Ehrlich plan won't save racing, critics say

During his campaign for governor, Robert L. Ehrlich Jr. locked himself into a plan that called for slot machines at only four racetrack sites in Maryland.

The reason other sites were off the table, he had said, was that opinion polls suggested that a majority of Marylanders were ready to accept slots at racetracks but not expanded, casino-style gambling at other locations. As a bonus, the plan would help save the state's storied horse racing industry.

But what must have seemed like a winning political hand hasn't turned out that way. As the General Assembly debates the legalization of slots, the "tracks only" approach may be turning into a liability, particularly as it becomes evident that Ehrlich's latest proposal would provide fewer dollars to save racing and more money for track owners.

Ehrlich's revised slots plan, released last week, would give nearly 46 percent of slots proceeds to track owners - almost double their share in his original bill.

All told, less than 6 percent of the profits from slots at the tracks would go to anyone in the horse racing industry other than a small group of owners, slot manufacturers and gambling companies.

"It has zero to do with saving the horse industry," said Del. Peter Franchot, a Montgomery County Democrat. "I think the horse industry in Maryland is being used very cynically by the people that are really going to benefit - the national gambling industry, slot manufacturers and a small number of track owners."

William R. Eadington, professor of economics at the University of Nevada-Reno, said racetrack owners have been effective lobbyists in "putting themselves in front of other groups" to serve as the preferred vehicles for expanded gambling.

But that leads to more fundamental questions, said Eadington, director of the university's Institute for the Study of Gambling and Commercial Gaming.

"One of the justifications is to save the racing industry, but racing is not to be saved," he said. "What you end up with is a subsidy from slot machine players. Is saving the racing industry really an important justification? There are a lot of industries that haven't been saved over the years."

Others disagree, pointing to states such as Delaware where revenue from slot machines has helped boost racing purses and attracted better horses from states without slots.

"Racing is worth supporting from a 'slots at the tracks' perspective, if the division of slots revenue is set up so the horse industry itself benefits," said Lonny Powell, president of the Association of Racing Commissioners International, a Lexington, Ky.-based trade group that represents racing states.

Racing advocates say preserving the sport is crucial to saving horse farms, open space and thousands of racing-related jobs in Maryland.

"The idea was to keep [slots] within three or four racetracks, and to help those racetracks grow and help racing do better," said Greg Massoni, an Ehrlich spokesman.

Big business

The push to develop racetrack casinos in Maryland - known as "racinos" in industry jargon - is part of a growing national trend as states look to plug budget gaps without resorting to unpopular tax increases.

Similar battles are being waged in state capitals across the United States, prompting a flurry of racetrack sales as major corporations seek to gain footholds in new gambling opportunities.

Magna Entertainment Corp., a Canada-based company acquiring tracks in the United States and Canada, bought Pimlico Race Course and Laurel Park last year. And Centaur Inc., an Indiana company that owns casinos in other states, has a deal to buy the Rosecroft racetrack in Prince George's County.

Meanwhile, Las Vegas-based casino companies such as Harrah's Entertainment Inc. are entering the horse racing business.

Gary Thompson, a Harrah's spokesman, said the company is moving aggressively into racetrack casinos because that is where it sees the best opportunities for expansion. The company owns racetrack casinos in Louisiana and Iowa.

"We look at any potential form of casino entertainment that would make sense from an investment standpoint and broaden the Harrah's brand," Thompson said.

The Rev. Tom Grey, who heads the National Coalition Against Legalized Gambling, said 18 states are considering the possibility of allowing slots at racetracks.

In Maryland and other states, racetracks are seen as an easier sell politically than full-scale, Las Vegas-style casinos, in part because they would be located at sites where legal betting already takes place.

"The entry point for the last four or five years for gaming in the U.S. has been at the tracks," said Steve Rittvo, president of the Innovation Group, a New Orleans-based consulting company. "The riverboat casino concept has gone passe."

Sebastian Sinclair, president of Christiansen Capital Advisors LLC, an industry analysis and management group, said racetracks make political sense for another important reason: Owners tend to have influence.

"A lot of racetrack owners are wealthy and well-connected," he said. "It's the 'sport of kings.' They tend to have really good, grass-roots state influence."

Horses and slots

Some say that putting slots at racetracks - while it might help the racing industry in the short term - fundamentally changes the nature of the tracks and hurts the sport in the long run.

"If you look at the statistics, it's not a racetrack anymore," said Eadington. "They get 90 to 95 percent of their money from slots, and racing is going to be marginalized or eliminated."

The racing commissioners group acknowledges this concern among horse interests, saying owners might seek to cut back less-lucrative live racing to focus on slots.

"I don't think it is the intent of those involved, but I think it is a risk," Powell said. "Our industry is going to have to be extremely proactive to make sure that does not happen."

Ehrlich's original slots plan did not include a provision requiring Maryland tracks to maintain live racing, but he announced last week that his revised bill would not allow tracks to reduce horse operations.

Robert Goodman, a professor at Hampshire College in Amherst, Mass., and author of The Luck Business, said he does not believe slots will solve the problems of the horse racing industry.

"If you can't get people to come in for horse racing, eventually the owners will reduce the number of live races they conduct," Goodman said.

He said slot machines - which require no skill - are bound to take center stage.

"The machines are the most lucrative form of gambling available," Goodman said, noting that most casinos get 70 percent to 80 percent of their revenue from slots. "They show up every Monday, don't go on strike and require very little maintenance."

If Ehrlich's plan goes through, Maryland would end up with three large, casino-style slots emporiums.

The governor's proposal would allow 3,500 slot machines each at Pimlico, Laurel Park and Rosecroft in Wal-Mart-size facilities. Each would have more slot machines than all but a few of the casinos in Las Vegas and Atlantic City.

Though Ehrlich has said that he would not support any expansion of gambling beyond the tracks while he is governor, Franchot said he believes that placing slots at the tracks is the first step toward casino-type gambling at a variety of Maryland locations.

In January, a Sun opinion poll found that two-thirds of Marylanders believe slots would eventually spread beyond the tracks.

"There's obviously a national strategy of the gambling industry to establish beachheads in states through the racetracks and then aggressively expand outward," Franchot said.

A big weakness in Ehrlich's slots plan, Franchot said, is that most of the financial benefits would flow to a small number of people who own the tracks.

"I think that's the Achilles' heel," he said. "We're enriching some individuals who don't deserve to be enriched because they allowed the horse industry to become blighted under their leadership."

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