Gambling revenue rides to the rescue (again)

How do you come up with the money to finance a new sports venue? Negotiators representing Baltimore and The Stronach Group faced that daunting question in piecing together their proposed $375.5 million plan to keep the Preakness Stakes in Baltimore while renovating the race tracks at Pimlico and Laurel. Their solution is complex, involving donating property, potential third-party stakeholders, the Baltimore Development Corporation, the Maryland Jockey Club and other racing groups. But the single most important funding source is Maryland’s casino gambling revenue, a hefty chunk of which was already directed toward the racing industry and ameliorating the impact of expanded gambling on the tracks and surrounding neighborhoods.

Using gambling revenue to keep a vital sports franchise from leaving Baltimore? Why does that sound so familiar? Most likely because it’s been done before. In 1987, a then first-year governor named William Donald Schaefer faced a similar challenge in keeping the Orioles in Baltimore. The baseball team was unhappy with Memorial Stadium, an aging dual-purpose facility that lacked charm and, more crucially, modern amenities like revenue-producing executive suites. Other cities were wooing baseball teams. Charm City was in danger of losing its beloved franchise after having already lost the Colts, its NFL team, to Indianapolis.


The solution? Lottery scratch-off tickets. Or, as the 1987 legislation authorizing the financing of Oriole Park at Camden Yards described them, “sports lotteries." Like the Pimlico proposal, the lottery proceeds would finance 30-year bonds. And who would supervise construction of this new facility? A new quasi-public agency, the Maryland Stadium Authority, was given that task. Thirty-two years later, the Pimlico proposal anticipates the MSA back in action supervising how lottery proceeds would be spent for sports facilities once again.

This parallel construction is, of course, no accident. For one thing, both plans have one individual in common: Alan M. Rifkin, the top-gun lawyer who in 1987 was a lobbyist and top Schaefer lieutenant in Annapolis setting up the Camden Yards financing package and who now represents the Jockey Club. But with all due respect to Mr. Rifkin, there’s another more important attribute at work here: the widely-held perception that revenue derived from gambling is the government equivalent of “found money” as opposed to tax dollars.


Spending tax dollars on a sports venue was as much a non-starter in state politics 32 years ago as it is today. Nobody in public office wanted to be seen taking money out of the pockets of regular folks to transfer it to the late Edward Bennett Williams, who then owned the O’s. One can safely assume Mayor Bernard C. “Jack” Young and others in City Hall objected to any perception they might doing the same for the Stronach family. But gambling revenue? History suggests that voters don’t see such proceeds in the same way.

In Annapolis, it’s sometimes jokingly referred to as a tax on stupidity: Gambling, then as now, remains a purely optional activity. Whether it’s a lottery ticket or a pull of a slot machine lever, it’s buyer beware. All such games are designed to ultimately profit the house, not the player. That’s why proceeds aren’t treated nearly as dear as revenue from income or property taxes, two of the most hated (if lucrative) sources of government revenue.

The Pimlico plan is made possible not only because it’s derived from casino gambling proceeds but because it hinges on gambling revenue already set aside specifically to offset the damage that competition from expanded gaming has done to Maryland’s race tracks. For the next seven years, that revenue stream can help pay off 30-year bonds. The challenge is that the largest single beneficiary, the Racetrack Facility Renewal Account, will then gradually sunset. Lawmakers will need to extend its life until 2050 or so. Otherwise, there are no bonds and no plan.

That may not be easy. Last year, Maryland voters approved a “lockbox” constitutional amendment to require new gambling revenues be spent on education. Kirwan Commission recommendations are already anticipating spending billions of dollars more on public education, and Gov. Larry Hogan stands opposed. That fight will likely define the next legislative session. Will horse racing and the prospect that the track renovations would draw from gambling revenues that might otherwise be spent on K-12 schools end up as collateral damage?

Nobody can handicap that competition quite yet, but given that the future of the Preakness has always been a gamble, it’s entirely fitting that wagering of some kind has been called upon to save Baltimore’s century-and-a-half-old horse racing legacy.