Clay Mitchell -- National Harbor: Unleash Its Economic Powers

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By Clayton A. Mitchell, Sr., Esquire

A proposal to expand gaming and to grant a sixth gaming license in Prince George’s County is on the forefront in Annapolis. Governor O’Malley, recognizing that the gaming industry in Maryland needs to be perfected and further developed, recently called for a Special Session for early August. At stake is the viability of a proposed gaming operation at National Harbor – a development that could create thousands of jobs and generate hundreds of millions of dollars for the State’s treasury. Even though this proposal seems like a proverbial “no brainer,” there is significant protest by a small group of organized business interests.

The principal owners of the Maryland Live! Casino in Anne Arundel County and their confederates assert that the National Harbor project should not be built because it is allegedly unfair and would render their casino businesses “unsustainable”. If indeed their operations are unsustainable, it is not because of perceived unfair potential competition - it is solely because our Legislature did not have the intestinal fortitude to do things right by establishing an all-out Maryland gaming industry from the outset.

A significant plurality of legislators is satisfied to fetter casino operators to slot machines. This group is willing to forego the substantial additional revenues derived from expanded gaming. They will do this because some of their powerful leaders have a gambling phobia and because influential existing gaming operators subjectively fear a loss of market share. These same legislators are prepared to cede the entire table game business to several surrounding states and, as a consequence, deliberately permit millions of dollars to keep flowing out of Maryland into these states’ treasuries. In order to assuage current gaming operators’ self-serving concerns and the irrational fears of a few leaders, what does this small but powerful group of legislators want you to do? Help them say “no” to thousands of new jobs and economic development at National Harbor.

In a recent media blitz, the expanded gaming antagonists have attempted to reorient the public conversation surrounding the National Harbor project from that of a legislatively-sanctioned economic development and jobs project to a fairy tale about “billionaire casino” operators getting “tax breaks” on the backs of “ordinary” Marylanders. This argument is a masquerade executed to prevent healthy competition and to cartelize a gaming oligopoly within Maryland.

According to a detailed analysis performed by Union Gaming Analytics of Las Vegas, Marylanders currently spend an estimated $620 million to $830 million annually on gaming in other states. Those significant lost dollars are voluntarily taken away from the Maryland economy because our state lacks commercially desirable gaming attractions. What do these other states’ casinos have that Maryland’s casinos do not? Table games and other sought-after destination amenities. Notwithstanding the expanded gaming opponents’ affectations to the contrary, if gaming in Maryland was expanded to include table games, Union Gaming Analytics estimates that the Maryland Live! Casino alone could increase its net revenues by $67 million annually – even in the face of an additional Maryland casino fifty miles to the south. Not too shabby.

Maryland’s public policy on gaming should not aim to maximize or preserve any one casino operator’s profits; it should be to create a catalyst for private sector job growth and to increase our state’s tax base. If expanded gaming was to materialize and the National Harbor casino became a reality, over 8,300 new direct and indirect permanent Maryland jobs are expected. Maryland would receive an estimated additional $269 million in gaming taxes from out-of-state residents and $69 million in non-gaming taxes. The net tax proceeds to Maryland’s coffers from gaming expansion overall is estimated to total $522 million annually. This accelerated economic activity is good for both the private and public sectors.

Maryland has not and should not seek to grant or foster legislatively-sanctioned franchise gaming monopolies. A measured dose of business competition yields better products and services. But even with the addition of the National Harbor casino, Union Gaming Analytics finds that the gaming market within fifty miles of National Harbor will be far from saturated and clearly able to absorb the additional gaming supply. Because of a lack of proximate venues, the population living within fifty miles of the proposed National Harbor currently spends significantly less on gaming than other comparable markets in the United States. There is demonstrable excess capacity to absorb a sixth casino – especially one in the lucrative Washington beltway area.

The opposition’s comparison of gaming taxes to other taxes is a ruse. Property taxes, income taxes, sales taxes and gaming taxes involve mutually exclusive policy considerations. Each tax rate must be separately evaluated on its own merits. At sixty-seven percent (67%), Maryland currently has the highest video lottery (slot machine) tax rate than all competing casinos in the Mid-Atlantic region. The Maryland rate is 7.3% to 12% higher than in Delaware, West Virginia and Pennsylvania. The effect of this significantly higher tax prevents operators from investing significant capital back into their properties and marketing programs. As a result, the current gaming product offered by Maryland is unattractive when compared to the gaming offerings of its neighboring states. With the prospect of creating thousands of jobs in a short period of time, this inequity must be legislatively remedied.

If Marylanders believe that other taxes should be reduced, they must renew their pleas on a case-by-case basis to their legislative representatives. To shoestring separate tax policies together is an intentional strategy of the National Harbor opponents to change the conversation from the merits of National Harbor’s beneficial economic impact to a re-litigation of increasing sales and income taxes.

What do the National Harbor opponents want you to do to rectify these perceived unfair tax increases? They want you to say “no” to jobs for thousands of unemployed citizens. This is exactly the discussion the opponents to National Harbor want you to have in order to preserve their economic self-interest.

According to OpinionWorks, a research and communications firm in Annapolis, there is strong support for expanding gaming by adding table games. Fifty-two percent (52%) of voters want to add table games to Maryland’s casinos while a mere twenty-three percent (23%) prefer limiting gaming to the existing slots. Eleven percent (11%) were unsure how they felt and fourteen percent (14%) said they do not support a slots program at all. When informed that expanding gaming would create over 3,000 good paying jobs, fifty-nine percent (59%) of voters supported table games.

Marylanders understand that job creation and expanded economic opportunities are the only important issues in this election cycle. Straw man arguments regarding prior fiscal decisions cannot eclipse the fact that we have the immediate power to create a world-class gaming industry in Maryland – an industry with a job-creating engine that can fuel the private economy and supplement the public coffers.

I believe in Maryland exceptionalism. In the recent economic downturn, we have acted to preserve our superior school systems, our triple-A bond rating, and our public priorities. Let us not fall into the trappings of the national political debate and engage in class warfare and status-envy. I do not want Maryland to feel it has to affirm its belief in fundamental fairness by throwing away its ability to distinguish between the intrinsic merits of tax policy as it relates to a modern job-creating industry and its tax policy as it relates to individuals.

Who doubts that if similar tax breaks were proposed for the expansion of solar energy plants, or if the expansion of permissible activities for eco-friendly manufacturing plants was proposed to promote the same magnitude of job creation, that the entire Legislature would overwhelmingly vote in favor of such a bill with giddy enthusiasm?

The anti-expanded gaming cartel want us to be beguiled – to not use our minds and to not consider the proposed National Harbor project by employing a hard economic analysis – and they want us to instead express to our legislators a general dissatisfaction with our current individual economic plights by opposing much needed economic development by so-called “billionaire” casino developers at National Harbor.

We ought to be angry, not at wealthy developers, but at those legislators who did not have the willpower to permit the gaming industry to initially develop in ways that made competitive interstate economic sense. Do we want to take out our frustrations on fellow citizens who seek nothing more than good jobs? Is that the kind of satisfaction to which we feel entitled? No.

Let us recognize that as the result of past lamentable decisions regarding gaming that we must now proceed in a reasonable deliberate manner to correct that which was initially done wrong. Demand that your legislators vote to expand gaming to include table games, permit the granting of additional gaming licenses and let the Maryland marketplace unleash its economic powers.

Clayton A. Mitchell, Sr. is an attorney in Stevensville and regular contributor to Center Maryland.

Editor’s Note: Some founders of Center Maryland are involved in the National Harbor project.
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