02/03/2009 1:00AM

Magna fails to pay Maryland slots fee


Magna Entertainment Corp., the owner and operator of Laurel Park and Pimlico Race Course in Maryland, did not pay a $28.5 million fee associated with its bid to operate 4,750 slot machines at Laurel, according to the company and officials in Maryland, a failure that may cost it a chance to bid on a casino license.

Officials for the state commission evaluating the bids said Tuesday that the commission would consider disqualifying Magna's application next week, along with the application submitted by Empire Resorts for a 750-slots casino in Allegany County. Empire, which owns and operates Monticello Gaming and Raceway, also did not pay the licensing fee.

"It appears that these do not meet the basic requirements," said Donald Fry, chairman of the commission.

Magna officials did not return phone calls Tuesday. The company issued a brief statement late Monday, the day the bids were due, acknowledging that it did not pay the fee.

Maryland voters approved a referendum last November authorizing up to 15,000 slot machines at five unspecified locations in the state. As a requirement of submitting a bid, companies had to pay $3 million for every 500 slot machines that they intended to operate.

Only six companies submitted bids, requesting, in total, 6,550 slot machines. One of the bidders, the Cordish Cos., submitted a bid that would compete with Magna's proposal by asking to operate a 4,500-machine casino in Anne Arundel County, where Laurel Park is located. The four other locations received one bid each.

Thomas V. Miller, president of the Maryland Senate, told the Baltimore Sun that the fee was a requirement of any legitimate bid.

"The way this was set up is you got to pay to play, and anybody who didn't put up their initial payment in my opinion is not a significant investor," Miller told the Sun.

Magna has lost $500 million over the past five years and has $550 million in long-term debt. Late last year, the company hired a consulting firm that specializes in bankruptcy reorganizations.

In December, Magna's parent company, MI Developments, put forward a plan that would spin Magna off from MI Developments. The plan included a $40 million contribution by MI Developments toward the licensing process in Maryland, and another $30 million to fund the construction of a casino at Laurel.

It is unclear if MI Developments provided the $40 million to Magna. Officials of MI Developments did not return phone calls on Tuesday.

Charles Degliomini, senior vice president of government affairs for Empire Resorts, said Tuesday that Empire did not include the fee as a way to demonstrate that the company did not want to participate unless the tax structure for casinos was changed.

"All we're trying to do is hold them up to a mirror and get them to look at themselves," Degliomini said. "These are the realities of the gaming world today."

Maryland legislators had anticipated that at least a dozen companies would submit bids, but the worldwide economic downturn and the 67opercent tax rate on gross gambling receipts appeared to dampen interest.

According to the commission, the other bidders included Penn National Gaming, seeking 500 machines in Cecil County in the far northeast corner of Maryland; Ocean Enterprises, owned by Delaware Park owner William Rickman, for a site in Worcester County with 800 slot machines; and Baltimore City Entertainment Group, for a 500-machine casino in downtown Baltimore. The Baltimore City group includes Paul Micucci, the former head of gaming development for Magna Entertainment.