Accord on slots may come this week

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BANGOR – Penn National Gaming Inc. and state officials may be close to a deal for getting construction crews back to the site of a $131 million gambling and hotel complex across Main Street from Bass Park.

City officials meeting Saturday were told that Gov. John Baldacci, who initially declined to enter the fray, has taken an active role in the matter.

An announcement regarding the project is expected early this week, according to members of the area’s legislative delegation.

The parent company of Hollywood Slots at Bangor, Penn National, stopped construction at the 8-acre site last Tuesday.

Penn said it was in response to a legislative proposal to increase the state’s share of revenues from the company’s slot machines. Lawmakers have been struggling for ways to balance the state budget.

Penn National operates 475 slots out of an interim facility in the former Miller’s Restaurant building on Main Street, but is authorized to run up to 1,500.

The work stoppage touched off a raging controversy between fans and foes of gambling, as well as a rally Wednesday that drew some 200 project supporters to the State House in Augusta.

Gov. Baldacci’s budget proposal leaves intact the existing revenue split among Penn National, the state, the city and a number of other beneficiaries, including the harness racing and agricultural fair industries.

Word of a possible breakthrough came Saturday from members of the area’s legislative delegation at City Hall for a joint workshop with the City Council.

The Penn National matter was the only topic of Saturday’s session, convened by council Chairman Richard Greene out of concern that the project – the biggest now under way in the state – was imploding.

“My understanding is that we’re close to [an agreement that would provide assurances] to the satisfaction of Penn National,” said state Rep. Sean Faircloth, D-Bangor. Faircloth is assistant majority leader in the House.

Rep. Patricia Blanchette, D-Bangor, said Baldacci had called her to say he wanted to attend Saturday’s gathering at City Hall but previously had agreed to speak at the University of Maine at Presque Isle commencement ceremonies also that day.

Word of a possible resolution to the nearly weeklong impasse was welcomed at City Hall.

“I’m much more optimistic than I was an hour ago,” Councilor Geoffrey Gratwick said Saturday.

The delegation members also said that state officials were seeking a mechanism to ensure other development projects are protected in the future.

Baldacci spokesman David Farmer on Saturday confirmed the governor’s involvement.

“He’s playing intermediary now between the Legislature and Penn National,” Farmer said.

“At this point, we’re working toward a solution. Everyone understands how serious it is up there in Bangor,” Farmer said. “We hope to have this resolved early in the week.”

According to Farmer, Baldacci met with the Legislature’s joint leadership Thursday, and key members of his staff assigned to the matter had met with representatives from Penn National and others with a stake in the Bangor project Thursday and Friday.

“The discussions went well,” Farmer said, though he noted that as of the weekend, the talks had not resulted in a concrete solution.

Discussions were slated to resume today, he said.

During Saturday’s workshop, area legislators tried their best to explain what led to the work stoppage.

Rep. Emily Cain, D-Orono, the only member of the Legislature’s Appropriations Committee from Greater Bangor, said she regretted “that we’re in this position.”

“If anyone had told us Tuesday [that Penn National would stop work], we wouldn’t have let it happen.”

Cain and other legislators, however, said money is tight in Augusta and that lawmakers were faced with trying to fund a number of competing needs, ranging from higher education and mental health services to jails and economic development initiatives.

Cain said the financial picture was “not pretty.”

Blanchette said part of the problem that led to the Penn National fiasco was a lack of understanding about gaming finances. She said one lawmaker on the appropriations panel did not know what a “handle” was, a term that means the total amount wagered.

“That’s when the breakdown started,” she said.

Jean Deighan of Bangor, an investment adviser and former member of the state’s Gambling Control Board, said term limits also appear to have been a factor.

“History gets lost,” she said, cautioning that lawmakers need to find “short-term solutions that don’t compromise the long term.”

While the impasse is unfortunate, state and local officials said, its implications go well beyond Maine’s borders.

Several people, from city and state officials to harness horsemen and construction company owners, have said last week’s controversy would have a chilling effect on other companies that might be considering investing in Maine.

As Councilor Gerry Palmer put it, Web capabilities mean that people in Hong Kong are aware of the Bangor impasse.

As it stands, Penn National pays the state a 1 percent tax on its gross slot machine income as well as a 39 percent state tax on its net income and a 3 percent tax to the city.

Democrats on the Legislature’s budget panel earlier this month proposed increasing the state share of the gross slot machine revenue from 1 percent to 2 percent and reducing the amount of money set aside as the “players’ share,” or the amount of bets that get paid back in winnings, from 93 percent to 92 percent. The proposal would raise an additional $13.8 million for the state over two years.

Republicans on the committee proposed capping at 5 percent a year increases in the allotments to various funds and programs, starting in budget year 2009.

Penn National spokesman Eric Schippers said last week that an additional 1 percent tax on gross revenues would increase the company’s tax burden from 51 percent of each dollar of net revenue to 61 percent, rendering the project “unprofitable.”