Ehrlich slots plan won't save racing, critics say

Gambling companies, track owners would profit

March 10, 2003|By Greg Garland | Greg Garland,SUN STAFF

During his campaign for governor, Robert L. Ehrlich Jr. locked himself into a plan that called for slot machines at only four racetrack sites in Maryland.

The reason other sites were off the table, he had said, was that opinion polls suggested that a majority of Marylanders were ready to accept slots at racetracks but not expanded, casino-style gambling at other locations. As a bonus, the plan would help save the state's storied horse racing industry.

But what must have seemed like a winning political hand hasn't turned out that way. As the General Assembly debates the legalization of slots, the "tracks only" approach may be turning into a liability, particularly as it becomes evident that Ehrlich's latest proposal would provide fewer dollars to save racing and more money for track owners.

Ehrlich's revised slots plan, released last week, would give nearly 46 percent of slots proceeds to track owners - almost double their share in his original bill.

All told, less than 6 percent of the profits from slots at the tracks would go to anyone in the horse racing industry other than a small group of owners, slot manufacturers and gambling companies.

"It has zero to do with saving the horse industry," said Del. Peter Franchot, a Montgomery County Democrat. "I think the horse industry in Maryland is being used very cynically by the people that are really going to benefit - the national gambling industry, slot manufacturers and a small number of track owners."

William R. Eadington, professor of economics at the University of Nevada-Reno, said racetrack owners have been effective lobbyists in "putting themselves in front of other groups" to serve as the preferred vehicles for expanded gambling.

But that leads to more fundamental questions, said Eadington, director of the university's Institute for the Study of Gambling and Commercial Gaming.

"One of the justifications is to save the racing industry, but racing is not to be saved," he said. "What you end up with is a subsidy from slot machine players. Is saving the racing industry really an important justification? There are a lot of industries that haven't been saved over the years."

Others disagree, pointing to states such as Delaware where revenue from slot machines has helped boost racing purses and attracted better horses from states without slots.

"Racing is worth supporting from a `slots at the tracks' perspective, if the division of slots revenue is set up so the horse industry itself benefits," said Lonny Powell, president of the Association of Racing Commissioners International, a Lexington, Ky.-based trade group that represents racing states.

Racing advocates say preserving the sport is crucial to saving horse farms, open space and thousands of racing-related jobs in Maryland.

"The idea was to keep [slots] within three or four racetracks, and to help those racetracks grow and help racing do better," said Greg Massoni, an Ehrlich spokesman.

Big business

The push to develop racetrack casinos in Maryland - known as "racinos" in industry jargon - is part of a growing national trend as states look to plug budget gaps without resorting to unpopular tax increases.

Similar battles are being waged in state capitals across the United States, prompting a flurry of racetrack sales as major corporations seek to gain footholds in new gambling opportunities.

Magna Entertainment Corp., a Canada-based company acquiring tracks in the United States and Canada, bought Pimlico Race Course and Laurel Park last year. And Centaur Inc., an Indiana company that owns casinos in other states, has a deal to buy the Rosecroft racetrack in Prince George's County.

Meanwhile, Las Vegas-based casino companies such as Harrah's Entertainment Inc. are entering the horse racing business.

Gary Thompson, a Harrah's spokesman, said the company is moving aggressively into racetrack casinos because that is where it sees the best opportunities for expansion. The company owns racetrack casinos in Louisiana and Iowa.

"We look at any potential form of casino entertainment that would make sense from an investment standpoint and broaden the Harrah's brand," Thompson said.

The Rev. Tom Grey, who heads the National Coalition Against Legalized Gambling, said 18 states are considering the possibility of allowing slots at racetracks.

In Maryland and other states, racetracks are seen as an easier sell politically than full-scale, Las Vegas-style casinos, in part because they would be located at sites where legal betting already takes place.

"The entry point for the last four or five years for gaming in the U.S. has been at the tracks," said Steve Rittvo, president of the Innovation Group, a New Orleans-based consulting company. "The riverboat casino concept has gone passe."

Sebastian Sinclair, president of Christiansen Capital Advisors LLC, an industry analysis and management group, said racetracks make political sense for another important reason: Owners tend to have influence.

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