As if Rhode Island doesn’t have enough financial problems to contend with right now, Twin River’s collapse appears imminent.

That this should be a major problem for Rhode Island speaks to the imprudence of getting too close to the gaming business in the first place, but that’s where the state finds itself as the owners of the video slots establishment miss one “forbearance payment” after another. Their situation is so dire they can’t meet interest payments on the loans they owe, never mind paying down the loans themselves.

Merrill Lynch – yes, the failed Merrill Lynch that Bank of America is having a hard time digesting – is the Lincoln, R.I.’s establishment’s biggest lender. They haven’t been paid in a while now. Apparently neither has another lender, Deutsche Bank, or the major construction contractor, Dimeo Construction. BLB Management Services, which operates Twin River, threw snake eyes when it went on a buying and construction binge back in 2005, and now it can’t meet its debt obligations.

Twin River’s troubles, and the scary prospect of bankruptcy, has been public knowledge since late last year, since word of its financial problems first surfaced. We have read of an offer by the owners to pay Rhode Island a one-time $500 million to get out from under the onerous $.60 on each losing dollar that they must pay the state. While rejecting that offer, state officials have let it be known that they will not let the place fail. General Treasurer Frank Caprio has even floated the idea that the state might take it over, hire a professional casino management team to run the place, and then put it back on the market when things get better.

Then the economy crashed. Twin River’s revenues have dropped with the economic downturn, making its financial situation – and the state’s – even worse. As we’ve seen with the layoffs at the two casinos in Connecticut and the slowdown in visitors to Vegas, people losing their jobs or in fear of that possibility have the willpower to stay away from gambling venues – or spend less if they do go. And it doesn’t take a card shark to figure out that a gambling establishment that is down on its luck is not going to be shelling out big jackpots.

With the gathering storm over Twin River state leaders have been pretty much mum on what they’re thinking and planning if the worst happens. But rest assured they’re not going to let the place close even for a day if they can possibly help it. House Speaker Murphy has made that clear by stating that all options will be considered except any reduction in the $.60 per losing dollar.

Ultimately, however, it’s the $.60 on the dollar that’s the big problem with Twin River, and why a takeover by the state is all but inevitable. The majority of casinos and other gambling venues typically pay less than $.30 on the dollar – to pay double that severely restricts the ability to fund operations and promotions, and squeezes profits. It is very hard to see Twin River doing better just on slots at $.60 on the dollar. Making it a full casino with table games would probably be the bargaining chip with any future private operator.

Behind-the-scenes negotiations are probably going on right now to make a temporary legal transfer of Twin River’s assets into the state’s hands as part of a Chapter 11 filing. Rhode Island, after all, has a super-legal authority with regard to the establishment – the state selects and oversees the private operators, issues their license to operate and controls the video slot machines.

With slot machine revenue being the state’s third major source of revenue – after the income and sales tax – the state probably has legal authority to keep the place open no matter what happens.

As mentioned, Treasurer Caprio has spoken of the state taking over Twin River until such time that it can be transferred back to private operators.

Unfortunately, that could take some time in the present economic climate. In the meantime the state may have to issue a guarantee on Twin River’s debt payments – or pay them directly under a takeover situation.

It promises to be a complicated, risky business for the state of Rhode Island. But having fed and supped upon this monster for so many years, the state really has no other choice.