The go-ahead for Minnesota-based Evitts Resort LLC to take over the Flintstone, Md. property will bring a new casino to the state and mark the end of the state of Maryland’s ill-fated attempt to promote economic development in a depressed region through a quasi-public operation.
The state of Maryland’s Board of Public Works approved the sale of the Rocky Gap resort to a Minnesota gaming company on June 20, paving the way for the state’s fourth casino to open next summer, Gazette.net reported.
The state’s Video Lottery Facility Location Commission conditionally awarded the Allegany County slots facility license to Evitts Resort LLC in April, contingent on the Board’s approval.
Evitts is slated to invest $54.6 million in the project to cover both the purchase of the resort and the construction of a planned 50,000-sq. ft. casino with 1,000 slot machines, Gazette.net reported.
Evitts will purchase the struggling, state-subsidized resort, which is located in Rocky Gap State Park in Flintstone, Md. and includes a hotel and a Jack Nicklaus-designed golf course, from the Maryland Economic Development Corp (MEDCO).
“This project will enhance the viability and stability of the Rocky Gap resort,” Donald Fry, chair of the location commission, told the Board.
The commission projects that the Rocky Gap casino will create 400 construction jobs, 520 permanent jobs and generate $40 million in gross revenues from slots in its first year, $16 million of which would go to the state’s Education Trust Fund.
“I think it’s a win for the state,” said Timothy Cope, President and CFO of Lakes Entertainment, which owns Evitts. “I think it’s great for Allegany County. It provides some economic development in western Maryland. I think it’s good for us.”
The casino’s opening would be targeted for the summer of 2013, Cope said.
“My support of this item is based on one reason and one reason alone: This gets Rocky Gap off the public rolls for good,” said Comptroller Peter Franchot, one of the three Democratic Board members who voted unanimously to approve the sale. Franchot has historically been a critic of bringing slots to Maryland, Gazette.net reported.
Rocky Gap was one of the five slot machine locations awarded by the state in 2008, but failed to attract an investor even after it was included in that group. As further incentive, lawmakers last year lowered the state’s share of slots revenue at the location from 67 percent to 50 percent.
The state-backed venture at the Rocky Gap property began almost two decades ago through the formation of MEDCO, whose mission is to promote economic activity in the state while helping to reduce unemployment. The resort, which opened in 1998, piled up annual losses that reached as high as $3.8 million in 2010, the Baltimore Sun reported in reviewing the property’s history before the final vote on its sale was held.
Bob Brennan, Executive Director of MEDCO, told the Sun the corporation would have to write off about $11 million on the deal, and two other state agencies would have to write off another $30 million in loans and unpaid ground rent. “If all my projects were like Rocky Gap, I’d be very thin,” said Brennan.
Christopher Summers, president of the conservative Maryland Public Policy Institute, told the Sun that the Rocky Gap experience is a “costly lesson” for Maryland taxpayers. “It’s a big warning sign that states shouldn’t be in the hotel business, nor cities. It’s not a core function of government,” Summers said.
The project’s bondholders, who approved the deal before the Board of Public Works, shared in the hit, the Sun reported. As part of the agreement with Evitts, Brennan said, bondholders shared about $7.8 million while absorbing about $26 million in losses. “The investors are not being made whole,” Brennan said. “They are settling for cents on the dollar.”
The hope now, Brennan added, is that the addition of the casino will finally provide the lure that Rocky Gap has lacked since its opening. “It needs another attraction to help bring customers, and gaming is certainly an additional attraction,” he told the Sun.
Cope told the Sun that his company has succeeded with projects similar to Rocky Gap. “I think we can provide a little more year-round entertainment,” he said.
Brennan estimated that the casino will add 400-500 employees to the resort, which now has a full-time staff of about 100.
MEDCO also owns the waterfront Hyatt Regency Chesapeake Bay resort, golf course and marina in Cambridge, Md. Brennan told the Sun that the opulent, AAA 4-star resort has also been taken a beating from the economic downturn, with an operating loss of more than $3.5 million for each of the past two years. But the property is holding its own and paying its bills without being subsidized by MEDCO’s other projects, he added—and in recent months, has been “knocking the cover off the ball.”
“All things considered, we’re doing a lot better than Rocky Gap,” he said. “I’m very bullish on our future.” He added that MEDCO has no interest in bringing a casino to that property.
Rocky Gap Resort and its attempts to attract new business through the management of Creative Hotels & Resorts was the subject of a C&RB cover story in October 2008 (“Filling New Needs at Rocky Gap Resort”).