A banker says the state should auction off the gaming license.

PORTLAND (AP) – Maine could do much better than simply receiving $100 million a year from a cut of slot machine revenue if the state auctioned off the rights to open a proposed casino, industry analysts say.

Auctioning off the license could bring in millions of dollars and the state could still take a share of the slots. The Passamaquoddy and Penobscot Indians have proposed giving the state 25 percent of slot machine revenue if state voters approved their casino proposal on Nov. 4.

“The bill is a total rip-off for the citizens of Maine,” said Jeff Hooke, a Maryland investment banker and valuation expert who urges states to auction off licenses to operate slot machines or run casinos rather than give away such monopolies for free.

Hooke said Maine’s casino referendum would give the Passamaquoddy Tribe and Penobscot Nation a license to operate a casino, for free, for 20 years. He said states shortchange themselves by doing so. The monopoly licenses could be worth hundreds of millions of dollars.

“Did the federal government give away the cellular-phone spectrum for free? No, they auctioned it off,” Hooke said.

Hooke said if Maine were to auction off a license to operate a casino monopoly in Maine, it would easily fetch $500 million and probably more. And, he said, the state still could demand a 25 percent cut of the slot revenues.

Erin Lehane, spokeswoman for Think About It, the political action committee that supports the proposal for a $650 million casino in Sanford, said an auction would ensure that the casino is owned by an out-of-state entity.

“If the state wants a casino, why not give it to our own people who live in state?” said Lehane, who said the Penobscot and Passamaquoddy owners would give preference to Maine workers and buying Maine goods and supplies.

She also insisted the state would do well by the proposal for 25 percent of slot revenue going to Augusta. “This will be the most heavily taxed casino resort casino in the country,” she said. “So it’s a pretty good deal for the state.”

Hooke has studied recent sales of semi-monopoly gambling licenses in large metropolitan areas in the United States.

In Illinois last year, a group of investors auctioned off its casino license to MGM Mirage for $615 million. The license was for a smaller casino than the one proposed in Maine. The Illinois license permitted only 1,200 slot machines and 60 table games, compared to the 4,000 slots and 180 table games the Maine tribes hope to operate in their proposed casino.

Two years ago, Argosy Gaming bought 42.4 percent of a Lawrenceburg, Ill., riverboat casino for $368 million, meaning a 100 percent share of that casino would have been worth $876 million. The riverboat had 2,246 slots and 95 table games.

Sebastian Sinclair, president of Christiansen Capital Advisors, a New Gloucester company that researches the gaming industry for government agencies and gambling companies, argues that the proposed casino does not qualify as a tribal casino, because the federal Indian Gaming Regulatory Act does not apply in Maine.

The National Indian Gaming Commission set up by that law has the power to shut down tribal casinos, but would not have that control over the proposed Maine casino. The Maine casino would be regulated by both the tribes and the state, which Sinclair said would effectively make it a state-licensed, commercial casino.

Sinclair said such casinos are much more heavily taxed than tribal casinos and the Maine casino should be taxed as a commercial casino.

He said commercial casinos pay taxes on all their revenues, not just slot machine revenues. So if the proposed 25 percent fee were assessed on all revenues generated by the proposed casino – about 75 percent of a casino’s revenues come from slots and another 25 percent from table games – it would amount to an 18.75 percent tax on total casino revenues, he said.

At that rate, Maine would establish the fifth-lowest tax rate among states with commercial casinos. He said Illinois taxes up to 70 percent of a casino’s revenues. Pennsylvania taxes at about 35 percent to 40 percent, and in Maryland it’s 45 percent to 52 percent.

So far, no state has auctioned off licenses.

“That’s because they tend to end up in the hands of politically influential corporations and individuals and they have the time and money to cultivate political relationships,” Sinclair said.

But Massachusetts Gov. Mitt Romney and state commerce chief Robert Pozen have both proposed the state sell off five-year licenses to operate slots in their state. Politicians in a few other states, such as Pennsylvania, Maryland and Illinois, are making similar proposals.

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