Cecil County Slots: County Pays to Play (A Cecil Times Special Report)

April 6, 2011

The old state lottery slogan, “you gotta play to win,” will take on a new meaning when Cecil County and the Town of Perryville begin divvying up their proceeds from the state’s first slots parlor, Hollywood Casino in Perryville. Private promises of financial help to lure the casino here are now coming home to roost, with at least $2.2 million expected to be turned back to the casino under a 2009 agreement that is only coming to light now.

The money that local government will receive from slots revenues does not come without strings attached, according to a lengthy Cecil Times review of government documents and interviews with participants in the largely private process that led up to an agreement to reimburse Penn National Gaming (PNG), the casino operator, for road and sewer infrastructure costs the company incurred while developing the facility.

The county and the town are now proposing to pay back about $2.23 million in reimbursements of infrastructure costs incurred by Penn National Gaming to get the slots parlor built. The reimbursements would come out of revenues the county and town will receive under “local impact aid” paid by the state out of slots revenues.

The county’s proposed $1.2 million share could be allocated over a three year span, amounting to about $400,000 a year for three years, while a three-year payback by the town of about $1.03 million would amount to $343,500 a year. The town is picking up part of the costs of sewer improvements while the county is refusing to cover sewer costs.

Nevertheless, those costs are far less than the overall economic benefits to the county and the town, both in terms of “impact aid” revenues and the jobs and associated economic development impact of the casino.

So far, the Hollywood casino has generated a total of over $2.4 million in local “impact aid” to Cecil County and the Town of Perryville from its opening last fall through February, 2011, according to the state Lottery Commission. Those proceeds are divided, with the county receiving 65 percent and the town 35 percent. [UPDATE: March figures raise the total local impact aid to $2,979,340 from the Perryville casino.]

But not a penny of slots impact aid has actually been turned over to the town or county because a state-mandated three-year plan on how to spend the money has not yet been approved by the county.

A county public hearing on the plan will be held on April 12, but the proposed plan contains a glaring hole: a “TBD”—to be determined—notation for “infrastructure reimbursement to Penn National Gaming”

For the first time, the Cecil County Commissioners on Tuesday briefly discussed in public dollar figures and continuing negotiations with PNG on infrastructure reimbursements But closed-door discussions have been ongoing since early 2009, with sometimes cryptic mentions in worksession minutes and private letters between the county and PNG.

In a letter to the county on 3/8/11 (obtained by Cecil Times under a Maryland public information act request) Penn National claimed it had spent $4.5 million on roads and related infrastructure costs for the casino. But as a “goodwill” gesture, the casino proposed reducing that figure to $3 million, seeking reimbursement to be divided over three years in repayments by the county and Perryville under their 65/35 sharing formula.

But the county, after reviewing invoices, recently concluded that some of those costs were unrelated to county infrastructure and cut the county’s overall share to 65 percent of the $1.84 million costs relating to improvements to Route 222. The county also is refusing to pay any share of the $1.1 million costs to upgrade the capacity of Perryville sewer services for the casino.

The Commissioners decided Tuesday to convey that viewpoint to Penn National and seek a meeting for further discussion. (Cecil Times has contacted PNG’s local attorney for comment and will update this report upon his response.)

In an interview with Cecil Times, Perryville Mayor James Eberhardt said Tuesday that the county appeared to be reneging on some of its past commitments to PNG but the town would live up its promises. As a result, the mayor said, the town would pay for 35 percent of the $1.1 million sewer service costs, in addition to its share of Route 222 improvements. Consequently, he said, the town’s overall costs would amount to about $1.02 million spread out over three years. (See link to Perryville’s draft local plan for using its slots impact aid:

“We are going to abide by the correct interpretation” of previous commitments to Penn National, the mayor said. He pointed out that none of the give-backs of revenues came out of taxpayer-provided funds and were solely taken from slots revenues that the town would never have had in the first place if the casino had not been lured to Perryville.

Looming over the current discussions is the arrangement that was set up by a letter, signed by Eberhardt and former County Commissioners President Brian Lockhart in late September, 2009, in which the local officials agreed to reimburse Penn National for needed infrastructure expenses on a cost-sharing basis of 65 percent from the county and 35 percent for the town. (A copy of the letter was obtained by Cecil Times under a Maryland Public Information Act request.) The letter did not specify any dollar amount of compensation.

In the Sept 24, 2009 letter to Steve Snyder, senior vice president of Penn National, the county and the town pledged their “continuing support” for the casino project in Perryville, despite the county’s 9/15/09 rejection of a proposal by Penn National seeking $6 million in property-tax related financing for the project. Instead, the county and the town agreed to “address, with the County and Town share of the VLT revenues, the required public infrastructure costs directly associated with the PNG facility which have been identified by both the Maryland State Highway Administration and the Town of Perryville.”

In addition, the reimbursements would be allocated to PNG “until the actual authorized infrastructure costs associated with the VLT facility for the Rt. 222/I-95 upgrades and Perryville water and wastewater infrastructure are reimbursed.”

According to a brief mention in county commissioners’ meeting minutes, there was a closed-door worksession of the commissioners on 9/22/09, at which the commissioners agreed to draft a letter to Penn National advising the company of their intent to assist in infrastructure costs. (Attending the session were Lockhart, James Mullin (R-1), Robert Hodge (R-5) and former commissioner Rebecca Demmler (R-2)

In a recent interview, Lockhart told Cecil Times that at the time, Penn National was looking at multiple locations authorized for slots facilities in the state and that Cecil County needed to show it was supportive to win such an important employer and economic development prize for the county. “We did not want to lose out on such a great opportunity,” he said.

Minutes of a 9/15/09 commissioners’ worksession show that Penn National was threatening to pull out of Cecil County and claimed that the company “has been approached by other jurisdictions to move this project to a new location.” The company complained that while the town had “worked to accommodate the project,” the county “has not provided Penn National any incentives to locate in this area.”

Given that mood and the county commissioners’ refusal to endorse PNG’s property-tax related financing plan, Lockhart said the county felt it had to do something to show good faith to PNG. He said he had support from a majority of the then-commissioners to endorse the 9/24/09 letter to Penn National and the reimbursement proposal. Lockhart and former Commissioner Wayne Tome (D-4) were firm supporters of aiding PNG and minutes of the 9/15/09 worksession show that Mullin “would like the county to continue seeking other measures for providing financing for this project.”

Commissioner Hodge told Cecil Times recently that he never saw the actual letter before it was sent to PNG and if he had, he would not have endorsed the open-ended nature of the document.

Earlier this year, there was a closed door meeting on 2/22/11 with representatives of PNG and the County Commissioners to discuss the infrastructure costs. According to a one paragraph summary of the one-hour meeting included on county meeting minutes, the topic discussed was “reimbursement of infrastructure costs proposal” with PNG agreeing to provide more details of its costs.

For most of its private discussions with PNG, county officials have claimed an exception to the state’s open meetings law that allows closed meetings “to consider a matter that concerns the proposal for a business or industrial organization to locate, expand, or remain in the state.”

For the 2009 discussions, the county was clearly dealing with wooing PNG to locate in Cecil County and closed meetings appear to be permitted under state law. Once the casino opened last fall, the exception is less clear.

However, the Perryville casino has 1,500 slot machines while the state referendum on slots authorized up to 2,500 machines in Cecil County. PNG has said in the past it would wait to see how profitable its operations in Perryville are, as well as economic conditions and competition from the upcoming Anne Arundel County slots parlor, before deciding whether to seek state approval to add more machines to Perryville and expand its operations.

Keeping PNG satisfied with its treatment in Cecil County, so that it will expand operations and the flow of revenues to the local governments, is cited by some county sources as a legitimate rationale for holding closed-door discussions with PNG on the infrastructure reimbursement issue.

But by keeping local citizens largely in the dark about the process, the county will have to expect citizens to ask a lot of questions at the upcoming public hearing on the “impact aid” expenditures plan.

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4 Responses to Cecil County Slots: County Pays to Play (A Cecil Times Special Report)

  1. Jackie Gregory on April 6, 2011 at 11:36 pm

    Thanks again for your excellent investigative reporting.

  2. Ken Wiggins on April 7, 2011 at 12:27 pm

    Add my thanks for providing a very valuable public service.

    I noted that most of these secret negotiations were well before the ballot question on approving slots. I don’t recall the open ended costs incurred by the taxpayers to fund these expenses as part of the ballot issue. In fact the whole sales pitch centered on how this initiative would bring money to our county.

    Now we learn that we are to subsidize a corporate hand-out at taxpayer expense. Shameful! This is what happens with government by secret meetings. (Its a fine example of why we need citizen representation on the Charter Council). The insider guys who made this “personal ” offer should be made to pay with their own money.

  3. John Abbott on April 7, 2011 at 6:54 pm

    Mr. Wiggins,

    Your statement of “most of these secret negotiations were well before the ballot question on approving slots” is not correct. Maryland voters approved slots in November of 2008. Cecil Times reported that correspondence with Penn National on this issue took place in September of 2009.

    I don’t like the committment to Penn National for reimbursement of costs any more than you do. However, taxpayer dollars are not being used for that reimbursment – it’s being funded from the slots revenue proceeds.

    I won’t disagree that this arrangement is distasteful. At a minimum, it deserved a lot more “sunshine” on the process and the decision than it got. I do appreciate the current board of Commissioners for analyzing the submitted expenditures by Penn National and making an informed decision on the costs they’ll agree to pay for.

    I agree that Cecil Times does a good job in reporting news not normally seen in print. One point of clarification. The state has been (on a monthly basis) depositing local government’s share of slots proceeds since December to Cecil County.

    Also, the State doesn’t mandate a 3-year plan – the legislation called for a “multi-year plan”. The county and Perryville both interpreted this to mean three years.

    Thank you again, Cecil Times, for your article on this matter.

  4. maria wilson on April 11, 2011 at 8:35 pm

    Thank you very much, Cecil Times. Nowhere else in this county would I be able to read about this!

    I am upset that this was all done behind closed doors. But I understand that sometimes the county has to work with a business to get them to come to our county.

    I just think the commissioners should have been a lot more open with the citizens to let them know what was going on. We all know that sometimes you have to make a deal to get the greater good– 350 jobs, economic development and impact aid to Perryville and the county. But I just wish it didn’t smell so bad!

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