An ambitious proposal by Maryland racing interests to install 18,000 slot machines - or one for every 300 Marylanders - at five state tracks stumbled out of the gate yesterday as supporters and foes of expanded gambling accused the industry of overreaching.
The plan, which industry leaders drafted at the urging of Robert L. Ehrlich Jr., was welcomed by the governor-elect - but only as a starting point for discussion. He emphasized that the proposal represented the industry's position - not that of his incoming administration.
"Our instruction to them was to get on the same page," Ehrlich said last night. "We draft our bill."
Ehrlich was quick to reject the most inflammatory provision of the industry plan: a proposal to put 2,250 slot machines at Ocean Downs outside Ocean City.
"That's just a nonstarter," he said.
Ehrlich has said he would support slots at the Pimlico, Laurel and Rosecroft tracks and one being built in Allegany County. But he has firmly ruled out an expansion of gambling on the conservative Eastern Shore, where many fear the slots would tarnish the "family" image of Ocean City.
The governor-elect, who will take office Wednesday, had encouraged the various factions of the racing industry - including standardbred and thoroughbred track owners and breeders for both - to come together on a plan they all could support.
"The fact that they could agree on something was historic," Ehrlich said.
The plan they came up with - a copy of which was obtained by The Sun - goes far beyond the plan Ehrlich campaigned on last year.
The industry is calling for 4,500 slots apiece at Rosecroft, Laurel and Pimlico - more than most of the major casinos in Las Vegas and Atlantic City, N.J., hold.
Thomas Bowman, president of the Maryland Horse Breeders Association, who was chosen by Ehrlich to be chairman of the industry effort, said two tracks owned by William Rickman Jr. - Ocean Downs and the track being constructed near Cumberland - would be allowed 2,250 machines each.
Ehrlich's proposal called for about 10,000 slots statewide. Last night, the governor-elect said the scale of the facilities proposed by the industry could be a problem.
"It's something we're cognizant of," he said.
Ehrlich said the industry's proposals for splitting the proceeds "also need to be tweaked."
The industry plan says that its proposed licensing fees could generate $300 million in the fiscal year beginning in July - giving the state a good start toward closing a $1.2 billion revenue shortfall.
The proposal calls for the state to receive 37 percent of the profits early on. Its share would eventually rise to 55 percent as the track industry pays off the costs of its initial investment.
Bowman said that would give Maryland the highest take of any state with slot machines.
The industry would start out collecting 49 percent, but that amount would decrease to 41 percent as revenues increase. In addition, 11.2 percent would go to thoroughbred and standardbred purses in the early going, but that percentage would also decrease over time. A smaller percentage would go into a breeders' fund.
The industry's proposal asked Ehrlich to seek protection against the legislature's reducing its share of gambling revenues, cutting the number of authorized slot machines or permitting slot machines to be installed anywhere but at the five tracks.
Bowman, a Cecil County breeder and veterinarian, conceded that the proposed slots at Ocean Downs are "not going to happen."
"Ehrlich is against slots at Ocean Downs and Timonium," Bowman said. The report does not call for slots at Timonium.
Rickman said the proposal submitted to Ehrlich isn't etched in stone.
"This is a work in progress," Rickman said. "It's just a starting point to open discussion with the administration and the legislative leadership."
Nothing in the proposal calls for an immediate expansion of slots to Ocean Downs, he said.
"It just can't be excluded forever. That's all we're asking," Rickman said, suggesting that public opinion toward slots in Ocean City could change.
The proposal says that if Ocean Downs were not to seek to install slots, the other four track owners would pay a small portion of their gambling revenues to that Eastern Shore track.
Opposition on the Eastern Shore is adamant.
Senate Minority Leader J. Lowell Stoltzfus, who represents the resort town, said that would only happen "over my dead body." Stoltzfus said he spoke with Rickman, Ocean Downs' owner, just Monday. "I told him slots are not right for us, and I will vigorously oppose it," the Republican lawmaker said.
Ocean City and Worcester County officials say gambling threatens a nearly $1 billion tourist industry that is fueled by more than 8 million visitors who stay at the Atlantic resort every year, generating as much as $100 million annually in state and local taxes.
"Ocean City is a family resort, and we don't see any redeeming value in bringing gambling here," said James C. "Bud" Church, a Worcester County commissioner. "Unfortunately, you can see a trend with the lottery, Keno and now slots. That's a path we don't want to take."
Senate President Thomas V. Mike Miller, a supporter of slots, said yesterday that the likelihood that slots would go beyond the four racetracks proposed by Ehrlich is "fairly remote."
Miller has been stating regularly this week that he believes interests related to slots have become overwhelmed with greed. "If people don't support slots in the defined guidelines, slots are going to be in deep trouble," he said.
Sen. Robert H. Kittleman, a strong supporter of Ehrlich's position on slots, called the industry plan "outrageous."
"I think they went way overboard in their negotiating position," the Howard County Republican said.
Jeffrey C. Hooke, a Chevy Chase investment banker, says the deal proposed by the racetracks would seriously shortchange the state.
Hooke is the leader of an advocacy group called Project $1.5 Billion, which argues that the state should seek to collect that amount in upfront licensing fees to allow slots at four sites. The industry proposal is a "terrible deal" for the state, he said.
"They're asking for a lot, they are offering a little, and it's going to be tough to find an agreement," Hooke said.
Hooke bases the $1.5 billion value for the licenses on what casino companies have been willing to pay for gambling licenses in Detroit and in suburban Chicago. These companies also pay the state governments in Michigan and Illinois a percentage of the "take," or the money left with the casino after players are paid any winnings.
The $300 million that racing interests have proposed paying up front isn't really a licensing fee because the racetrack owners would be allowed to recoup that money through reductions in other taxes over four years, Hooke said. But, Hooke said, the overall tax rate - which the industry proposes would start at 37 percent - is not all that different from Delaware's and West Virginia's.
"The proposed betting taxes are similar, but they don't have the huge population base of the Baltimore-Washington area," Hooke said. "Slots facilities in metro areas such as ours can support higher betting taxes or very large upfront fees."
The industry's proposals for Pimlico, Laurel and Rosecroft are also potentially contentious because of their sheer size - as many as 4,500 machines at each location.
Lawrence A. Klatzkin, a gaming analyst with the investment banking firm Jefferies & Co. in New York, said only one casino in Las Vegas and three in Atlantic City have more than 4,000 slot machines. "Forty-five hundred slots would put them among the largest casinos in the world," Klatzkin said.
Klatzkin said racetrack casinos, also called "racinos," have far fewer slot machines in most states. "Most racinos have 1,500 or 2,500 machines," he said. "One or two have 3,000, but that's pretty rare."
House Speaker Michael E. Busch, a leading opponent of slots, said there was no way such facilities could disguise themselves as anything but casinos. Busch criticized Ehrlich for soliciting the industry's proposal on the "centerpiece" of his administration's program. "You're asking the racing industry to be your budget adviser," the Annapolis Democrat said.
Bowman said Ehrlich's request for industry input was an attempt "to do as much fact-finding as possible and to include the horse industry as much as is reasonable." He stressed that the horse industry was not writing law but was merely telling Ehrlich what it would like if slots become legal.
Sun staff writers Chris Guy, Ivan Penn, Tom Keyser, David Nitkin and Tim Craig contributed to this article.