The remaining $27.5 million needed will be sitting in a state account for track upgrades — called the Racetrack Facilities Renewal Fund — in 2021, when the project would get going.
Slots money would be used to pay back the bonds.
Promoters of the plan estimate that the cost of paying back the bonds would be $17 million per year. Over 30 years, those payments would add up to $510 million for the $348 million bonds, a number includes the interest paid on the bonds.
The money would come from a portion of three funds that get a slice of the money that’s gambled on slot machines:
The Racetrack Facilities Renewal Account, which helps pay for track upgrades.
The Purse Dedication Account, which beefs up prize money for winning races.
Local Impact Grants, which go mainly to Baltimore City, Anne Arundel County and Prince George’s County.
Adjustments would need to be made to all three funds to make the financing plan work.
The Racetrack Facilities Renewal Account would supply half the money.
The plan involves using $8.5 million per year from the Racetrack Facilities Renewal Account, or RFRA, to help make the $17 million annual bond payments.
RFRA currently gets 1% of all the money that’s gambled on slot machines in Maryland. Of that, 20% goes to harness racing tracks for upgrades and 80% goes to thoroughbred racing tracks. Only Pimlico, Laurel and the Timonium Race Track at the Maryland State Fairgrounds host thoroughbred racing in the state.
The share that goes to thoroughbred tracks adds up to about $8.6 million per year. The plan would use $8.5 million of that toward the bond payments.
Under current law, once each casino reaches its 16th anniversary — which will happen between 2026 and 2032 — that money will go instead into the Education Trust Fund.
The law would need to be changed to allow the money to keep going into RFRA for several more years, and to use it for paying off the bonds.
There is precedent for extending the payments into RFRA. When slots were first legalized, the payments into RFRA were required for eight years. That was extended to 16 years when table games were legalized in 2012.
The Purse Dedication Account would provide $5 million to pay off the bonds.
The Purse Dedication Account gets 6% of all money wagered at slot machines, and that is used to increase the prizes earned by race-winning horses.
State law would need to be changed to allow for part of the purse money to go toward the track renovations.
Local Impact Grants set aside for Park Heights would contribute $3.5 million for bond repayment.
An additional 5.5% of the money wagered on slots goes into a fund that provides grants to local governments to use in communities affected by gambling. Most of it goes to Baltimore City, Anne Arundel County and Prince George’s County.
Of that amount, 18% or $9 million per year, is required to go to Baltimore City to use in the Park Heights community around Pimlico.
The proposal counts on the city using $3.5 million of that Park Heights money to help with the bond repayments.
Under current law, the set-aside for Park Heights expires in 2032, and that money would go back into the fund to be distributed among all the jurisdictions. The law would need to be changed to extend the money to Park Heights past 2032 and to allow it to be used for the bond payments.
This is only a portion of money that the state gets from slot machines at casinos.
The $17 million that would go to paying for the racetrack renovation bonds represents a fraction of the nearly $729 million that casinos pay to the state each year.
The casinos pay a hefty amount of money to the state from their slot machines. The rates range from 40% of what’s gambled on slots at Rocky Gap Casino in Allegany County to 61% at Hollywood Casino in Cecil County.
The casinos also pay 20% to the state from table games revenue.
Of the money paid to the state, $543 million went to the Education Trust Fund, $93 million went to local aid, $77 million went to horse racing, $11 million went to fund casino regulators and $5 million went to “responsible gaming.”