Slot Machines Could be Fancy, and Pricey

By ADAM KERLIN

ANNAPOLIS (April 02, 2010)—Pull a lever and win some coins. While this may be what a typical person thinks of when envisioning slot machines, gamblers in Maryland may be in for a much more interactive experience when the state's slots parlors begin opening this fall.

Visiting the state's gaming facilities might mean taking a mystical journey into an ancient Mayan realm to the sounds of "soothing world music." Or gamblers might head to the farm and play Cock-A-Doodle-Dough, a state of the art video lottery terminal featuring farm animals that break into song with every winning combination of "nesting hens."

But a proposal by the Maryland State Lottery Agencythat could allow spending more than $50,000 per machine has alarmed some public officials who think that's too much taxpayer money, creating another obstacle for a state gambling industry already beset by problems.

The Board of Public Works was scheduled to vote on a contract that would allow the Maryland Lottery to begin purchasing slot machines in advance of two Maryland slots parlors opening this fall, but the costs and opposing ideas on how to acquire the machines forced a postponement of the vote until Wednesday.

The Maryland Lottery is proposing a master contract that would lock the state into an agreement with nine approved manufacturers of gaming machines. The overarching contract, capped at $800 million over a 10-year period, would allow the Maryland Lottery to create subcontracts with any of the nine companies as needed, without having to gain approval from the Board of Public Works each time.

Members of the Maryland Lottery told Gov. Martin O'Malley, Comptroller Peter Franchot and Treasurer Nancy K. Kopp last week that the master contract would enable them to get slot machines into gaming facilities more quickly, but Franchot expressed concern for what he called an "unfunded contract."

"Frankly, I just see it as a risky and irresponsible way to deal with fiscal policy," Franchot said. He preferred that each purchase be brought before the Board of Public Works.

Franchot also was taken aback by the proposed contract's budget, which would allot enough money to spend an average of $53,333 for the purchase and maintenance of each of the 15,000 video lottery terminals Maryland is planning to buy.

"What are these machines made of?" Franchot said.

Maryland's gaming laws require the state to own all the machines that will eventually be placed in five privately owned slots parlors, which have all encountered highly publicized obstacles in getting open. Maryland's provision that mandates ownership of gaming machines mimics laws in Delaware, Rhode Island and New York.

John Finamore, senior vice president of regional operations for Penn National Gaming Inc., said his company's ownership of the Cecil County slots parlor, set to open this fall, will be Penn National's first endeavor in a state that owns the machines in one of its facilities. And although Finamore compared the variation in prices of slot machines to that of automobiles, ranging drastically with respect to newness and quality, his price range was nowhere near the price-per-machine estimate that concerned Franchot.

"There are big ranges," Finamore said. "The typical average is somewhere in the $16,000 to $20,000 range."

Finamore said it typically takes up to 10 weeks for a company to receive slot machines after ordering them, and an additional eight weeks to install them on the floor of a gaming facility. The approximately 18 weeks it takes to order, ship and install slot machines doesn't include time-consuming contract negotiations, which would all have to be approved by the Board of Public Works if the Maryland Lottery's master contract isn't awarded.

"Generally they don't have these machines sitting on a shelf," Finamore said of the companies that manufacture machines specifically for their buyers. "It's not like ordering some type of product you see in a hardware store."

Penn National typically negotiates contracts based on a certain number of machines on a company-by-company basis.

Carole Everett, the state lottery's director of communications, said in an e-mail that the Maryland Lottery can't answer any specific price questions until they gain approval for a contract.

She said the master contract would set a maximum amount they could spend purchasing machines, but the total amount spent after they're all bought through subcontracts might not be that much.

Of the nine companies listed on the proposed contract, eight are spread across five states and one is in Canada.

Diamond Game Enterprises Inc., one of the nine companies approved under the potential master contract, touts itself as the "innovator for emerging markets," using state of the art animations, sounds and graphics to sell their products.

Shuffle Master Inc., a Las Vegas based company, was also approved under the possible master contract. Unique in comparison to the proposed contract's other manufacturers, Shuffle Master focuses mainly on producing table games, making slot machines only for some markets.

There has been a push for table games in the Maryland General Assembly this legislative session. Some delegates and senators, led by Senate President Thomas V. Mike Miller Jr., have sponsored bills that support adding card and table games to Maryland's gaming laws.

But without the support of O'Malley and House Speaker Michael E. Busch, who believe the state needs to work on establishing slots before pushing for table games, a bill allowing table games in the state's five slots parlors seems to be going nowhere.

A bill sponsored by Miller supporting card games at Rosecroft Raceway in Prince George's County has passed the Senate, but needs approval by the House before it can be put before voters in a referendum.

Everett did not comment on whether Shuffle Master Inc. was included in the contract in case bills supporting table games pass. She simply said the nine companies on the proposed master contract are included because they were all found to be technically qualified.



Capital News Service contributed to this report.