Slots approval followed by several setbacks in Pa.

THE BALTIMORE SUN

As the Maryland General Assembly looks again toward legalizing slot machine gambling to solve budget woes, Pennsylvania's experience could serve as a cautionary tale.

Six months after Pennsylvania's legislature passed a law that permits 61,000 slot machines at 14 locations, state officials are still struggling to launch their gambling program.

The board appointed to oversee slots is just beginning to set up an office and hire a regulatory staff. No licenses have been issued, and none are expected to be issued for months. Even slots backers say it could be another year or more before the first machines are in place in Pennsylvania and begin to generate money designated for property tax relief.

Maryland Gov. Robert L. Ehrlich Jr. announced Friday that he will try for the third time to get a slots bill passed through the General Assembly. Slots bills have passed the Senate each of the past two years but have been blocked in the House of Delegates.

Ehrlich's proposal would allow 15,500 slot machines statewide, spread among four racetrack locations and two non-racetrack "destination locations" that have not yet been determined.

A spokesman for Ehrlich said the governor believes some slot machines could be in place and generating money within a year of a bill's passing.

But Pennsylvania has encountered an array of unexpected hurdles in getting its slots program under way.

Problems arise

Since Pennsylvania's legislature passed slots legislation in the midnight hours on the eve of the July 4 holiday weekend, there have been these developments:

Gov. Edward G. Rendell's first pick to lead a board charged with overseeing slots stepped down after news reports detailed his work as a private investigator for an alleged mob associate.

An anti-gambling group filed a lawsuit challenging the way Pennsylvania's slots law was passed. The suit could block the state from issuing licenses until the constitutional issues it raises are resolved.

Erie's mayor, Rick Filippi, has been indicted on public corruption charges because of his alleged insider dealings on a land transaction related to a proposed slots casino development. He has pleaded not guilty.

Some school boards are balking at tying themselves to slots. The law sets a complicated formula that allows school systems to use slots money to reduce property taxes for local homeowners but requires them to raise local wage taxes. The fewer school boards that participate, the fewer homeowners who will get the promised property tax relief.

The slots law, which supersedes local zoning control, identified geographic areas but not specific sites for five stand-alone slots casinos - sparking bitter squabbles among politically connected businessmen and groups vying for these licenses.

Those five licenses are in addition to seven awarded to horse racing tracks, which include three new tracks that are being built in anticipation of slots. Each facility is allowed up to 5,000 machines. The law also provides for two smaller resort licenses limited to 500 slot machines each.

Slots supporters in the Keystone State say the process is moving along as expected and express confidence that the state will end up with a successful program that will create jobs and benefit the state's taxpayers.

"I think everybody has to go with the flow here," said Thomas M. Kauffman, executive director of the Pennsylvania Horse Racing Association. "This is a complex undertaking, and it's going to take some time."

Kauffman and other slots supporters say the tracks could get conditional licenses by early next year and have temporary facilities in place soon after, allowing them to open for business with a limited number of slot machines.

But few in Pennsylvania are taking bets on when the state will begin hearing the rattle of slot tokens dropping into metal hoppers.

Nick Hays, spokesman for Pennsylvania's Gaming Control Board, said that launching a slots program is a complicated task, and no target dates have been set.

"The board itself does not have any kind of a time frame," he said. "They're going to take the time necessary to do it right."

Meanwhile, Pennsylvanians are getting their first glimpse of some of the less savory elements that often surround efforts to legalize casino-style gambling.

Besides the embarrassment over the Rendell appointee to the gaming control board and the indictment of Erie's mayor, there are other controversies, including a provision in the legislation that allows legislators and other public officials to have up to a 1 percent ownership stake in slots casinos.

That has left anti-gambling activists who tried unsuccessfully to persuade lawmakers to vote against legalizing casino-style gambling saying, "We told you so."

Michael Geer, president of Pennsylvanians Against Gambling Expansion, said attitudes in the state toward slots are quickly souring.

"What we believe has transpired over the past six months is that many Pennsylvanians, and some of the state's business and political leaders, have awakened to the crime and corruption and the negatives we warned about," he said.

Geer's group, along with several anti-gambling lawmakers, the League of Women Voters and other groups, has a suit pending before the state Supreme Court that seeks to overturn the slots law.

In essence, the suit argues that the law was passed in an unconstitutional, "stealth" manner that did not allow for open and public debate.

The suit says slots were approved after an innocuous, one-page bill that dealt with fingerprinting for certain employees involved in horse racing was heavily amended on the Thursday before the start of the July 4 holiday weekend to include slots.

The one-page bill had been through three considerations in the House of Representatives and two in the Senate and was on its last reading in the Senate when it was amended, according to the suit.

"[A]t the last legislative second, this legislation became a 145-page bill creating, regulating and taxing a casino slot machine industry in Pennsylvania," the suit says.

"The members of the General Assembly voting on this Act could not and did not have an opportunity to consider and understand the scope and nature of the legislation they were adopting," the suit says. "Likewise, members of the general public, caught unaware ... were deprived of the opportunity to meaningfully participate."

Geer said that "buyer's remorse" was evident within hours of the slots law's passage, as legislators learned more details and began to have serious concerns about some provisions.

The General Assembly voted later to amend the law to address some of the concerns that emerged after the law's passage, but Rendell vetoed the changes.

Rocco Pugliese, a Pennsylvania lobbyist with several gambling industry clients, said he does not believe anti-gambling activists will prevail in court. "I don't think it's going to jam up the works," he said.

Property taxes

There are other storm clouds gathering, however, that could cause political grief for legislators who voted to allow slot machine gambling. One of the most significant is the confusing process in the law for reducing property taxes.

A big selling point for slots was that, among other things, it would generate $1 billion to lower property taxes statewide. Property taxes, the main funding source for Pennsylvania's schools, are highly unpopular, especially among retirees on fixed incomes who no longer have children in school.

State officials predict that the money that slots generate will allow property taxes to be cut by an average of $330 for each homeowner.

But they say now that it will be at least 2007 before slots generate enough money to trigger the launch of the tax cuts. And some homeowners may get no property tax relief at all.

School systems will pass gambling money on to homeowners in their districts as tax cuts. Each school board has to decide by May 30 whether to opt in to the slots program, and some are balking.

Those that participate have to accept restrictions on their ability to raise property taxes in the future. And they have to impose a one-tenth of a percent wage tax on those who live in the district that also would be applied toward property tax relief.

Robert Morgan, a Republican school board member for the Pottstown School District in suburban Philadelphia, said he has no strong feelings about legalizing gambling but plans to vote against participating.

"To me, it's a no-brainer," Morgan said. "It's a stupid law. ... It was never about property tax relief or money for schools. What this law was about was how to get gambling into Pennsylvania."

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