Penn National is complaining that the state wants too large a cut of slot machine profits.
AUGUSTA – The state wants to take too much of the slot machine profits, which may make a Bangor racino unworkable, an executive for the owner of Bangor’s racetrack said Wednesday.

Eric Schippers, vice president of public affairs for Penn National, said the state take on slot revenue in a bill approved by the House and Senate would amount to a tax rate of 49 percent.

“Penn National is deeply concerned” about that, he said.

But if Penn National pulls out, the state has another developer in the wings: the Passamaquoddy and Penobscot tribes, backed with money from Foxwoods.

The tribes stand ready to step in if Penn National abandons the racino, said Penobscot Chief Barry Dana on Wednesday. “As an instate owner, the tribes’ profit margin does not have to be as high as Penn National’s,” Dana said. The tribes have sent a letter with that message to legislators.
Dodge City worries
Meanwhile, the Senate gave the racino regulation bill a big, 29-6 approval Wednesday. Without the regulation in the bill, there would be “a Dodge City, a wild, wild West of gambling up there. We’d have the most lax law in the country,” said Sen. Kenneth Gagnon, D-Waterville.

At issue is who gets how much of the take.

In the language behind Question 2, which was approved by voters in November, there was little regulation and the take was high for the developer, since it was written by Shawn Scott’s Capital Seven, which owned the Bangor Historic Racetrack at that time. The slot machine owners would have kept 75 percent, the state and harness racing industry would split 25 percent.

In January, Gov. John Baldacci proposed L.D. 1820 to tighten regulation. As legislators worked on the bill, Scott sold the track to Penn National and the corporation agreed to accept a smaller, 63-37 split. “That would support harness racing, agricultural fairs and prescription drugs” and make the racino viable, Schippers said.

The committee then made revisions. The state and stakeholders would take 39 percent and Penn National 61. Plus, the state would take 1 percent of the total amount gambled to cover its oversight. That’s a huge change, Schippers said.
A handle on things
That total amount gambled is called a handle. Based on the expected 1,500 slots in Bangor, the handle would be approximately $824 million. “One percent of that is $8.2 million. That’s actually 10 percent of the gaming revenues,” he said. When that, plus the state share in the 39 percent is combined, it amounts to a 49 percent tax, Schippers said.

“Clearly for this project to be viable, for us to invest the type of capital we’d like to, a state tax of 49 percent is way too high. We have said that in a small market like Bangor we could support 37 percent,” Schippers said. “Above that, it will have a significant effect on what kind of investments we make.”

When asked it that would mean Penn National would back out, Schippers said he doesn’t yet know. “We’re still working hard to amend the bill. We want to take a careful look at the final outcome and make a determination at that point. It’s premature before the legislation is finalized.”

If the bill isn’t changed to Penn’s liking before it receives final votes, it could mean “dramatically scaling back investment in that facility,” Schippers said. “We remain hopeful.”

But lawmakers did not seem interested in taking away the 1 percent. In fact, Gagnon predicted Penn would take the deal Maine hands them. “Penn National told me they can live with this,” Gagnon said.

“The problem for Penn National is they paid too much to Shawn Scott” to buy the track, said Lee Umphrey, Baldacci spokesman.

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