Lottery, gambling revenues dropping State’s racino cut may be down $3.6M

AUGUSTA – The economy is affecting gambling revenues for the state with members of Maine’s Revenue Forecasting Committee this week tentatively projecting lower revenues from both Hollywood Slots and the Maine State Lottery.

“It’s pretty clear that the economy is having an effect on racino revenues,” Grant Pennoyer, director of the Legislature’s Office of Fiscal and Program Review, said Wednesday. He is one of the six members of the committee.

“There is a very pronounced drop in revenues from the first few weeks of when they opened the new facility,” Pennoyer said, referring to Hollywood Slots Hotel and Raceway, which opened its new location in Bangor on July 1. “They had a big start, but it has come down a lot.”

Pennoyer said the panel, which meets periodically, is charged with estimating current budget year state revenues and revenues over the next two-year budget cycle. He said committee members used actual data on how much is being bet on average at each slot machine at Hollywood Slots to project revenues.

“They nearly reached $3,500 a machine in that first week. That was phenomenal,” he said. “We are now seeing that in the $1,800 [per] machine area.”

Pennoyer said it is clear that revenues need to be reprojected down for the racino, but by how much is not clear. The panel has drafted a first estimate that revenues from the racino will be down $3.6 million this year and that revenues for the two- year budget cycle should be reduced by about $4.5 million a year. The panel meets again next month and will review their adjustment.

“I hope we can get [Hollywood Slots General Manager] Jon Johnson here for that meeting so we can have a further discussion about our assumptions,” Pennoyer said.

Gambling Control Board Executive Director Robert Welch said he is convinced the economic downturn in general and the high price of gasoline in particular has had an impact on Hollywood Slots. He said that less disposable income means less gambling.

“Discretionary spending is being taken up by high fuel prices,” Welch said. “We know that a gallon of gas has come down obviously in the last couple of weeks. I think you will see better figures in October because people have a few extra dollars in their pocket after filling up.”

Johnson of Hollywood Slots said Wednesday that he could not get into specifics regarding proprietary matters, such as patron counts and revenues.

He did, however, offer a general observation. “The recession is affecting everybody – retailers, hoteliers, restaurateurs. We’re no exception,” Johnson said.

Welch said that while there is no comprehensive data available, there is clear anecdotal information that casinos across the country are being hurt by the economy.

“Mohegan Sun [in Connecticut] has stopped construction on a new hotel,” he said. “Foxwoods [in Connecticut] laid off 700 people just a few weeks ago. Everyone is pointing to the economy as the reason.”

Pennoyer said that other organizations and agencies that share in the revenues from Hollywood Slots will also be affected by the re-projections. He estimated the Fund for a Healthy Maine, for instance, would lose more than $1 million a year.

A reduction in Hollywood Slots revenue also affects scholarship funds for the University of Maine and the Maine Community College System and support for the harness racing industry and agricultural fairs. The city of Bangor will also get less than expected for its 1 percent share as the host community for the racino.

The panel on Tuesday heard that Maine State Lottery revenues are also failing to meet projections. Lottery Director Dan Gwadosky said both instant ticket and online game revenues are not meeting original estimates.

As of Oct. 25, instant lottery tickets were down 8 percent, he said. “Online sales are down 9.7 percent. I am not as concerned about online sales because they fluctuate rather dramatically based on the size of the jackpot.”

Gwadosky recommended the panel reduce revenue expectations from the Lottery by $500,000 this budget year and in each year of the next two year budget.

But he brought the panel some good budget news too. He recommended that revenue from liquor sales be increased by $500,000 a year for each of the three years. He said there has been a slow but steady increase in the purchase of liquor, and that increase shows no sign of slowing down.

The committee expects to finalize its revenue numbers next month so Gov. John Baldacci can complete work on his proposed emergency budget.