Although it varies by state, casino revenue is said to benefit education, or senior citizens, or public safety, or parks, or stadiums, or countless other publicly financed endeavors. At least the revenue is said to benefit such programs. But the money trail from casino to taxing agency to the favored program itself isn’t always transparent.
It’s a different story in Maryland, where the state is betting some of the revenue it takes in from slot machines on small business.
A Dec. 20 story by J.D. Harrison on washingtonpost.com. highlighted Maryland’s use of its casino income to directly seed start-ups and back small business. According to Harrison, Maryland’s Volt Fund program received its first $7.8 million from the state’s slots take in 2013 and awarded it to three investment organizations to distribute to worthy ventures.
Entrepreneurs must pitch the organizations with their ideas, competing for Volt funding the same as if they were pitching private investors or banks. The money they get is not a handout, however. It comes in the form of a loan — a loan with sweetheart terms, but a loan nonetheless. Funding ranges from $25,000 to $500,000 at rates of 2 percent to 5.25 percent.
As Harrison points out, it is an unusual use of casino revenue, so much so that Maryland officials told him they know of no other such program in the country.
“Sometimes it’s not clear where the money from casinos winds up, and with this, they can see the direct correlation between where the proceeds are going and the benefits to the local economy,” said Stephen Primosch, who, as vice president of Anne Arundel County financial services, manages Volt funds for the county economic development agency.
The Volt Funds program (Volt being the acronym for video lottery terminal) was created by legislators in 2007, but went unfunded until the first casinos opened in the state last year. By law, Volt receives 1.5 percent of the state’s revenue from slot machines. Regulations also earmark half the revenue for businesses within 10 miles of a casino. The rest can be awarded to small businesses anywhere in the state.
Anne Arundel County, home to Maryland Live, the state’s first casino, received $3.3 million for its economic development agency, and has awarded $2.8 million in loans to all manner of businesses, from Lego-based activity centers to tech start-ups. The money, Primosch told the Post, was not loaned in vain. According to the agency, the 16 Volt loan recipients in the county retained 110 jobs and created 137 more.
Beau Portillo told the Post he would not have gotten the aforementioned activity center, Brick House, off the ground in Annapolis without the Volt Fund loan. “It’s a great program for people like us that have a concept but nothing more to back it up except a history of hard work,” Portillo said.
Reference:
Harrison, J.D., “Maryland Bets on Small Businesses with Loans, Investments Financed by Slot Machines“, Washington Post. 12/20/13.
