After spending millions lobbying for slot machine gambling, Maryland horse racing interests found themselves struggling yesterday just to keep a seat at the table as another study recommended putting the machines at locations other than racetracks.
The latest setback for racetrack owners occurred as an independent researcher advised a legislative panel that the state should explore putting slots along Maryland's borders - not at racetracks.
The report by Robert E. Carpenter, an economics professor at the University of Maryland, Baltimore County, is the second study in a week to conclude that slots at sites other than racetracks would pump far more money into the state's treasury and offer a better deal for taxpayers if the state decides to legalize slots.
"You should consider decoupling the plan from the racetracks to maximize the state's financial return from slots," Carpenter advised members of the House Ways and Means Committee.
He said state ownership of a slots casino - which would be run by casino industry experts in exchange for a management fee - is also an idea worth exploring.
But racetrack executives told panel members that they need slot machines to compete with racetracks in Delaware, West Virginia and elsewhere that use money from slots to subsidize the purses that are paid to the owners of top-finishing horses.
And they argued that racetracks are the best sites for slots because gambling occurs there and because they have the infrastructure in place to handle large crowds.
But even they seemed resigned to accept that any slots bill offered next year is likely to include proposals for slots casinos outside racetracks.
Jim McAlpine, chief executive of Magna Entertainment Corp., majority owner of Pimlico and Laurel Park race courses, said the tracks want to ensure they are included in any slots bill.
"If slot machines come to Maryland, we need to be on a level playing field," McAlpine told committee members.
The horse racing industry is in a markedly different position from the one it occupied when slots were considered during this year's legislative session.
At that time, Gov. Robert L. Ehrlich Jr. and Senate President Thomas V. Mike Miller were pushing a slots-at-tracks-only measure.
That bill was criticized for being overly generous to a small group of racetrack owners who would have been allowed to build huge slots casinos. It failed, largely because of strong opposition from House Speaker Michael E. Busch, an Anne Arundel Democrat.
In his analysis, Carpenter suggested that locking onto the tracks as the only site for slots is a mistake.
He said the state would have transferred "hundreds of millions of dollars of value from the people of the state to the casino's owners" if it had passed the slots-at-tracks-only bill proposed this year, which required only modest licensing fees.
In a separate study released last week, Jeffrey C. Hooke, a Silver Spring investment analyst with a tax study group, suggested the state could generate hundreds of millions of dollars by auctioning slots licenses to the highest bidder instead of giving them to racetrack owners.
Carpenter said sticking with the tracks-only approach makes little economic sense for other reasons.
"If the state goes with the tracks, then there are at least two middlemen between the revenues generated by the machines and the people of the state - the track owners, and most probably the manager that the track owners will hire to run the business," Carpenter said. "Each middleman needs his cut."
Maryland racing executive Joseph A. De Francis said after the meeting that the studies put out by Hooke and Carpenter are "fundamentally flawed."
He said their proposals for handling slots legalization would have a devastating effect on the racing industry in Maryland.
"If you ignore and destroy the racing industry, then regardless of where you put the [slots] facilities and how nice you make them ... the state will be worse off," De Francis said.
Some of the proposals to put slots at sites outside racetracks have called for designating a small part of the revenues as a subsidy for the tracks.
Carpenter and the racing executives were among a parade of experts to testify before the House Ways and Means Committee yesterday.
The panel also heard from Frank J. Fahrenkopf Jr., who heads the American Gaming Association, the gambling industry's chief lobbying arm; anti-gambling activists; and groups representing Maryland horse owners.
Slots opponents told panel members that they need to consider the social costs of slot machines. They said allowing slots would lead to more gambling addiction, crime and other problems.
However, Fahrenkopf said independent studies have found that casinos don't cause the kinds of problems that opponents note.
The hearing was the second in a series being held to study the issue of legalizing slots.
The next is a site visit Sept. 9 at Rosecroft Raceway in Prince George's County and public hearing at Prince George's Community College.
