Economic and community development, including housing; and  Other public services and improvements

 Allegany County: uses above and pay down debt incurred by the county in the construction and related costs.  Baltimore City: Improvements in the immediate proximity to the casino for uses above.  Prince George’s County: 40% (not to exceed $15 million) shall be used to address infrastructure needs related to Maryland Route 210.

Anne Arundel County Local Development Council

Primarily in the communities in immediate proximity =

3 Mile Area

Baltimore City Local Development Council (Immediate Proximity)

3 miles

Responsibilities of the Local Development Council and County Government

 A county shall develop a multi-year plan for how to spend the funds  Submit the plan to the LDC for review and comment before adopting the plan or expending any funds  LDC shall advise the county or municipality on the impact of the casino on the communities and identify needs and priorities to address the impacts.

Baltimore City Local Development Council

MISSION The Council has three primary roles and missions: (1) consultation on the expenditures of the local impact funds (2) review of the Casino licensee’s master plan for the development of the Casino site (3) consultation on transportation planning

Distribution of Local Impact Grants

 82% to the local jurisdictions with a casino, based on each jurisdiction’s percentage of overall gross revenues from slots.  From FY 12 – FY 32, 18% to Baltimore City with the Pimlico Community Development Authority acting as the LDC.

 For capital projects benefiting economic and community development:

 At least 75% consistent with the Park Heights Master Plan; and  The remainder dedicated to the needs of:  Any census blockgroup that Baltimore City identifies as being located partly or entirely within 1 mile of Pimlico Race Course, but not within the boundaries of the Park Heights Master Plan; and  Any neighborhood included in the Northwest Community Planning Forum Strategic Neighborhood Action Plan  Out of the 18% above, $1 million provided annually to Prince George’s County for public safety projects in the community within 5 miles surrounding Rosecroft Raceway

Distribution of Local Impact Grants

For a casino at Ocean Downs:

 60% to Worcester County;  20% to Ocean City;  10% to Town of Berlin; and  10% to Ocean Pines (for specified infrastructure projects)

*See Section 8A, Ch. 4, Acts 2007 Sp. Sess., as amended by Ch. 479, Acts 2009.

Distribution Changes When Baltimore City Casino Opens

 100% of the local impact grants from slots in Allegany, Cecil, and Worcester counties shall be distributed to the local jurisdictions in which the casino is located.  What does that mean exactly?

 These three counties will no longer contribute to the “pool” of money used to distribute the 82% proportionally and the 18% to Pimlico.  The “pool” for these will only be made up of Maryland Live, Horseshoe Baltimore, and eventually the Prince George’s Casino.

Distribution Changes When Prince George’s Casino Opens

 Additional Lump Sum Local Impact Grants

 Allegany County - $200,000  Cecil County - $130,000  Town of Perryville - $70,000; and  Worcester County - $200,000

 Then distribute the 82% and 18%

 The distribution of the 82% equals the sum of the amounts to be distributed to Anne Arundel County, Baltimore City, and Prince George’s County divided by three.

 The three smaller counties – Allegany, Cecil, and Worcester – still get 100% of their local impact money.  The lump sum grants come from the “pool” of Maryland Live, Horseshoe Baltimore, and Prince George’s Casino.

Casino Revenue Projections

MLGCA Contracts with Gaming Revenue Consultants

 MLGCA contracts with two independent consultants who use their own proprietary “Gravity Model” to estimate revenue.  The two consultants compare results and revise if necessary  MLGCA uses the average of the two estimates  MLGCA posts all reports and presentations on gaming.mdlottery.com  MLGCA and Consultants present findings to Board of Revenue Estimates’ “Revenue Monitoring Consensus Group”

Board of Revenue Estimates (BRE)

 Estimate revenues that fund State government  The Board sends to the Governor, for submission to the General Assembly, an itemized statement of estimated revenues for the current and next fiscal years along with recommendations.  Reviews findings and recommendations of the Revenue Monitoring Consensus Group.

 Department of Legislative Services  Department of Budget and Management  Comptroller’s Office  Treasurer’s Office  MDOT

 The Board has three ex officio members: the Comptroller of Maryland, the State Treasurer, and the Secretary of Budget and Management.  The Director of the Bureau of Revenue Estimates serves as Executive Secretary.  As of December 2013, the BRE is estimating casino revenue.

BRE’s December 2013 Estimates (Slots)

 FY 13

 Maryland Live’s first full operational year  Casino revenue from VLTs increased 188%  Total of $560.3 million

 FY 14 (Est.)

 Casino revenue from VLTs Increase by 10.1%  Total of $616.7 million

 FY 15 (Est.)

 Horseshoe Casino in Baltimore scheduled to open  Casino revenues from VLT increase by 23.1%  Total of $759.4 million

BRE’s December 2013 Estimates (Table Games)

 FY 13 (Four months)

 Total of $48.0 million

 FY 14 (Est.)

 Year-to-date through November total of $90.7 million  Total of $236.8 million

 FY 15 (Est.)

 Horseshoe Casino in Baltimore scheduled to open  Total of $326.4 million

Casino Revenues

Fiscal Years 2012 - 2015 ($ in millions)

FY12 FY13 FY14 (Est.) FY15 (Est.) ETF 94.3 284.3 344.3 417.0 Operator’s Share 64.2 223.8 401.6 545.0 Local Impact 10.7 30.7 33.4 40.7 Small, Minority, Women Businesses 2.9 8.4 9.1 11.1 PDA 13.6 39.1 42.3 51.5 RFRA 4.9 10.8 10.4 7.2 MLGCA 3.9 11.2 12.3 13.3 194.5 608.3 853.4 1,085.8

Monthly Revenue Reports

 MLGCA puts out the previous month’s revenue numbers on the 5th of the month  Charts on gaming.mdlottery.com>FINANCIAL REPORTING  VLT Revenue and all statutory distributions  Table Game Revenue

 Banking Games: Players play against the House (BJ, Roulette, Craps, etc.)  Non-banking Games: Players play against each other (Poker)

 VLT and Table Game monthly revenues by casino

Questions