State-run slots plan concerns groups

If lawmakers decide to legalize slots in Maryland, House Speaker Michael E. Busch says, the state ought to seriously consider building and owning the facilities to ensure the maximum payoff for taxpayers - an idea that would bypass the racetracks.

But a campaign is emerging from a number of groups to poke holes in the idea and divide Busch's support.


Specifically, minority groups say that any slots deal must include the possibility for minority ownership - a concept precluded by state participation.

Unions say that state construction of slots facilities would be exempt from prevailing wage standards, and that state ownership might preclude organized labor.


And local jurisdictions that would be home to state-owned slots palaces would lose a key benefit of privately owned facilities: property tax revenues, as the state-owned facilities are exempt from local taxes.

Busch dismisses most of those concerns, insisting that should lawmakers decide to go for legalized slots - something he does not support - the state's highest consideration must be how much they're going to take in. He is critical of plans to place slots at racetracks, saying that would provide "unjust enrichment" of track owners.

"You've got to look at this as being all the state's money from the outset," Busch said. "You want to get the highest return on your dollar."

A report by the House Ways and Means Committee released this month endorsed public ownership of slot machines as a gambling option that ought to be seriously considered by lawmakers.

By contrast, Gov. Robert L. Ehrlich Jr.'s gambling proposal calls for 15,500 slot machines to be allowed at four racetracks and two other locations along the Interstate 95 corridor. All would be privately owned under the governor's plan.

"The governor is opposed to state-managed facilities," said James C. "Chip" DiPaula Jr., Ehrlich's budget secretary.

Nevertheless, DiPaula said, Ehrlich is willing to negotiate with the House speaker and has not closed the door to the idea of state ownership. In response to a request from legislative analysts, the Department of Business and Economic Development compiled a list over the past few weeks of 115 state-owned sites of at least 10 acres each in the six jurisdictions along I-95.

The report highlights such spots as the Maryland House in Harford County, as well as parcels along Osler Drive near Towson University and along Meadowridge Road in Elkridge.


"It was just a complete list of sites, in response to a request from the Department of Legislative Services," DiPaula said. "It's nothing more than that. We're not endorsing slots at any of these locations."

The most ardent opponents to state ownership of slots are racetrack owners. They have long sought slots, and - with the governor's support - argue that it makes the most sense to put the machines at their locations because they are already home to legal gambling.

In a hearing Wednesday before a Senate committee, the track owners presented an economic analysis outlining the risks the state might face by putting up $1 billion or more to build and operate slots dens, and they asked whether state ownership would actually produce more money for Maryland's budget.

Yet as interest grows in state-owned slots emporiums, influential Democratic lawmakers are becoming increasingly vocal in their opposition because they believe that such a move would keep minority businesses from owning a share of slots.

"African-American lawmakers will not support anything that does not provide for economic development and ownership opportunities," said Del. Clarence Davis, a Baltimore Democrat and strong slots supporter.

Sen. Nathaniel J. McFadden, a Baltimore Democrat and the Senate majority leader, said he will only support slots "if there is significant African-American participation."


McFadden said state ownership would impede that participation. He said he was studying the governor's proposal, which requires that the holders of slots licenses meet the state's requirements for minority participation.

Even the Maryland State and D.C. AFL-CIO argued against state ownership. "State ownership of the slots, I believe, would preclude minority-equity participation, which I think is an important benefit of private ownership," said Fred D. Mason Jr., the union organization's president.

Mason also pointed out that the unions have agreements with two of the racetracks under consideration for slots, while there is no guarantee of collective bargaining among workers should the slots facilities be owned by the state.

Workers at most, but not all, state agencies are unionized.

The House speaker rejects the argument that minorities must hold ownership stakes in slots locations such as the tracks or private slots dens.

"There are better opportunities for minority participation if we're talking about open bidding for the right to operate these facilities," Busch said. "If the state owns it, everybody in Maryland owns it, and the maximum amount of money would go to the maximum amount of Marylanders, regardless of race, color, creed or religion."


Although Busch and other state-owned slots supporters argue that their proposal would maximize revenues for Maryland, Senate President Thomas V. Mike Miller warns that local jurisdictions might not agree once they realize that the facilities wouldn't produce local dollars.

"They're not paying property taxes if they're owned by the state; they're coming off the tax rolls," Miller said. "That's an important idea for the counties to remember."

The governor's slots proposal includes a diversion of revenues from the machines to local jurisdictions for "impact aid." That money might have to be increased should the slots dens be state-owned and the jurisdictions lose property tax revenues, proponents of the idea say.

Members of the Senate's Budget and Taxation Committee - which is set to start work on the slots bill next week - said they have heard the various concerns about state ownership but want to consider the idea in more depth to see if they can win support from Busch.

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