Party About Over In Chesapeake Beach
Bingo-Machine Ban Means Budget Gap

By Christy Goodman
Washington Post Staff Writer
Sunday, November 16, 2008

Chesapeake Beach has managed to lower its property tax rate and increase its rainy day fund in recent years while the state and many other localities face serious economic trouble. However, the new town administration will soon face harder times.

The town has benefited from a half-percent admissions and amusements tax on the gross receipts of instant bingo and pull-tab vending machines -- a multi-million dollar industry in the town. But those instant bingo games that closely resemble slot machines will become illegal July 1, resulting in a significant gap in future budgets. The town has budgeted $500,000 in admissions and amusements taxes in fiscal 2009.

"We can't cut out a half-million dollars' worth of income and just hope that it is going to reappear," said Bruce A. Wahl, Chesapeake Beach mayor. "We are going to have to cut expenses or raise income some other way, and we are going to need to go into it with our eyes wide open." Wahl called it one of the biggest challenges of his first term.

The town collected about $28,000 from the tax in fiscal 2001, the year Gerald W. Donovan, former mayor and owner of Rod n' Reel Restaurant and Marina, won a ruling in the state's highest court stating that the machines were legal.

Five years later, in fiscal 2006, the town collected more than $300,000 in admissions and amusements taxes, according to the state comptroller's office, comprising about 7 percent of the town's budget. That amount increased to almost $700,000 in fiscal 2008, nearly 14 percent of the budget, including federal, state and local funding sources.

During that period, the council decreased the town's property tax three times, from 53.6 cents per $100 of a home's assessed value in 2001 to 37 cents this past year, said Leslie Porter, town treasurer.

"The town is definitely going to feel the loss of it," said Donovan, whose Chesapeake Beach Resort and Spa includes about 270 of the machines, more than three times the number operating at Traders Seafood Steak and Ale.

"The places in the beach, we've paid the town nearly $700,000 and this is nothing to be ashamed of," Donovan said.

Council member Patrick J. Mahoney said the council was "very prudent" budgeting the "bingo tax" in earlier years, resulting in surpluses that fed the town's rainy day fund. He said the town was in good shape and working out next year's budget is "a fairly doable task." He promised no service cuts or tax increases.

The town will continue to collect the tax on pull-tab vending machines and regular call bingo games -- it just won't be as sizeable, Mahoney said. The council member also said he expects that the 2009 General Assembly will extend the use of instant bingo machines in Chesapeake Beach.

However, Sen. Thomas M. Middleton (D-Charles), one of the co-sponsors of the legislation to stop the proliferation of instant bingo machines in the state, said he has heard of no such bill on the horizon.

"There is nothing that prevents anyone from bringing in a piece of legislation for those groups to allow them to be able to game. . . . I doubt it will pass, but you never know," said Middleton, who supported the successful slots referendum Nov. 4.

Beginning last January, Rod n' Reel and Traders were required to pay a Maryland admissions and amusement tax of 20 percent of their net receipts from the machines. As of September, the state had collected almost $4 million from Chesapeake Beach establishments, according to the office of the comptroller.

Middleton said the state does not want to share the slots revenue with anyone. "To allow them to [operate the instant games] puts them in direct competition with the state," he said.