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Sunday, August 1, 2004
Control over slots a big deal
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AUGUSTA — State regulators want to monitor every bet, spin and payout made at Maine's first racino. Penn National Gaming Inc., which plans to put 1,500 slot machines at Bangor Raceway starting in 2006, is looking for control over the machines, as well. The Pennsylvania-based gaming company does not want rules that will inflate costs and limit its flexibility to bring in the most popular and newest machines slot fans seek out. The task of dividing control over a gambling enterprise expected to average $824.5 million in annual bets will be up to the Gambling Control Board. Under pressure to get the racino up and running, its five members have been meeting before being confirmed to reach agreement on a variety of rules, from hours of operation to advertisements the slot operator can run. The council has met little opposition so far in its work. But when members this month look at who has control over the actual machines, the council and Penn National could clash. The issue focuses on how closely the state gets to watch each machine, and at how much the state's oversight could cost the gaming company. "I prefer, in this area, regulations that follow what former President Reagan said: 'Trust, but verify,' " said Michael Cantara, commissioner of the Department of Public Safety. What is at stake, Cantara said, is the integrity of Maine's first foray into slots. Regulators must have a watchdog system that protects players, ensuring machines pay out 89 percent of all bets placed as required by law. It also must guard a variety of interests - from the community college system to harness racing purses - that will get a slice of the slot revenue. Penn National and its supporters have concerns whether public-safety officials in their zeal to regulate slot machines could require a costly system that is unnecessarily burdensome. If this happens, some fear slot revenues would suffer and Penn National may reduce its investment in the Bangor racino. "The regulation can go to an extent that makes it very difficult for an operator," said Bill Hathaway of the Maine Harness Horseman's Association, which is counting on the slots to revive the struggling harness-racing industry. The Gambling Control Board, which an executive order allows to meet as an advisory council before its members are confirmed by the Legislature, has not started to sort out how it plans to watch the slots. This month, it will start wading through the highly technological world of computerized systems that provide oversight of slot machines. The debate over how the state can protect the machines from problems that range from tampering to unfair payouts has started already among public safety officials, Penn National and Scientific Games, a Georgia-based company that helps run the Maine State Lottery. Details of the computer systems are expected to be laid out later this month. D. Eric Schippers, vice president of public affairs for Penn National, explained the issue as a difference in wires. Public safety officials and Scientific Games are pushing to monitor betting and payouts via what is known as a two-wire system used in states such as Delaware. One wire will carry information directly to regulators and another wire would relay the same information to the operator. Through its wire, the state can control every machine, knowing every time it is played, opened or serviced, while also having the ability to shut it down if a problem is detected. "This is technology that makes sure the fox is not watching the hen house. It is an issue of integrity. It is issue of public accountability," said Cantara, who sees little choice in the watchdog systems due to specifications laid out in state law. Penn National favors what is known as a one-wire system used in states such as New Jersey. The would-be operator would run the system and state regulators would tie into it. Regulators would be the only people with access to part of each machine that generates the slot results. The so-called one-wire system still would allow regulators to follow machines in real-time and disable a machine if a problem arises, Schippers said. "The same degree of monitoring can be achieved," Schippers said. The reason Penn National wants this system has to do with cost and the way the gambling industry attracts slot players, although it is unclear how much either a two-wire or one-wire system would cost in Maine, Schippers said. Penn National has to pay this amount no matter what. Cantara questioned whether the gaming company, by pushing for the cheaper system, is angling to reduce this tax in a future legislative session. Schippers would not speculate on this issue, only saying Penn National at this point wants the new racino to have a cost-effictive system. Bangor officials are watching the cost of the system. The city is depending on the racino for an economic boost. They fear the more Penn National spends on a system to monitor the machines, the less it will invest in the new racino that will rise next to the city-owned racetrack. "Our goal is (Penn National) spends as much money on the facility itself," Bangor City Solicitor Norman Heitmann III said. What is also important to Penn National is whether the technology the state chooses to monitor slots will limit the new machines it can bring to Bangor. Thousands of new slot machines are created each year to appeal to gamblers. Because of computer-compatibility issues, the two-wire systems used in other states can reduce the variety and newness of slot machines at a racino, Schippers said. "Consumers seek these hit machines out . . . casino slot managers have an ever-changing job in trying to stay abreast of consumer tastes," said Eugene Christiansen, chief executive officer of Christiansen Capital Advisory, a New Gloucester-based firm that follows the gambling industry. Brennen D. Lawrence, director of business development for Scientific Games, which is interested in installing a state-run system at Bangor, said regulators need a watchdog computer system where the state does not just get financial numbers but can watch every machine in real time and shut down any machine at any time. Lawrence disputed Penn National's claim that a so-called two-wire system would limit the types of games that could come to Bangor. Also, he said the centralized system his company produces can monitor other sites from the same location if slot machines expand in Maine. Regulators plan to meet Aug. 19 to hear from Penn National, Scientific Games and other companies interested in what kind of watchdog system the state should choose. Staff Writer Mark Peters can be contacted at 791-6325 or at:
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