Slots at other sites would do little harm to racing, study says

They would also bring in more money, it argues

report draws criticism

November 12, 2003|By Greg Garland | Greg Garland,SUN STAFF

Allowing slot machines at sites other than horse-racing tracks in Maryland would do little damage to racing but would raise significantly more money for the state than if they were restricted to the tracks, according to a report to be released today.

The study by Chevy Chase investment banker Jeffrey C. Hooke for a nonprofit, conservative tax policy group, challenges assertions that allowing slots elsewhere could drive horse racing tracks in Maryland out of business.

Hooke said it is a "myth" that horse racing can't survive if slots are allowed at other, nearby sites and the tracks aren't allowed to have them.

Tracks in Indiana and Illinois have seen little change in the dollar volume of their businesses since those two states brought in casino-style gambling at locations other than racetracks, he said. The same situation applies in Kentucky, which is bordered on three sides by states with casinos, he added.

Wagering on horses in Michigan declined after three casinos opened in Detroit in 1999, but Hooke attributed that primarily to the recession of 2001-2002.

"The evidence is that there may be some minor cannibalization," up to 10 percent of wagering at the track, Hooke said.

But he said the state could address that by dedicating a small portion of slots revenue -- perhaps 3 percent to 5 percent -- to supplement purses paid to owners of top finishing horses.

Hooke's study immediately drew fire from racing interests, who dismissed the report as inaccurate and distorted.

"Here's a guy who has absolutely no knowledge of horse racing other than from the research he has gleaned," said Timothy T. Capps, vice president of the Maryland Jockey Club, which owns Pimlico Race Course in Baltimore and Laurel Park in Anne Arundel County. "He seems to have some kind of anti-racing agenda."

Capps said competitive pressure from slots gambling has forced tracks to close in some states.

The latest report by Hooke comes at a critical point in the debate over slots.

A slots-at-tracks-only bill promoted by Gov. Robert L. Ehrlich Jr. failed this year, but the General Assembly agreed to study the issue over the summer and fall and plans to take it up again early next year.

Some legislative leaders -- most notably, House Speaker Michael E. Busch -- say if the state is going to have slots it ought to consider putting them at sites other than racetracks, perhaps even at state-owned locations.

Titled "Horseracing and Casino-Style Gambling: Facts Behind the Myths," Hooke's report for the Maryland Tax Education Foundation disputes several claims by racing interests.

He dismissed claims by track owners that they can't make a decent profit unless they retain at least 40 percent to 50 percent of the slots "win" -- which is the money left over after players are paid winnings but before other expenses.

Hooke said that tracks in New York are moving ahead with slots plans even though they are allowed to retain 20 percent of the win. "This fact suggests that 20 percent of the win provides a satisfactory profit," he wrote.

He also said that allowing track owners "massive profits from slots monopolies" is no guarantee that they will spend very much of that money upgrading horse racing facilities.

Hooke said that regulatory filings by publicly traded companies that own racetrack casinos in West Virginia and Delaware show "the vast majority of reinvested profits are applied to slots facilities and related amenities, rather than racetracks."

For example, he said, the ratio of dollars invested in slots compared with horse racing is 20-1 at Dover Downs in Delaware.

Hooke had suggested in a previous report that slots licenses be competitively bid and that they be open to non-racetrack bidders.

He estimated that would generate $300 million to $500 million more per year for the state than the tracks-only bill that failed this year.

"It's a tremendous waste of taxpayers' money to subsidize a wealthy clique of racetrack owners," Hooke said. "I just think it's wrong."

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