When A Casino Project Is A Very Bad Bet

12686_diceorb When A Casino Project Is A Very Bad Bet BLOG VIEW: Back in July, I called attention to a dubious scheme to boost the sagging fortunes of National Harbor, a mixed-use complex located in Maryland's Prince George's County – across the Potomac River from Washington, D.C. – by adding a casino to the property. The entire endeavor smelled for too many reasons, ranging from proposed sweetheart tax deals for the casino's potential operator to the intentionally vague claim of a local jobs bonanza once the gaming would begin.

Of course, anyone who is even vaguely familiar with markets boasting casinos knows that these outlets have no solid history of building and maintaining long-term regional wealth – especially during periods of economic fragility. (Can you say ‘Las Vegas’ or ‘Atlantic City’?) There is also the ethical question of encouraging gambling during periods of economic hardship – and anyone taking a casual stroll through a casino on any given day can clearly see that denizens of gaming venues are often the ones who can least afford to waste their money on slot machines.

The Maryland state government, to its credit, was aware of this issue. The good news is that the state's Department of Legislative Services (DLS) hired PricewaterhouseCoopers (PwC) to do an analysis of the proposed project. Ah, but there is also bad news: since June, the DLS has repeatedly refused to acknowledge requests by Republican state legislators to see the results of the PwC data.

According to a story published last week by MarylandReporter.com, House Minority Leader Tony O'Donnell and Del. Susan Krebs say they have only received a copy of PwC's bill for $61,730. And what did the state get for its $61,730? Your guess is as good as mine.

What is the excuse for DLS' refusal to present the full PwC report? According to Warren Deschenaux, DLS director of policy analysis, his department is ‘obligated to protect [PwC's] proprietary data, tools and methods.’ Odd, but I thought state government's first obligation was to protect the people it served – especially against shady characters seeking to make a fast buck at the taxpayer's expense.

I've said it before and I will say it again: any state that seeks to bring in new commercial developments must first focus on establishing a positive tax structure that will attract serious growth industries. That is not the case in Maryland: on July 1, the financially successful residents received a 14% increase on their state taxes. Really, who would want to set up a new business in a such an environment?

Also, commercial developments need to attract high-paying jobs. Casinos are a great place to work if your career aspirations run the gamut from cocktail waitress to food court cashier, but this is not an industry that will encourage and maintain a strong economic base through the creation of well-paying full-time jobs.

Furthermore, any significant commercial development proposals need to have housing-related aspects – after all, the people being attracted to these new businesses will need a place to live. The Maryland casino scheme has no housing element, and affordable housing has been a problem in Prince George's County for many years.

And last, but hardly least, tomorrow's commercial developments cannot rely on the generosity of the taxpayers. National Harbor is a prime example of the problems associated with that strategy. According to a report by Baltimore's WBAL-TV, the county and the state provided $360 million over the past seven years to National Harbor, which ultimately cost $870 million to build.

But last year, the Gaylord Hotel, the complex's anchor attraction, saw a 4.9% decline in its occupancy rate and a 9.6% drop in visitor spending outside of the hotel. If the economy continues to remain unsteady – and I am seeing no evidence that happy days are here again – it is hard to imagine the complex enjoying a financial renaissance within the near future.

In fairness, it should be noted that the casino was not the initial choice for reviving National Harbor. Originally, the complex's operators reached out to Disney with the idea of creating a resort at National Harbor. After toying with the idea, Disney declined and sought after more lucrative and intelligent projects. Really, if Mickey Mouse is holding his nose and walking away from this mess, why would anyone else want to be involved at National Harbor?

– Phil Hall, editor, MortgageOrb

(Please address all comments regarding this opinion column to hallp@mortgageorb.com.)


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