As racino revenues rise, income from lottery falls

AUGUSTA – Slot machine players at the state’s only racino in Bangor are having an impact on state lottery revenues, Maine Lottery Director Dan Gwadosky told members of the state revenue forecasting commission Tuesday.

“There is only so much disposable income to go around,” Gwadosky told the panel. “When the racino is doing $50 million a month, that has got to come from someplace.”

But while Gwadosky expects lottery revenues, which were about $50 million last year, to go down about 1.1 percent, the head of the state’s Gambling Control Board told the forecasting commission that gross revenues from slot machines are expected to continue rising.

State Gambling Control Board Director Robert Welch said Hollywood Slots in Bangor expects to complete its new gambling facility, which will hold 1,000 slot machines, in August 2008. He said the doubling of machines from the current 500 will not mean a doubling of revenue, but it certainly will increase revenue.

“I have been told we should use 11/2 times for the increase,” he said. “So that should be reflected in revenue projections.”

Gwadosky, meanwhile, told the panel that a study of lottery sales in communities close to the Hollywood Slots facility shows sales have decreased. He said instant tickets are down about 17 percent, and online games are down 3 percent.

Gwadosky recommended the panel look at slightly lowering the revenue projections for the lottery as a result. He expects revenues to decrease 1.1 percent from current overall lottery sales levels over the next two-year budget and to stabilize in the years thereafter.

He said scratch tickets continue to be the largest revenue raiser for the lottery, contributing 70 percent of all sales.

Gwadosky also told panelists that discussions are under way for a new online game with “modest winnings” to replace the current Megabucks game, which is not performing as well as the Lottery Commission would like. The state still might partner with New Hampshire and Vermont in offering the new game, or it might work with the Powerball commission to create a new game that can produce more revenue than Megabucks. The state would continue to offer the current Powerball game as well.

“We are looking at a new game, as soon as we can work something out with Tri-State [Megabucks Commission], and we have 62 scratch tickets out there now, and we will continue to develop new tickets,” Gwadosky said.

He said that, combined, those efforts should minimize the loss of revenue to the Lottery Commission as slots revenues continue to increase.

Welch, meanwhile, told the revenue forecasting commission that he has been surprised at the growth of revenue from the Hollywood Slots facility. He said that last January, gross sales topped $35 million and that sales increased to $51 million in September.

“It has surprised me to see how this has grown from month to month to month,” he said. “I thought we would see a gradual reduction as the newness wore off, and, instead, it has grown.”

Welch said the “newness” factor may kick in sometime in the future, but so far there have been no indications of that in Maine, although other states with startup slot facilities have seen sharp decreases after initial sales.

“I think at some time it will have to level out a bit,” he said. “Maybe that will come in the winter if we get some bad weather.”

Jerome Gerard, acting executive director of Maine revenue services, is chairman of the forecasting commission. He said the re-projections from the agencies concerning the state’s various gambling revenues were not surprising, but the commission took no action.

“We are waiting to deliberate when we have all the information before us,” he said. “We don’t have the information needed to do the major revenue lines.”