Education would get 64% share from slots

Track owners due 25% under Ehrlich proposal

Industry questions viability

January 31, 2003|By Michael Dresser and Greg Garland | Michael Dresser and Greg Garland,SUN STAFF

Gov. Robert L. Ehrlich Jr. plans to claim 64 percent of the profits for education from installing slot machines at four state racetracks - one of the steepest gambling taxes in the nation.

The governor's aides outlined his much-anticipated proposal at a State House news conference yesterday, saying the administration would limit the track owners' share of the proceeds to 25 percent - about half the share the industry had proposed.

The portion Ehrlich would reserve for the state from the 10,500 slot machines was more than expected - a politically attractive strategy but one that could pose economic problems. Independent experts and industry executives questioned the viability of the plan, saying the return to the industry would be so paltry that racetracks would lose money.

"It needs a lot of work," said Bill Rickman Jr., co-owner of Delaware Park and a prospective slots operator at a planned Allegany County track.

Eugene Christiansen, a financial adviser to gambling companies, said he would be surprised if there are any takers for Ehrlich's deal. He said the high tax rate and stiff upfront licensing fees would deter racetrack owners from building new facilities and paying operating costs.

"Racetracks are like any other business," Christiansen said. "They are not going to deliberately walk off a cliff."

Ehrlich, in an interview last night, stood by his proposal.

"Our purpose is not to enrich but to save horse racing - thoroughbreds and standardbreds," Ehrlich said.

By dedicating the state's proceeds to education, Ehrlich reversed course from the proposal his aides outlined last week. After receiving stern warnings from General Assembly that the link to schools was essential to passing the plan, the governor abandoned plans to put the money in the state's general fund.

Revised plans

As expected, the administration backed off plans that it floated last week to allow three giant gambling halls with 4,500 slot machines each. Instead, the plan would limit the number of slots at Pimlico, Laurel and Rosecroft racetracks to 3,000 each - still among the biggest racetrack casinos in the country, according to gambling industry analysts.

Another 1,500 machines would be permitted at a track to be built in Allegany County. That would bring the statewide total to 10,500 - far less than the 18,000 sought by the racing industry or the 16,000 the administration had told legislative staff it was planning to propose.

Two provisions of the governor's bill could stir opposition to the legislation from communities near the racetracks. One would let the slot machine operations stay open from 8 a.m. to 2 a.m. 365 days a year. The other would send the 3 percent local share of the proceeds to City Hall and the governments of the counties that house or are near the tracks - without limiting the aid only to the neighborhoods most affected. (Anne Arundel and Howard counties would share in the proceeds from Laurel Park.)

Slots foe responds

The most powerful opponent of slots, House Speaker Michael E. Busch, was quick to pounce on the planned hours of operation. "If you're living in Pimlico or living in Rosecroft or living in Laurel, you're now going to have basically 18-hour-a-day traffic," the Annapolis Democrat said.

Busch, who has called for slots to be taken "off the table" this year, said Ehrlich should not count on the $400 million in revenue the governor anticipates from slots to help close the more than $1.2 billion shortfall in next year's budget. The speaker said the House would instead seek $200 million in spending cuts and $200 million in new revenues from closing corporate tax "loopholes."

Ehrlich reacted with a barbed quip and a hint of possible vetoes: "Closing tax loopholes, one of my favorite terms - otherwise known as raising taxes."

The governor's plan drew praise from two other key leaders of the Democratic-dominated General Assembly.

Senate President Thomas V. Mike Miller said the Ehrlich proposal would not satisfy any of the interested parties - which he called the sign of good legislation.

Del. Howard P. Rawlings, chairman of the House Appropriations Committee, found the governor's proposal similar enough to his own to exult that "imitation is the sincerest form of flattery." The Baltimore Democrat said Ehrlich's decision to dedicate the money to education - as Rawlings' bill does - "removes a big hurdle."

Rawlings also said he was "satisfied" that the governor included a requirement that slots operators meet both the state's minority enterprise goal and the minority participation goals of the jurisdictions where the tracks are located - which in the case of Baltimore is higher.

Other key provisions in the Ehrlich plan would:

Require that the slot machines are owned or leased by the state and tied into a central computer system.

Set up a Maryland Education Trust Fund to receive the slot revenues, which would be used to fund the education aid formula drawn up by the Thornton Commission and adopted by the legislature last year.

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