Reports of $1B casino loss wrong

CHARLES TOWN – Hollywood Casino doesn’t have as much to fear from a study as recent news reports might indicate, the study’s author said in an interview.

Sage Policy Group Chairman and CEO Anirban Basu said a report from the Oct. 11, Charleston Daily Mail warning of $1 billion in lost revenue to West Virginia if Maryland voters OK a ballot initiative calling for a new casino in Prince George’s County and table games significantly overstated the conclusions of his study.

“That’s not what we’re saying at all,” Basu said in an interview. “What our study indicates is that if Question 7 does not pass … Marylanders will continue to spend at Charles Town in numbers quite similar to those that existed before Maryland introduced gaming facilities. The point is that with the passage of Question 7, it would be significantly less than the $1.1 to $1.5 billion we project that Marylanders will spend in Charles Town over the next decade. But we don’t try to estimate how much less.”

Basu said in order to draw the conclusion that Hollywood Casino would lose $1 billion in revenue from the Maryland gaming market, one would have to assume that Charles Town’s market share would disappear. This, he says, is a bad assumption.

“We are not suggesting that Charles Town’s share of the Maryland market would go to zero,” he said. “That wouldn’t happen. And we presume that some people that have become habituated to gaming at Charles Town would continue to do so.”

But Basu argues the impact — while most likely much less than the reported $1 billion — could be substantial nonetheless.

“The impact would be consequential because of the geography of Prince George’s County particularly in relation to Montgomery County, (which) “is Maryland’s most populous and most affluent jurisdiction,” Basu said. “Since the introduction of slot machines in 1997, Maryland has been Charles Town’s most lucrative market, with the most supportive jurisdiction being Montgomery County.”

In addition, the new facility could increase competition over other important regional gaming markets like Northern Virginia.

“This would represent an opportunity for Maryland to enlarge its economy by attracting more out-of-state players, since the Prince George’s County facility would be quite proximate to Northern Virginia,” Basu said. “And Northern Virginia, of course, is home to some of the most affluent districts in the nation. The location of a facility in Prince George’s County that also offers table games would likely be an attractive combination.”

The Sage study was paid for by Maryland Jobs & Schools, a political action committee funded in part by MGM Resorts International, which has spent about $14 million in advertising in support of Question 7.

Basu said he thinks the Northern Virginia market is not yet “saturated,” that is, many potential gamers are not currently being served. Add a facility at Prince George’s County’s National Harbor could enlarge the regional gaming pie, meaning it would not only profit by competing over gamers currently patronizing existing facilities but also tap into as-yet untapped markets.

“A Prince George’s County facility would significantly increase the size of the marketplace by creating a venue that would be quite convenient to major Northern Virginia communities including Arlington and Fairfax County,” Basu said. “I think that it is true that there will be more competition in Maryland, but the market definition will also change. And which impact dominates the other is a function of how attractive the Prince George’s facility will be. That is the key. The facility has to become a destination in its own right.”

The potential impacts of a new casino in Maryland on county revenue are the subject of worries for Jefferson County.

“I think we all agree that it is a real danger to revenue, even if we can’t agree on the exact forecast,” said Commissioner Frances Morgan. “We’re trying to study it in case it happens. What we have done up to now is that we have asked our finance fellow (Paul) Shroyer to help us run some scenarios.”

Morgan said in the next few weeks, the Commission will consider what it might have to cut if it faced a 15 to 20 percent decline in revenue from gaming.

“It would be tough, there’s no question about it,” Morgan said. “Since, altogether, gaming revenue runs a little over 20 percent of our average annual budget right now, if that were cut into by a couple hundred thousand dollars or more it would be very serious. We would have to look at downsizing some programs or providing less services in various areas. We would have to make some tough choices.”

Commissioner Walt Pellish said it is important that the county focus on what can be done to positively ensure the county’s well-being in the future future, not just worry about Question 7.

“Quite frankly, this is why I’m so strongly concerned with economic development,” Pellish said. “We’ve got to broaden our revenue base by getting new businesses into this county.” Pellish said a more diversified business community would better shield county tax revenues from shocks in individual markets, like the potential shock posed by Maryland’s ballot question.

Nevertheless, Commissioner Lyn Widmyer said she believes the issue of Maryland gaming is going to play a big factor when the commissioners begin their budget discussions in October.

“Any decline in revenue will really effect the county budget, there is no doubt,” said Widmyer, who said she believes the county is focusing too much on expansion of retail businesses and should focus instead on “job centers.”

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