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Massachusetts Slot Machine Licensing Fees Criticized

Friday, March 06, 2009

BOSTON, Massachusetts -- As reported by The Boston Globe: "State Treasurer Timothy P. Cahill's estimate that three slot machine parlors he has proposed for Massachusetts would produce $2 billion
  to $3.3 billion in licensing fees was criticized yesterday by gambling specialists as significantly inflated and apparently based on outdated data that did not take into account current economic realities.

"Cahill also encountered problems on a second major proposal, a plan to privatize the state lottery that he unveiled yesterday morning. It is a move that has been contemplated by other states, but which the US Department of Justice has said would violate federal law.

"Cahill's numbers for slot machines were based on an underlying flaw, an assumption that each slot machine would produce profit of $275 per day, which is probably too optimistic, specialists said. Cahill used that number in a financial analysis to conclude that prospective bidders would agree to pay between $665 million and $1.1 billion each in upfront fees for a license.

"'Nobody's ever paid that much for a casino license,' said Clyde Barrow, a casino specialist at the University of Massachusetts at Dartmouth. 'I can't see anybody putting up that kind of money to license a slot parlor. This is really an eye-popper for me.'

"The real-world experience for states has been far less lucrative. Pennsylvania has sold licenses to operate slot machines for $50 million each, which is only 7 percent of Cahill's lower estimate..."


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