Category Archives: Business Development

Casino-nomics: The Good, the Bad

By Barry Rascovar

July 17, 2014 — Once upon a time, casinos looked like the salvation of Atlantic City, a famed but dilapidated resort town on the Jersey shore.

Historic Atlantic City

For well over a quarter-century, New Jersey’s gamble worked.

Unfortunately, state and local politicians failed to reinvest the taxes flowing from a dozen casinos into Atlantic City. It remained a depressing, down-on-its-luck town of impoverished minorities surrounded by glitzy hotel-casinos.

Now the bubble has burst.

Out of State Competition

Pennsylvania, Delaware and New York gambling casinos have set Atlantic City on its heels.

Maryland’s initial entries — at Perryville and outside Ocean City — were too small and poorly run to create a problem for the Jersey resort.

But when David Cordish’s huge Maryland Live! Casino opened, Atlantic City took a big hit.

Maryland Live!

Maryland Live!

The growing number of casinos in the Northeastern U.S. is delivering staggering blows to the former Queen of the Atlantic Resorts.

The jobs of 7,000 Atlantic City casino workers could disappear by Labor Day — a stunning number for a community of 40,000.

One casino, the Atlantic Club (formerly the Hilton and before that the Golden Nugget), went out of business in January.

Atlantic Club

Shuttered Atlantic Club

Two more casinos are definitely shutting after August — Trump Plaza and Showboat, owned by Caesars Entertainment.

Showboat Casino closes in September

Showboat Casino closes in September

A fourth hotel-casino along the boardwalk, the spectacular and expensive ($2.4 billion) Revel high-rise, is in bankruptcy for the second time. It will be shuttered in mid-September unless a buyer surfaces.

 

Revel Hotel and Casino

Revel Hotel and Casino

More closings are possible.

Caesars Entertainment, for instance, is wallowing in a sea of debt and must increase the profitability of its three remaining Atlantic City properties.

Others, like Resorts International, can’t overcome aging buildings and lack of drawing power in the winter months.

Resorts International

Resorts International

It was bound to happen.

Atlantic City eagerly let too many casinos open their doors. Now the town is over-saturated with giant gambling hotels. A contraction was inevitable.

City and state officials  never planned for the day when competing casinos would surface in nearby states, thus shrinking Atlantic City’s gambling market. They placed all their economic bets on the gaming industry.

Now town officials are belatedly scrambling to rejuvenate Atlantic City and bring in other attractions before blight and despair set in around the hulking, abandoned gaming halls and hotels.

Success at Maryland Live!

Maryland, meanwhile, is profiting handsomely from its long-delayed entry into casino-nomics.

Cordish has shown the way, outmaneuvering racetrack owners and creating a mecca for lovers of casinos.

Maryland Live! is now the most profitable full-service gambling site on the East Coast.

In June, Maryland Live! raked in $56.5 million, $8 million more than Atlantic City’s Vegas-like casino, Borgata, situated several miles from the resort’s boardwalk.

Borgata complex

Borgata complex

Business is booming on Maryland Live!’s casino floor and restaurants. Locating the facility in one of the East Coast’s most popular shopping malls, Arundel Mills, proved a huge asset.

Yet those halcyon days are coming to an end for Cordish.

In late August, Caesar’s will open its Horseshoe Baltimore casino near Ravens Stadium.

It will cut into Maryland Live!’s gambling revenue by as much as one-third.

There’s more bad news coming: Completion of the MGM National Harbor casino overlooking the Potomac River and the Capital Beltway in late 2016.

MGM National Harbor

MGM National Harbor

This will be the most elegant and trendy gambling joint in the region, ideally situated to draw customers from Washington, D.C., Virginia, the Carolinas and Prince George’s County.

Still, Cordish’s complex — on the lower floor of a parking garage — will remain quite profitable.

That’s because Maryland capped the number of in-state casinos at six.

Moreover, the chances of Virginia joining the casino craze are highly unlikely.

Meanwhile, Maryland’s future Big Three — in Baltimore, National Harbor and Arundel Mills — will compete for gambling customers without fear of other entrants diluting the market.

Rural Casinos in Maryland

Maryland’s three smaller casinos are surviving, though at a lesser level of success.

Penn National’s poorly conceived and poorly run Perryville casino in Cecil County should be thriving given its location directly off an I-95 exit.

Hollywood Perryville

Hollywood Perryville

But Penn National threw up a bland, warehouse-like structure in an out-of-sight valley. It has failed to offer gamblers much in the way of entertainment, excitement or value.

Yet Hollywood Perryville took in $7 million in June. Not bad, but it hardly taps the site’s potential.

Harness Racing and Slots

Bill Rickman’s Ocean Downs casino and race track near Ocean City stubbornly refuses to offer table games.

Still, its 800 slot machines do exceptionally well in the summer months, taking in $4.8 million in June — an average of $200 per day per machine.

Rickman, whose main money-maker is the Delaware Park casino and race track near Wilmington, has an added advantage at Ocean Downs: He gets a slice of slots revenue from other Maryland casinos to boost racing purses and make track improvements at his Ocean Downs harness oval.

It’s a great package deal.

Western Maryland Casino

Maryland’s other small casino, at Rocky Gap Lodge near Cumberland, is still in its developmental stage.

Yet it took in $3.7 million in gambling revenue in June from 577 slot machines ($186 from each device per day) and 16 gaming tables.

Rocky Gap near Cumberland

Rocky Gap near Cumberland

With savvy management and marketing by Lakes Entertainment, Rocky Gap could evolve into a popular resort destination offering far more than gambling — a championship golf course, a comedy club, 215 hotel rooms, a convention center and a lakeside location in a state park.

Lakes Entertainment benefits from the fact it bought Rocky Gap on the cheap from the state, which was desperate to reinvigorate the picturesque lodge built with state funds.

It paid the state just $6.8 million and has poured another $25 million or so into upgrades. Gambling revenue will help make the resort much more viable.

Rocky Gap

Rocky Gap

Unlike Atlantic City, Maryland never viewed gambling as an economic development savior.

It’s a pleasant economic bonus for Maryland’s education coffers and a generator of lots of decent-paying jobs for the state.

Casinos can’t be viewed as a long-term growth industry, though. More likely, the six casinos will turn into steady generators of state tax revenue, much like the state lottery.

slots

With no back-up plan, the end of the casino boom is a calamity for Atlantic City.

In Maryland, legalized gambling at a limited number of locations has a far better chance of becoming a long-term survivor.

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Garrett County’s Isolation — Responses

By Barry Rascovar

May 4, 2014 — Who woulda thunk it? A column on Garrett County’s isolation in mountainous, far Western Maryland produced a tsunami of responses — both pro and con — including one from an offended gubernatorial wannabe’s staffer and another from an offended O’Malley administration.

And here I thought I was saying something nice for a change!

Garrett County

A few local residents felt I was too kind in my admiration; others appreciated that someone from the big city three hours away noticed there’s more out to Garrett than state forests, ski lifts and a man-made lake.

The governor’s folks didn’t like being accused of “benign neglect” when it comes to promoting and aiding the state’s most decidedly Republican county. The administration’s opus, though, inadvertently proved my point.

The letter noted that O’Malley has poured $70 million into Garrett’s roads since 2007. There’s another $10 million coming this year, too — nearly all of it to improve state highways in the county.

The Rest of the Story

Here are some facts left out of the O’Malley administration’s letter: Garrett received 20 percent less in local transportation aid, 15 percent less in recreation and natural resources aid, 4 percent less in library aid and 2 percent less in education aid from Annapolis this year — even as the overall state budget grew by 4.3 percent.

So much for the O’Malley-Brown administration’s claim of putting Garrett County on its priority list.

Indeed, there’s scant evidence either O’Malley or Brown have thought much about helping Garrett boost its economic potential as a recreation wonderland.

Ever hear about the governor or lieutenant governor making news by vacationing at Deep Creek Lake or at the Wisp ski resort?

Deep Creek Lake

Deep Creek Lake

Ever catch O’Malley or Brown cutting commercials that promote Garrett as a retreat for families who like outdoor activities?

To them, it’s a forgotten, Republican part of Maryland not worth their time.

Wisp ski resort

Meanwhile, a spokesman for businessman Larry Hogan Jr. wrote to protest the column’s assertion that no candidate for governor cares about Garrett County.

“Western MD is absolutely a priority for Hogan,” says Adam Dubitsky of the Republican candidate’s campaign staff, “which is why he visited shortly after announcing and will be back again. . . .  Larry has repeatedly criticized Annapolis elites for ignoring Marylanders who live west of Frederick City and especially those who reside west of Sideling Hill.”

Fracking Can Be Fractious

Other readers took issue with the column’s concern that overly strict state regulations could doom hopes for an economic boost tied to drilling for natural gas in Garrett County using hydraulic fracturing techniques, better known as “fracking.”

One resident wrote, “I live in Garrett county and do not want fracking here. Don’t be too quick to judge.”

Here’s another: “Thank you so much for your article about Garrett County. . .  in most areas you ‘hit the nail on the head’.  However, many in the county do not want fracking, many are concerned about the impact on our tourist industries including the lake and the many local state parks. . . .  noise and water pollution are the major concerns.  Fracking is a big, noisy business with big trucks and constant disruption.  I know that simplifies a problem. . .  but it is a concern, as well as a drop in the property values.  After living near a natural gas storage pumping site for 25 years. . .  the traffic and noise are an impact on daily living and enjoyment of property, or small acreage.  Just sayin’. . . Thank you for ‘listening!’ ”

A resident of Lonaconing wrote: “Very interesting article, although a couple minor errors, plus, I wanted to give you a little additional insight. . .

“First, Garrett Co is not the only county that will benefit from fracking. . . . Allegany County will also. . . western Allegany County (the George’s Creek valley) also sits over the Marcellus Shale reserve.

“Secondly, as far as gubernatorial candidates. . . when [Doug] Gansler did his Western Maryland tour, he only went as far as Cumberland (Allegany Co.). . . He never touched Garrett. . . Hogan is the only candidate I know of that’s gone to Garrett for a political visit. . .

“Other than that, nice article. . . nice to get a little focus up this way.”

Community College Guarantee

Here’s another response concerning Garrett County’s guarantee of a community college education for its high school graduates:

“As a Western Marylander, I appreciated this column. I thought you would be interested to know that, inspired in part by the Garrett County Commissioners’ decision to pay for community college for Garrett students, the Allegany County Commissioners have dedicated most of the revenue they receive from the new Rocky Gap Casino to paying for local students to attend Allegany College of Maryland and Frostburg State University. In discussions I heard, they talked about both the economic development benefit of having a better-educated populace, as well as the ability to keep our young people from having to leave the county for opportunity.”

From the president of Garrett College, Rick MacLennan, came this comment:

“Thank you for your recognition of the County/College partnership.  Existence of the County scholarship program was a significant variable in my decision to accept the presidency (and yank my family across the country from the state of Washington) in 2010.

“It was very nice meeting you—come back and see us again.”

 

Garrett Co. MD

Garrett County (in pink)

 

Others didn’t see it that way. Here’s a correspondence from Grantsville:

“I liked reading it, but I think you drank the Cool-Aid a bit too heavily! I have only lived out here for 6 years, so I hardly qualify as a resident let alone a local. I am a retired software engineer and teach at Garrett College (one course in computer science).  Some observations that I have gleaned:

  1. The average Garrett Scholarship student is ill-prepared for much of anything out of high school.  90% going to Garrett College have to take remedial math and English! . . . It may be that those going to other institutions are better-prepared, but I suspect it is self-selection rather than ability.
  2. Of my students, I have lost about 20% after the first week, 60% by the mid-terms, and 20% will pass. . . I am extremely lenient with no dings for late homework, open book and unlimited time for tests, etc. and still see only a couple of students get through the semester with good grades!
  3. The primary school system does not seem to adequately provide for vocational training. . . I suspect a lot of students should be pushed toward building trades, communications, wind turbine maintenance, etc.
  4. A lot of Garrett’s problems are self-inflicted.  There is a lot of NIMBYism that is often misplaced.  For instance, the objections to zoning prevent any useful regulation of land use including fracking, wind turbines, suburban sprawl, etc. . . .

“On the positive side:

  1. The roads are incredibly well-maintained, especially in the winter.
  2. The temperatures are about 10F lower than certainly Baltimore and even Cumberland (more like 8F there).
  3. Services are adequate and Pittsburgh, Johnstown, Morgantown, or Altoona (or even Frederick, D.C., or Baltimore) are a reasonable distance.
  4. Arts are OK — I . . . travel back to Frederick weekly to play in the Frederick Symphony because there is nothing close even at Frostburg University. We do have some arts at Frostburg, Cumberland, GLAF [Garrett Lake Arts Festival], and Music at Penn Alps. . . .
  5. The fall is fantastic!  Winter is a real winter (if you like that — if not, don’t come out here!)”

Missing Key Points

Here’s a different perspective from a Garrett resident:

“The article totally misses several key facts . . .

“Garrett County (GC) residents are partially responsible for their political isolation. They lean so far right that ordinary (above and below middle class citizens) hardly ever speak out regarding their concerns about important issues. . . . .

“The lack of public outcry has caused a severe excommunication of area residents. Since they don’t raise their voice, it leaves only wealthy business owners to push political ideas. This has turned Garrett County into a mecca for minimum wage. Our leaders complain that families don’t stay in the area, yet college educated people are left working at Lowe’s or Wisp, for a scant $ 7.25 per hour, because our local government has done nothing to address wage inequality. . . .

“While the state has certainly been unfair to the county, county government has done nothing but benefit a few select business owners, while largely ignoring the struggling working population.”

That’s a portion of the responses to my rather mild column.

Folks speak their mind in Garrett County, though they do so with extreme politeness. I found it a neighborly place that isn’t given sufficient attention by the powers in Annapolis. The citizens of that remote mountain county deserve better.

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Caution in Annapolis While Leaning Left

By Barry Rascovar

March 14, 2014–IT WAS A disappointment to liberal opinionators but the 2014 General Assembly proved surprisingly cautious and balanced in moving Maryland decidedly to the political left during its 90-day session that ended April 7.

Gov. Martin O’Malley, barely containing his national ambitions, took a hard-left turn in his legislative agenda. It was aimed at impressing liberal Democratic interest groups across the country.

But House Speaker Mike Busch and Senate President Mike Miller wisely slowed the O’Malley Express and made sure Maryland didn’t get too far out in front of the Democrats’ march to the far left.

Senate President Mike Miller

Senate President Mike Miller

Time and again, leaders in the House and Senate put a damper on overly ambitious liberal proposals. Here are a few examples:

–Minimum Wage. Yes, O’Malley is bragging that Maryland is leading the nation by passing a $10.10 minimum wage. But read the fine print.

The first wage boost next January is only seventy-five cents an hour. It won’t be till mid-2018 – over five years from now – when Maryland reaches O’Malley’s Nirvana, that $10.10 threshold.

This cautious approach is dictated by legitimate concerns that a rapid, 39 percent wage boost will hurt many small businesses and retail chains and could lead to layoffs, store closings or cutbacks in work hours.

Weakening the Bill

The final bill also exempts certain employers, adds a lower, trainee category, contains no automatic annual inflation boost and denies higher wages to tipped workers.

O’Malley can brag all he wants, yet the final version is a far cry from his original proposal. The new law does provide higher baseline wages for low-income workers, but it takes a decidedly conservative approach getting there.

Pit Bull Legislation

–Dog Bites. Yes, lawmakers finally found comity on reversing a dreadfully misguided ruling by the state’s Court of Appeals that called one breed of dog, pit bulls (though they are not really a breed) “inherently dangerous.”

Pit-bull owners aren’t off the hook, though. Lawmakers added language making all dog owners legally responsible if their pet bites someone. That thoughtful, moderate step levels the field and strikes a blow for individual responsibility when good dogs do bad things.

Puff-and-Pay

–Decriminalizing marijuana possession. This move is being hailed as the first step toward fully legalizing marijuana. In truth, lawmakers aren’t opening the floodgates.Marijuana smoker

A $100 fine for a first offense is a hefty price to pay for getting caught with pot. A $250 fine for a second offense will put a crimp in most wallets, and a $500 fine for a third offense comes with possible mandatory drug counseling.

That’s quite a penalty for inhaling this carcinogenic weed.

Perhaps the bill will reduce jail overcrowding in large jurisdictions, as some predict, and allow police to focus on serious criminal offenses. Or it could mean a deluge of new pothead offenders. We’re in virgin territory that could well require a re-thinking of this move by the 2015 or 2016 legislature.

Medicinal Pot Smoking

–Medical marijuana. This law could make it easier for seriously ill patients to get relief from their pain, anxiety and/or nausea. Academic medical centers refused to participate in the existing program for fear of endangering their massive federal research grants, so now legislative sponsors are trying a different approach through pre-approved physicians.

Still, drawing up the rules and regulations will be complicated and could take quite some time to complete — at least 18 months. Lawmakers continue their go-slow approach.

Creating a market for marijuana growers could easily spin out of control. Some physicians may abuse the privilege of prescribing this controlled substance. The law may have to be revised yet again in future years to make it effective.

Early Start to Schooling

–Pre-K expansion. Yes, Maryland is enlarging its program to give pre-kindergarten education to underprivileged children. Lt. Gov. Anthony Brown is crowing about this grand achievement.

But wait a minute: Only 1,600 kids will be helped under this legislation. That’s a drop in a very large ocean.

At that pace, Brown will be eligible for Social Security before all the needy kids in Maryland get into this worthwhile program. His claims of a great step forward ring hollow.

Easing the ‘Death Tax’

–Estate tax reduction. O’Malley could still veto this bill to impress ultra-liberal groups that idolize candidates who bash the rich. Keeping this punitive tax on the wealthy would appease the left wing of his party.

Still, there’s no denying wealthy Marylanders are moving to Florida and other states that don’t punish the heirs of an individual who happens to leave relatives great sums of money.

Both Miller and Busch recognized Maryland was losing many of its best and most committed civic leaders as result of this soak-the-rich policy.

House Speaker Mike Busch

House Speaker Mike Busch

They pushed through changes that will make the state’s estate tax identical to federal limits – but only gradually over the next five years.

It’s a nod to the business community from top lawmakers based on practical realities. It’s also a pullback from O’Malley’s perpetual, liberal business-bashing.

All of these measures indicate that the state’s legislature remains stubbornly moderate in tone, fearful of moving too quickly or too aggressively on social issues. Rarely do Maryland’s legislative leaders fully embrace the knee-jerk crusade du jour. They keep worrying about the unintended, negative consequences.

Cooler heads prevailed in Annapolis this session. Though the legislature is increasingly dominated by liberal Democrats, it’s a positive sign that caution remains an integral part of the Maryland General Assembly’s DNA.

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Is a Higher Minimum Wage Counter-Productive?

By Barry Rascovar

March 24, 2014 — Since it’s an election year, Democratic politicians in Annapolis are eager to pass an increase in the minimum wage. Gov. Martin O’Malley is poised to promote a higher minimum wage law in Maryland as part of his incipient campaign for national office.

But is it a good idea? Will there be unintended consequences in the form of job reductions?

That could well be the case, based on a recent Texas A&M economic study. It’s also the findings of a February study by the Congressional Budget Office.

Minimum Wage Increases

Minimum Wage Increases

Bottom Line: A jump in the minimum wage by 10 percent (Maryland’s proposal is 13 percent in Year One and a cumulative 39 percent over three years) will have a significant negative impact on future job hiring.

The non-partisan CBO forecasts that a federal hike in the minimum wage from $7.25 an hour to $10.10 an hour could mean a likely loss of 500,000 jobs nationwide, although there’s a chance the job loss could top one million.

The Texas A&M study may be more relevant in that it looked at new job creation in the year following previous minimum wage hikes. “Net job growth falls in response to an increase in the minimum wage,” it concludes.

Tom Firey of the Maryland Public Policy Institute figures this could mean the loss of 25 percent of all newly created jobs in Maryland if the General Assembly ups the minimum wage.

His adds: “In this miserable economy, the last thing we need is to further handicap job growth and business start-ups.”

All this is fascinating data and under normal circumstances the facts and figures should prove persuasive.

Not for politicians in an election year, though. Not when labor unions and liberal advocacy groups are going overboard promoting a higher minimum wage as the Second Coming.

Minimum Wage protester

But beware of the side effects: Higher consumer prices, a contraction of small retail businesses and unemployment for many now employed at the minimum wage rate.

The trade-off: help for the lowest salaried workers, who would see their pay (before taxes) go up by 3 percent.

Yet raising the minimum wage amounts to a shotgun approach: Only 19 percent of those who would receive this raise come from households below the poverty threshold of $15,730 for a family of two and $23,850 for a family of four.

Indeed, 29 percent of those benefiting from a $10.10 minimum hourly wage would come from households earning three times the poverty level ($46,190 for a family of two, $68,450 for a family of four).

An Alternative Route

A far better way to deliver financial support to the lowest-paid workers is increasing the federal and state earned income tax credit. One hundred percent of that money winds up in the hands of a low-wage worker earning less than $15,000 annually (the cap is $54,000 for a couple with three children). It’s a highly effective income supplement for low-wage workers.

That’s not going to happen in Maryland because a more generous EITC means a big hit to the governor’s budget, whereas raising the minimum wage socks it to small businesses primarily, not the government.

Yet given Maryland’s shaky economic recovery, lawmakers in the Senate are beginning to have second thoughts about sharply raising the state’s minimum wage. After all, Maryland lost nearly 10,000 jobs in January. Passage of the governor’s bill might accelerate those job losses.

It’s a Catch-22 for liberal Democratic lawmakers. Advocates standing on the sidelines promote this bill as a huge boost to the economy. Yet no impartial economic study comes to that conclusion.

Middleton’s Demand

Now a key senator, Thomas McLain (Mac) Middleton from Charles County, has thrown a new issue on the table. The governor’s bill ignores the plight of workers who care from the state’s developmentally disabled. They’d end up earning less than the new minimum wage.

Middleton won’t move the governor’s bill until this oversight is addressed. Developmental workers — 18,000 in community settings — deserve far more in wages than they’re paid ($9.82). They perform some of the most emotionally trying work in society tending to 25,000 developmentally disabled people in Maryland.

Even more egregious, the state pays its own developmental workers in rural state residential facilities much more. That fundamental inequity makes no sense except in terms of saving money when the state budget is formulated.

O’Malley’s minions are negotiating with Middleton and likely will find a way to satisfy the senator. Yet this problem is just the tip of the iceberg.

How many other job categories within state and local governments will have to be adjusted because of a $10.10 minimum wage? Is it affordable?

Passage Coming

There’s no doubt a modified version of O’Malley’s bill will be approved.

It may not have all the bells and whistles far-left advocates and the governor desire, such as an automatic cost of living increase and a big boost in salaries for tipped workers.

The path to $10.10 might be phased in more slowly. More exemptions might be added to cover college students working the summer beach season in Ocean City.

In the end, though, Maryland lawmakers will put a higher minimum wage on the books — even though it may not make sound economic sense and might prove the wrong way to address this dilemma.

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Common Sense and LNG Exports

By Barry Rascovar

March 10, 2014 — FINALLY, a dose of common sense in the swirl of hysterical hype and fear-mongering by environmental groups over the proposed liquid natural gas export project at Cove Point in Southern Maryland.

Cove Point LNG Terminal in Lusby, MD

Cove Point LNG Terminal in Lusby, MD

If you listen to the protesting greenies, this $3.8 billion project by the large energy company Dominion will send natural gas prices higher, promote the use of dirty energy sources like oil and coal, pollute the Chesapeake Bay, pollute Maryland’s air, worsen global warming and encourage more shale-oil fracking.

Few of those assertions have much credence. Some are bald-faced, and intentional, twisting of the truth.

More on target is Virginia-based Dominion’s assertion that environmentalists are trying to use this LNG project as a proxy for their war on hydraulic fracturing of shale rock and the Keystone Pipeline. Neither has a direct link to what Dominion wants to do.

‘Clear and Unambiguous’

That’s why it was refreshing to hear common sense applied to this propaganda battle by Judge Michele Hotten of the Maryland Court of Special Appeals, who strongly supported a circuit court ruling in Dominion’s favor.

It was “clear and unambiguous,” the judge wrote in a recent 3-0 decision, that an LNG export terminal is permitted at Cove Point under a 2005 agreement with environmental groups. Period. End of argument.

Those groups won’t let it end, though. They are intent on litigating this project ad infinitum — anything to delay and eventually kill this evil proposal.

The problem is that what Dominion wants to do at Cove Point isn’t evil. It isn’t a pox on the environment. Quite the contrary.

Proposed expansion at Cove Point LNG Terminal

Proposed expansion at Cove Point Terminal

Dominion wants to export $6 billion a year in LNG to India and Japan, two nations that are heavy polluters of the air by burning huge amounts of oil and coal. Natural gas, by contrast, is a far cleaner-burning substitute source of energy and a far more energy-efficient commodity.

Which is better: Burning coal and oil or burning natural gas?

We should know the answer since Maryland and most other states are forcing utilities to shutter their existing oil-burning and coal-burning electric plants in favor of the vastly superior alternative, natural gas.

Double-hulled Tankers

But won’t Cove Point harm the bay?

Not really. Dominion expects about 85 double-hulled tankers to visit its terminal annually — the same number as visited Cove Point at its peak when it served as an import terminal between 1978 and 1980. Besides, LNG is super-safe. If there’s a spill, the natural gas evaporates and dissipates because it is lighter than air. There has yet to be an environmental disaster caused by an LNG tanker.

But won’t Cove Point stimulate more fracking?

Of course not. That’s a manufactured canard. Cove Point’s exports won’t influence the decision by energy companies to drill for oil and gas using hydraulic fracturing techniques. The rush is on to discover more of this country’s abundant supply of cleaner-burning natural gas. If Cove Point never exports a cubic foot of LNG it will have zero impact on the future of fracking.

Nor will Cove Point have anything to do with the Keystone Pipeline decision. Connecting the two is preposterous and an indication of extreme paranoia.

Given that Cove Point is one of 21 LNG export proposals seeking regulatory approval — plus another six that have gotten the federal go-ahead, its impact in the greater scheme of things is being incredibly overblown.

Impact on Pricing

Won’t Dominion raise natural gas prices by exporting this commodity?

Pure buncombe. Two years from now, U.S. production of natural gas is projected to exceed domestic consumption. Energy independence is within reach.

Once the U.S. starts exporting energy, it will have a positive impact on shrinking this country’s trade deficit.

A new office within the State Department is vigorously pursuing “energy diplomacy” based on the growing U.S. ability to export vast quantities of LNG. Natural gas exports are likely to become a key geopolitical weapon against Russia’s aggression in the Ukraine and a way to draw that struggling nation away from Vladimir Putin’s grasp.

Cove Point exports, starting in 2017, will be part of that American effort. The LNG plant also will provide a big boost for Maryland’s economy. Thousands of high-paying construction jobs. Seventy-five new permanent jobs. A 60 percent boost in Maryland’s exports. A big jump in sales and income taxes for the state and Calvert County.

No wonder an overflow crowd at a March 1 hearing in Southern Maryland overwhelmingly supported Dominion’s project.

LNG hearing in Southern Maryland

LNG hearing in Southern Maryland

That hasn’t stopped the greenies, who rounded up supporters from the Baltimore area to stage a big protest as the Maryland Public Service Commission began hearings on this case.

Anti-Cove Point protesters in Baltimore

Anti-Cove Point protesters in Baltimore

But the PSC’s role is narrow: Whether to permit construction of two natural gas turbines that will provide the energy for compressing the natural gas to minus-260 degrees Fahrenheit (that’s when the gas turns to liquid).

Baltimore protest of LNG Terminal project

Baltimore protest of LNG Terminal project

The PSC’s staff has recommended approval. It’s pretty much a straight-forward proposal — two clean-burning turbines to power the liquefaction. The heat generated during that process would be recycled to provide energy for the rest of the Cove Point facility, thus reducing the plant’s greenhouse gas emissions.

This project is being studied to exhaustion. Twenty-one thousand pages of reports and information have been prepared for regulatory agencies. Fifty more permits and approvals are still needed before the three-year construction phase commences. Final approval rests with the Federal Energy Regulatory Commission and the Department of Energy.

That’s why it was refreshing to see the courts take a no-nonsense approach and examine the facts rather than heeding the heated, emotional rhetoric of opponents. But this battle is far from over, which is a shame.

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Redistricting, Minimum Wage & TV Debates

A Weekly Roundup

By Barry Rascovar

March 7 — TODAY’S House of Delegates session will mark the halfway point for a bill raising Maryland’s minimum wage in phases from $7.25 to $10.10 by 2017 — nearly 40 percent.

Recent minimum wage protest

Recent minimum wage protest

Without question, the O’Malley administration’s bill will pass. The votes are there. But it’s not exactly the bill Gov. Martin O’Malley presented in January.

There’s no automatic inflation clause. Amusement park workers are exempted (largely to accommodate Six Flags in chairman Dereck Davis’ Prince George’s County). Implementation is delayed six months to ease the transition for businesses.

Senate Action Next

Most of the changes are sensible, but more may be coming in the Senate, where there is a little more skepticism about the advisability of such a major increase in business expenses during the weakest economic recovery in memory.

Rural counties in Western Maryland and the Eastern Shore may need special attention. Living expenses are a lot less there. A 40-percent hike in wages for many small, rural businesses might prove counter-productive. Ocean City’s minimum-wage summer help is primarily college students, not adults raising a family.

Too Much in a Weak Recovery?

The bill’s three-year phase-in may be too aggressive during this exceptionally mild recovery. It might be wise to adopt a more gradual rise.

But one way or another, an increase in Maryland’s minimum wage is coming — and is necessary.

It’s now a matter of how willing lawmakers are to heed warnings by business that O’Malley’s original bill  could have unintended consequences.

+++++

ON THE OTHER END of the economic spectrum, Senate and House leaders (but not O’Malley) are pushing a bill to lower Maryland’s estate tax. This is overdue.

Wealthy Marylanders are switching their residences to avoid this state tax. Some of Maryland’s most respected business leaders are among them. The tax makes no sense, especially when surrounding states are benefiting.

A gradual return to the days when Maryland’s estate tax matched the federal levy seemed likely to pass until revised estimates on Thursday showed a new quarter-billion-dollar hole in O’Malley’s budget. That may force lawmakers to delay implementation of the phase-in.

O’Malley has not been part of the estate-tax movement. It doesn’t fit into his presidential playbook.

Instead, Senate President Mike Miller and House Speaker Mike Busch are leading the charge. They’ve finally recognized the need to start reforming parts of Maryland’s unbalanced tax laws. They’ve figures out that chasing wealthy Marylanders out of the state is a terrible strategy.

+++++

A SIDELIGHT of the minimum wage debate this week was an attempt by Democratic gubernatorial candidate Del. Heather Mizeur to go beyond O’Malley’s bill and raise the standard to $11.37 an hour by 2023.

Del. Heather Mizeur

Del. Heather Mizeur

Mizeur’s amendment bombed.

She got just eight votes, including her own.

That indicates the narrowness of Mizeur’s ultra-liberal appeal, even in a liberal General Assembly. It does not bode well for her statewide campaign.

+++++

A HANDFUL of bills in the General Assembly seek to reform Maryland’s politicized redistricting process. They aren’t going anywhere.

That’s too bad, because turning redistricting over exclusively to those in power has gotten out of hand.

The current maps are undemocratic and a disservice to voters. Maryland’s congressional maps, for instance, are appalling. No effort is made to create compact districts or keep communities together.

MD's gerrymandered 3rd Congressional District

Gerrymandered 3rd Congressional District

Yet until the Supreme Court and the Maryland Court of Appeals change their tunes on redistricting, legislative reforms are meaningless.

The highest federal court has washed its hands of redistricting, claiming it is purely a political matter. So much for ensuring fairness and sane congressional districts.

Interference By Appeals Court

The state’s highest court, meanwhile, has become too deeply involved in redistricting, imposing archaic thinking in drawing legislative boundaries.

As a result, cross-jurisdictional districts that follow neighborhood growth patterns are virtually forbidden. Rigid adherence to county and city lines trumps everything, even when citizens pay no heed to those boundaries in their daily lives.

What a mess. Redistricting, as currently practiced, is giving representative democracy a bad name.

+++++

TELEVISED DEBATES in the race for governor have been set. All three of them.

Don’t expect much.

The candidates will be well rehearsed, especially the front-runner, Lt. Gov. Anthony Brown, who needs careful scripting.

Televised Political Debates

Don’t expect one of these in MD’s 2014 TV debates.

But the real laugher will be the lone televised debate among lieutenant governor candidates.

These hopefuls aren’t elected on their own: They are the conjoined twins of gubernatorial candidates. So on TV, they will mimic positions taken by their far-more important running mates.

No Assigned Duties

That’s because their own views don’t count.

Under the state’s constitution, the lieutenant governor has no designated powers. He (or she) is there in case the governor drops dead or comes down with a disabling disease.

So if you happen to miss the scintillating debate among wannabe lieutenant governors, don’t fret.

Tuning in would be a waste of your time.

#     #     #

Tennessee Leads the Way

Boosting Community Colleges

By Barry Rascovar

MARYLAND is way behind the learning curve. It needs to look to what Republican Gov. Bill Haslam is proposing in Tennessee: free community college for any high school graduate in the state.

While Gov. Martin O’Malley’s State of the State Address lacked creativity and forward-looking initiatives, Haslam delivered a cutting-edge plan to Tennessee lawmakers. He’ll use lottery proceeds to set up a $300 million endowment for the two years of free-tuition guarantees to state high school grads at community colleges or technology centers.

Tennessee Gov. Bill Haslam

Tennessee Gov. Bill Haslam

The “Tennessee Promise” stands in stark contrast to O’Malley’s niggardly attitude toward Maryland community colleges, which actually serve as the education backbone of this state. Instead of making enhanced funding of community colleges a priority, the lame-duck governor wants to reduce mandated funding levels.

It’s another example of O’Malley’s missed opportunities.

Perhaps some of the wannabe candidates for Maryland governor will notice Haslam’s daring proposal in Tennessee, which could put that state in great position to attract new companies. In Maryland, sadly, community colleges remain an undiscovered gem.

*     *     *

Rob, We Hardly Knew Ye

GOOD NEWS for democracy: Twelve-term Congressman Robert Andrews of South Jersey is making an early exit from Capitol Hill in ten days. Thank goodness.

Andrews is under investigation for using campaign funds for family trips to California and Scotland. In 24 years, he’s had no real leadership role in the House.

Retiring Rep. Robert Andrews of New Jersey

Retiring Rep. Robert Andrews, (D-N.J.)

He’s introduced more bills than any other congressman during that time. His record of success? Six hundred forty-six bills thrown in the hopper; none passed.

Think about that.

A .000 batting average.

O for 646 at-bats, with 646 strike-outs.

No wonder the Washington Post labeled Andrews “America’s least successful lawmaker.”

His departure will hardly make a wave.

#     #     #

Maryland’s Slick Casino Move 

NO ONE noticed at the time, but Maryland pulled a fast one on casino bidders for the new license in southern Prince George’s County.

Everyone was expecting a long, drawn-out courtroom battle after MGM Resorts International won the coveted license. MGM plans to build a $925 million luxury gambling/hotel mecca overlooking the national’s capital.

MGM Casino at National Harbor

MGM Casino at National Harbor

But neither Greenwood Racing nor Penn National, the losers, will contest the award — despite the fact Penn National could see its Charles Town, WV, casino lose hundreds of millions of dollars due to MGM’s earlier-than-expected start in mid-2016.

Why didn’t the losers gripe in court and prolong the matter? Because of a provision in the state’s request for proposals (RFP). It turns out, the state gets to keep all of the bidders’ down-payments until appeals are concluded.

That would have meant the $18.5 million Penn National put up, and the $29 million Greenwood Racing put up would be locked away in an escrow account for years.

That’s a hefty punishment for profit-making companies to absorb.

The companies decided to forego the longshot bet of winning on appeal. This way, they get all those millions returned immediately so they can re-invest that money in other casino bids or expansion elsewhere.

Meanwhile, the state gets to reap a gigantic benefit — the early opening of what experts say will be the most profitable casino in the mid-Atlantic region, with the state keeping over half of those proceeds.

#     #     #

 

Do-Gooders Know Best

By Barry Rascovar

For MarylandReporter.com

Feb. 2, 2014 — RAISING THE MINIMUM WAGE is all the rage among liberal Democrats and liberal advocacy groups. Listening to them it’s clear a much higher minimum will dramatically close the income inequity gap.

Nirvana is just around the corner.

All this is well intentioned. Yes, there is a widening gulf between America’s very rich and the middle and lower classes. Yes, the nation’s minimum wage needs adjustment. Those at on the bottom of American society need extra financial help.

But is the nearly 40 percent jump in the minimum wage proposed by President Obama and his wannabe successor, Maryland Gov. Martin O’Malley, the solution?

Obama State of the Union Address

President Obama’s State of the Union Address — “Raise the minimum wage”

Will prosperity sudden blossom, job-growth flourish and the poor take home enough pay to cover all expenses?

Sadly, the answer is “no.”

Indeed, a rapid and steep rise in the minimum wage may result in the Law of Unintended Consequences coming into play – fewer job opportunities, layoffs, cutbacks in hours worked, higher consumer prices and more delays in business expansion.

O'Malley State of the State Address

Governor O’Malley at State of the State Address — “Raise the minimum wage”

Put yourself in the small businessman’s position.

She employs mainly low-wage workers at two or three retail locations. Wages already eat up most of her revenue. Now those wages are going to rise by over a third.

Chance are this business person will take steps to curb her new overhead – letting some workers go, reducing hours for other employees and raising prices, if competition permits.

Some small businesses may be so hard hit that they can’t  stay open. Even larger operations might see profits dip substantially, forcing them to put growth plans on hold.

Negative Impact From Doing Good

Do-gooders could end up harming the very people they seek to help.

It is encouraging that House Speaker Mike Busch and Senate President Mike Miller recognize caution is required in approaching the minimum wage issue.

One size may not fit all businesses in various parts of the state.

Behind the counter jobs at minimum wage.

Behind the counter jobs at minimum wage.

A $10.10 minimum rate in impoverished and isolated Garrett County goes much further than in Montgomery County, but Garrett business owners may not be able to afford such a large wage boost.

Ocean City’s part-time summer employment base attracts college students, not folks looking for full-time work. Boosting their pay by nearly 40 percent doesn’t help the poor at all. It may, though, force some small entrepreneurs to close up shop.

A Better Method

There’s a far better way to help men and women struggling at the bottom of the economic ladder. It’s called the earned income tax credit – a targeted wage supplement that rewards the working poor.

So why isn’t O’Malley proposing a major boost in Maryland’s earned income tax credit? Because it would require him to pay for it and cut tens of millions from other agencies and programs.

It’s far easier for O’Malley – as he has done throughout his terms as governor – to beat up on the business community and demand the private sector help the poor. It  becomes a private-sector burden rather than a burden on O’Malley’s budget.

There shouldn’t be a debate over raising the minimum wage gradually over a number of years. It’s too low now.

Deceptive Political Mindset

But liberal politicians have seized on this issue as an easy answer to the nation’s persistent slow growth. It isn’t.

They ignore the real purpose of minimum wage jobs – to get young people  starter jobs so they can learn about showing up regularly and on time, to provide supplemental wages for older folks, and to assist those whose full-time job doesn’t pay all the bills.

In most cases, these positions are not for those seeking permanent employment. They are entry-level jobs.

High turnover is expected. The work doesn’t require much brain-power. The jobs are designed to be a start or a supplement, not a career.

Cautious Approach Needed

Attacking income inequality is far more complicated than simply doubling or tripling the minimum wage.

Attacking the business community for pointing out the obvious flaws in this liberal crusade doesn’t help matters, either.

There’s little doubt O’Malley will get a modified minimum wage proposal through the General Assembly this session.

Yet a slow and cautious approach is advisable.

The next group of elected Maryland officials needs to focus more on designing programs that actually stimulate and encourage economic growth.

O’Malley and his liberal followers seem to have fallen into the political trap of calling for superficial solutions that do not come close to resolving the exceedingly knotty problems confronting society.

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Read other commentaries by Barry Rascovar at www.politicalmaryland.com.

 

Lt. Gov. Anthony Brown and Obamacare

By Barry Rascovar

December 9, 2013 — Let’s face it: Maryland dropped the ball on implementing Obamacare. To date the rollout has been a failure.

Thirty-seven hundred sign-ups since October 1? That’s pathetic.

Who bears ultimate responsibility?

Let’s start at the top with Gov. Martin O’Malley and his designated point man on the healthcare rollout, Lt. Gov. Anthony Brown.

Ever since 2010, Brown has promoted his leadership role in the Obamacare implementation.

Lt. Gov. Anthony Brown

Lt. Gov. Anthony Brown of Maryland

The lieutenant governor co-chairs the Health Care Reform Coordinating Council responsible for spending $163 million in federal funds on an internet signup website.

Until recently, he’s been quick to take credit for this initiative’s potential to extend health care to more of the state’s 800,000 uninsured.

Missing in Action?

Yet when the Maryland Healthcare Connection computer system froze, the lieutenant governor was nowhere to be found.  E-mails released to the Baltimore Sun confirm that Brown was a no-show in keeping on top of this vitally important state technology program.

When Maryland’s connector system crashed and continued malfunctioning, Brown let others take the heat.

At a Senate Finance Committee hearing to discuss systemic problems plaguing the state’s botched website, Brown was absent.

Instead, it was Health Secretary Josh Sharfstein who had to admit there’s no telling when the state’s website will be glitch-free.

Josh Sharfstein

Health Secretary Josh Sharfstein

It was Sharfstein, not Brown, who had to admit there’s nothing the state can do to help people who are losing their healthcare benefits through no fault of their own.

A similar scenario played out before a House committee in Annapolis. Brown remained a no-show.

Then on Wednesday, WBAL-TV’s ace reporter Jayne Miller tracked down Brown and asked about his responsibility for the health care sign-up mess.

She got an aggressive brush-off from a man who sounded offended that his leadership was being questioned.

Brown caught a break Friday when Rebecca Pearce, executive director of the troubled health exchange, resigned after O’Malley sent in his staff to oversee the crippled IT operation.

Now Brown has a scapegoat. Yet he’s having increasing difficulty responding to criticisms that he was too busy campaigning to bother with the nitty-gritty of this IT implementation.

He’s promised to address all this at a carefully scripted and rehearsed press conference sometime this week — if he can fit it into his busy campaign schedule.

Brown’s campaign advertises that he is a proven leader. His websites brag about his role in bringing to fruition the Affordable Care Act. He’s gotten a national award for it.

But he doesn’t have any answer to why he was asleep at the switch, why he wasn’t on top of this exceedingly complex IT operation that cried out for strong, forceful leadership from someone like Brown with a military background.

This is already a central point in the campaign for governor.

Attorney General Doug Gansler accused Brown on Thursday of “ducking responsibility” for the problem — an apt summation of the current situation.

That same day, Brown conceded, “Everyone that has been involved. . . is responsible and that includes me.”

That’s a great way to minimize your own culpability. But it won’t fly in the hothouse arena of a gubernatorial campaign.

Brown may be the general in charge of this operation, but he seems eager to have his  lieutenants take all the grief for a botched mission.

Questions, Questions, Questions

Where was he when feuding contractors were at war with one another in developing the IT system?

Why wasn’t he doing something to remove bureaucratic barriers from Washington that were constantly gummed up the IT system?

Why wasn’t he aware the system hadn’t undergone comprehensive testing?

How will he explain the fact that he didn’t find out the state’s IT program was messed up until it crashed?

Was he a leader in name only?

MD Healthcare Connection

Maryland Healthcare Connection

Slow Fix Hurts Brown

Brown’s dilemma is that Democrats pick their nominee for governor in late June. That may not be enough time to fully fix this technology disaster.

Giant back-end headaches could emerge even as front-end computer glitches are resolved.

Insurance companies may announce large, unexpected losses as a result of the government’s incompetence.

Tens of thousands may continue to experience enrollment failures or wind up uninsured because of flaws in the computer software. Confusion and screw-ups could persist.

Legislative hearings during the upcoming General Assembly session could prove intensely embarrassing.

This has been, to date, an epic implementation fiasco.

If public anger builds rather than dissipates, there will be political consequences especially in a state like Maryland with its early primary elections next year.

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Maglev: An Impossible Dream?

By Barry Rascovar

December 2, 2013 — MAGLEV IS BACK. So run for the hills.

Maglev Train in China
Maglev in China

 

 

 

 

 

 

 

 

 

A new coalition of Political Influentials is lobbying for this ultra-expensive, ultra-high-speed rail system.

How expensive?

Let’s start at $15 billion, or more, just for a magnetic levitation route, underground, from Washington to Baltimore — 39 miles.

Yes, you could make the trip between the two cities in 15 minutes. Yes, it would transform commuting.

Just imagine the ticket prices.

Maglev in Asia

In Shanghai, which has one of the only two commercially operating maglev routes in the world (the other is in Aichi, Japan), a one-way ticket from the airport to the outskirts of that mega-city costs a heavily subsidized $8.14 — and then you’ve got to catch a cab or light-rail train to downtown.

That line is considered a flop.

Construction costs on a Washington-to-New York route could top $600 billion, but at least you’d be able to reach the Big Apple in an hour — about the same as a plane flight.

It’s ridiculous pie-in-the-sky rambling from lobbyists looking for a gigantic federal handout that isn’t going to happen.

We’ve heard this tune before.

Past and Future Maglev Plans

The Abell Foundation was a big maglev booster, proposing a line from Camden Yards to Union Station at a cost of $5.1 billion (in 2007 dollars).

That plan went nowhere in the halls of Congress.

Japan is eager to tout a maglev line in the U.S. for the Northeast Corridor.

Its government is building a $100 billion long-distance maglev route over the next 15 years from Tokyo to Osaka. This could turn into a white elephant unless Japan persuades other countries to build similar lines that would bring down construction costs.

Maglev in Japan

Maglev in Japan

There’s no doubt maglev would be beneficial.

Its trains are propelled by superconducting magnets, thus reducing friction and allowing for super-high speeds of up to 300-plus miles an hour.

There’s virtually no noise. Trains can operates in all kinds of weather.

But, oh, the price tag.

Amtrak wants to build its own high-speed train route from D.C. to the Big Apple. Travel time would be 94 minutes. All it would cost is $151 billion.

Given this country’s historic parsimony toward mass transit, neither Amtrak’s plans nor the maglev group’s plans are going to get traction in Washington.

A Private-Sector Solution

Only through private-sector development will maglev happen in the U.S. of A.

Is there an Elon Musk * out there eager to put up a dozen or so billion dollars to build a magnetic levitation route?

Quick: Call Bill Gates, Warren Buffett or Google co-founder (and University of Maryland alum) Sergei Brin. * *

That’s the only way this pipe dream is ever going to turn into an American reality.

#     #     #

* Billionaire refresher 1: Elon Musk is founder of Pay Pal, Tesla Motors (electric cars) and Space X, (space-launch vehicles). Net worth: $6.4 billion. He’s also working on  a “hyperloop” — a subsonic air travel machine in a partial vacuum that would operate between the outskirts of Los Angeles and San Francisco. Cost: $6 billion.

* * Billionaire refresher 2: Bill Gates (net worth: $72 billion), Warren Buffett (net worth: $59 billion), Sergei Brin (net worth: $25 billion)

( Read all of Barry Rascovar’s columns at this website, www.politicalmaryland.com )