BANGOR – In response to a legislative push to balance the state budget by increasing Maine’s share of revenues from slot machines, Penn National Gaming Inc. pulled the plug Tuesday on further work on the $131 million gaming and hotel complex it has been building across Main Street from Bass Park.

Supporters of the project criticized lawmakers for backing out of a business agreement, jeopardizing jobs, and threatening economic development efforts.

Gambling foes said Penn National’s decision to stop work was merely a scare tactic.

Groundwork on the proposed permanent facility was nearly complete and construction was expected to begin soon on the complex when work was halted Tuesday. The new complex was to replace the existing Hollywood Slots at Bangor facility that opened in November 2005 in what was supposed to be an interim facility located in the former Miller’s Restaurant building, just up the street from the current work site.

“We have halted construction as of today,” Penn National spokesman Eric Schippers confirmed Tuesday.

“Given the [political] landscape as it currently stands now, our confidence is shaken in the state’s willingness to keep its word,” he said.

Peter Vigue, president and CEO of Pittsfield-based Cianbro Corp., called the issues that led to the work stoppage “a sad day for Maine.”

“This is a big deal. It’s a huge blow to the Bangor area and the people of the area,” Vigue said. “They already are economically challenged, which further exacerbates the problem.”

As it stands, the company pays the state a 1 percent tax on its gross slot machine income, or “coin in,” as well as a 39 percent state tax on its net income and a 3 percent tax to the city.

But Democrats on the Legislature’s budget panel now are considering increasing the state share of the gross slot machine income from 1 percent to 2 percent and reducing the amount of money set aside as the “players’ share,” or the amount of bets that gets paid back in winnings, from 93 percent to 92 percent.

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

According to Schippers, 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, which he said makes the Bangor project “unprofitable.”

Cianbro last month was awarded the construction contract for the permanent facility. Hollywood Slots General Manager Jon Johnson said Monday that the contract will not be executed until the revenue issue is resolved.

“They have actually suspended all of the work, in writing, directing us to stop all work at the site,” Vigue said Tuesday.

“They have been directed by their senior management and their [board of directors] chair to discontinue work until they have been given assurances” that the state won’t cut further into the company’s profit margin.

“They have no interest in investing here until the Legislature assures them that they will deal appropriately with the issue,” Vigue said. “They want to be assured they won’t be under attack in the future.

“It’s as simple as honoring your commitment and contract,” Vigue said. “Again, it sends a clear message to companies looking to invest here that Maine is not open for business.

“Think about it. What is to prevent this Legislature or the state from [increasing the tax burden] on any successful organization or business, regardless of who it is?” Vigue said.

But the head of an organization that opposes gambling in Maine called Penn National’s action Tuesday a bluff.

“I really think it’s an empty threat,” said Dennis Bailey, executive director of CasinosNO!

“They made the same threat last time,” Bailey said, referring to a 1 percent tax on Hollywood Slots’ total wager, or “coin in,” that lawmakers in 2004 imposed on top of the 39 percent tax assessed on its net revenues.

“At that time, Penn National said, ‘We can’t do it for that,’ but they did,” he said.

“I think they’re going to whine and complain, but I don’t think they’re not going to do it,” he said, adding, “There’s no risk. People line up and they give you money and they don’t have to give you anything in return.

“The state is getting fleeced just like the players at Hollywood Slots,” Bailey said. “Apparently, Penn National would rather see taxes increased on homeowners and the elderly rather than giving up a tiny slice of their billions in return for their risk-free monopoly.”

Schippers denied halting was a scare tactic.

“This is not meant any way as a threat,” he said. “At that tax rate, this project becomes unprofitable. This is about having a fiduciary responsibility to our stakeholders. Investing $131 million in a project [that will not yield a profit] simply doesn’t make sense.”

Keeping the project afloat has become the focus of a coordinated effort involving, among others, the city of Bangor, Cianbro Corp. and other companies connected to the project, and the state’s harness racing industry, which includes horse owners, breeders, trainers, suppliers and a host of other related businesses.

The groups will gather in Augusta today for a rally in support of the Bangor project and to lobby lawmakers to leave the current revenue split intact.

George McHale of Orrington, who chairs the Maine Gambling Control Board and the Maine Harness Racing Commission, said that the gambling board’s role was regulatory and as such, members would not be getting involved in the fracas.

From his vantage point as head of the harness racing panel, however, he said, “The thing that people have to realize is that the harness racing industry is for the first time beginning to see the light of day.”

Last season, he said, was the first in which the harness racing community reaped some financial benefit from the Bangor slots operation.

“It meant that people were able to actually start being able to support their horses and that people didn’t have to sell their farms,” he said.

Bangor City Manager Edward Barrett said Tuesday that the City Council has authorized him to retain the services of Augusta attorney and lobbyist Dick Trahey of Maine Governmental Relations. He said Trahey has been working to protect Bangor’s interests with regard to the Hollywood Slots project for the past several years.

Barrett also said the City Council’s 2005 resolve asking state decision-makers to let Hollywood Slots at Bangor run for three years before making any major changes in the laws and rules that already have been put into place still stands.

He also said several city representatives, including state Rep. Patricia Blanchette, who also is a city councilor, and Councilor Frank Farrington were expected to take part in today’s rally.

“There’s really nothing more we can do at this point other than make our position known to the Legislature and help with the educational process,” Barrett said.

“The bottom line is the Legislature is attempting to extract more money out of Penn National,” Bangor City Council Chairman Richard Greene said.

“That is bad, bad, bad,” he said. “Penn has lived up to every one of its words and the city has lived up to every one of its words. Now it’s up to the state to do the same.”

Word on the street

“The state should leave it the way it is,” said Ken Thompson, 66, of Sangerville. “I think the state goes overboard with some of these taxes. It will discourage other businesses from coming in.”

Thompson has been to the current Hollywood Slots racino in Bangor once.

His wife, Judith Thompson, 57, of Sangerville, said, “The state has their fingers on too many things.”

Re’al Cyr, 57, of Millinocket just moved back to Maine after six years and said Tuesday he knew only a little about the racino situation. “If [the 1 percent increase] doesn’t help Bangor, there isn’t much of a point,” he said, adding that the state should look at moral values in a decision. “If it’s not beneficial for the state, maybe they should build in another state.” He was touring Main Street on Tuesday and said he had never been to Hollywood Slots.

Arline Sprague, 81, of Orrington said, “It should make money for Bangor. … It’s too bad because the money would go to Bangor. There will always be gambling somewhere.”

Looking for revenue

Joint Standing Committee on Appropriations and Financial Affairs

In looking at ways to finance the state’s two-year budget, the panel is considering increasing from 1 percent to 2 percent the state’s share of the gross slot machine income from Penn National Gaming Inc.’s Hollywood Slots operation in Bangor. It also is considering reducing the amount required to be set aside as the “players’ share” from 93 percent to 92 percent. Such changes would generate an estimated $5.4 million in the first year and $8.4 million in the second year of the state budget.

Committee members:

Sen. Margaret Rotundo, D-Lewiston, Senate chairwoman

Sen. John L. Martin, D-Eagle Lake

Sen. Karl W. Turner, R-Cumberland

Rep. Jeremy R. Fischer, D-Presque Isle, House chairman

Rep. Margaret M. Craven, D-Lewiston

Rep. Janet T. Mills, D-Farmington

Rep. Emily Ann Cain, D-Orono

Rep. Linda M. Valentino, D-Saco

Rep. David C. Webster, D-Freeport

Rep. H. Sawin Millett Jr., R-Waterford

Rep. Patrick S.A. Flood, R-Winthrop

Rep. John C. Robinson, R-Raymond

Rep. Jayne Crosby Giles, R-Belfast