PROVIDENCE — The owners of Twin River are betting their own dollars that offers of free slot play will draw more people to their sprawling greyhound racetrack and video-gambling emporium in Lincoln.

With the economy in a downward spiral, some other casino operators have considered cutting back free handouts to stem losses.

But after months of negotiations, the state’s Department of Revenue yesterday signed off on an agreement that allows Twin River to test-market a player-rewards program, similar to those offered in most full-scale casinos, over a 92-day period targeted to begin later this month.

The agreement allows Twin River to give away up to $1.5 million in free play during the trial period, and then up to 4 percent of its “net-terminal-income” from the same month a year earlier. Should the move backfire or fail to live up to revenue expectations, the agreement requires the owners — who include two of the original developers of the Mohegan Sun casino — to reimburse the state, up to a point, for lost tax revenue.

While full details of Twin River’s latest lure are not yet known, Twin River spokeswoman Patti Doyle said each customer who qualifies — “based on [their] historical play” — will get a letter “that informs you of the new promotional credits program, thanks you for your patronage and reveals to you the number of dollars you are being given in free play.”

Asked how much someone would have to gamble to earn a free-play credit, she said: “We are not disclosing. Proprietary information.” Would everyone get the same amount, or at least the same amount in relation to how much they play? Again, her response left the question unanswered: “Personalized and based on historical play.”

But in a statement to a Senate committee last March, Twin River’s vice president for marketing Joe Malnerich said such promotional credits are common in the industry, and “our ability to offer this program would, quite simply, help level the playing field with the nearby Connecticut casinos and generate significant gaming revenues for the state.”

“Indeed, it will provide a compelling reason for gaming patrons to choose Twin River as their gaming destination as opposed to traveling out of state,” he told the senators.

The player-reward program, approved yesterday, marks the latest attempt by Twin River’s owners, who have been struggling to meet their lender payments, and the state, which depends heavily on gambling revenue, to jump-start business at the newly renovated racetrack formerly known as Lincoln Park. Gambling is the state’s third-largest source of income behind income and sales taxes.

In April, lawmakers voted to allow 24-hour gambling at Twin River and Newport Grand on weekends and holidays. Newport Grand’s owners only opted to stay open later on weekends, but Twin River began overnight operations on Mother’s Day weekend. The result: net terminal income at Twin River — or the amount left after all player winnings have been paid — jumped 13.9 percent to $38.9 million this May over the same month a year ago, a net gain of $4.7 million, according to Paul Dion, the Department of Revenue’s chief of revenue analysis.

While it is impossible to say whether a 3 a.m. gambler might have wagered the same amount at another time on another day had the doors not still been open at that hour, Twin River booked $921,772 in net terminal income from overnight gambling alone.

The state’s stake is huge, as the supplier — and operator — of the 4,751 video-gambling machines housed at Twin River, and the 1,120 at Newport Grand. It gets close to 60 cents out of every gambling dollar that has been wagered and lost in one of these machines.

Fearful that the new free-play credits might cut into this bounty, the agreement hammered out by state Lottery Director Gerald Aubin, his boss, Department of Revenue Director Gary S. Sasse, and DOR legal counsel Jacqueline G. Kelley, requires the payment by Twin River to the state of up to $918,900 — equivalent to 61.26 percent of the $1.5 million — if the customer-attraction program does not live up to expectations during the three-month trial.

Should the program continue beyond its initial 92 days, a new and slightly more complicated arrangement kicks in that reads this way: “If Twin River fails to achieve the 4-percent increase in net terminal income for the guarantee period it will be obligated to reimburse the state 61.26 percent of the total amount by which Twin River fell short…or 61.26 percent of the total value of the promotional points issued, whichever is less.”

But there is an out for Twin River if paying the state would leave it in such financial straits that it could not meet its “forbearance agreement,” with its chief lender, the Merrill Lynch Capital Corporation. Extended several times, the agreement forestalled legal action to collect on the $577 million in outstanding loans tied to Twin River’s renovation and operation.

Asked the status of that agreement yesterday, Doyle said: “The deadline on the forbearance agreement is August 19th and we will work up to that date before any announcements are made relative to progress. Discussions with our lenders are ongoing.”

No one is saying, for the record, how much more money they hope and believe this new player rewards-program will generate. But the agreement anticipates a much larger gain than the 2.7-percent growth in video-gambling receipts that the state’s official revenue estimators anticipated when they met last month.

Meanwhile, the state’s Department of Business Regulation confirmed that Rhode Island’s greyhound racing industry is in the same downward spiral that the industry is reporting nationally.

In a letter to other members of the Abilene, Kan.-based National Greyhound Association, NGA secretary-treasurer Gary Guccione said: “With the industry in an inexorable downturn, with purses not keeping pace with expenses, resulting in declining registrations and membership numbers; with fellow members being forced out of business virtually everyday, we have to ask ourselves where DO we go from here?”

“We simply cannot remain in this downward whirlpool we’ve endured through the past decade that’s making our game less and less significant and appealing.” The letter seeks donations of between $25 and $1,000 to hire a Utah-based law firm, Crawford Quilty Law, for $200,000 to “explore our best options.”

Locally, wagering on greyhound races has dropped from $23.4 million in 2003, when the state collected $1.6 million in commissions from the races, to $13.6 million last year, with the state getting just over $980,154.

kgregg@projo.com