Impact on tracks without slots unclear

BALTIMORE (Map, News) - Voters will go to the polls next November to decide whether Maryland will have slot machines. The location for those facilities has been built into the bill they will vote on. But less definite is the impact of putting slots at racetracks, or away from them.

Experts disagreed on the point, some saying it would kill the tracks, while others said non-slot tracks may be underwritten by those with gambling and owned by the same company.

The referendum next November would amend the state constitution and allow 15,000 machines at five sites: Baltimore City and Allegany, Anne Arundel, Cecil and Worcester counties. The Anne Arundel and Worcester county locations could encompass Laurel Park and Ocean Downs, leaving three off-track sites.

PRO AND CON

Harford County Councilman Dion Guthrie spent 40 years installing slot machines and video lottery terminals at tracks around the country for the American Totalisator Company.

“I have seen wherever they have put in slot machines and or casinos, if they weren’t at the racetracks … it was matter of time before the racetracks closed,” Guthrie said. “It’s the final nail in the coffin.”

However, Jeff Hooke, a Maryland-based investment banker familiar with slots and the racing industry, disagreed.

“That’s one of the myths perpetuated by the horse racing industry,” said Hooke, also chairman of the Maryland Tax Education Foundation. “We looked at several states where casino gambling was introduced but not at the racetrack. Not one track went bankrupt.”

In a 2003 study, the foundation found that betting at tracks declined between zero and 10 percent if slot facilities are operated off-track, based on data from four states with tracks and casinos operating independently.

Putting slots away from the track would allow the state to locate them in more strategic locations, make more money, and pump up percentages for horse owners and track owners, Hooke said. But track owners would benefit from having slots on-site, gaining secondary revenue from shopping, concessions and parking.

“It’s a not a huge windfall for the tracks — if anything it’s a huge windfall for the horsemen,” Hooke said. “They can run the same old nag and make two or three times as much.”

UNCERTAIN FUTURE

The bill passed by lawmakers last month dedicates 2.5 percent of slots revenue for capital improvements to all the state’s racetracks for an initial eight years, after which the percentage is directed back to education.

That capital improvement revenue will help make up the difference between slots tracks and non-slots tracks, especially if the two are owned by the same company, said Tim Capps, former vice president of the Maryland Jockey Club and executive-in-residence at the University of Louisville's Equine Industry Program. Pimlico and Laurel Park are owned by Magna Entertainment Corp.

“The possibility of something good happening at Laurel is very high; it will be the best facility in the state,” Capps said. “If you’ve got Laurel and Pimlico under the same umbrella … Pimlico could well find itself getting underwritten by Laurel.”

At least one track has already been affected by a lack of slots. Two weeks ago, Penn National Gaming announced it would drop its $20 million acquisition of Rosecroft Raceway in Fort Washington after Prince George's County was not included among the potential slot venues.

“As a result, Rosecroft, which already has been operating at a loss, will be denied the opportunity for an alternative revenue source that would enable it to compete with other tracks in the state and racing and gaming venues in neighboring states,” the company said in a Nov. 28 release.

Capps said Rosecroft might struggle after the eight-year capital improvement funding period ends, but said that by that time, slots may have caught on and lawmakers could consider expanding the number of slot venues.

“They may come back and take another look at this thing,” Capps said. “If the referendum passes and it’s successful, they might come back and in these local jurisdictions say, maybe [Prince George’s] county isn’t out of the picture yet.”

Division of slots revenue under referendum bill

The November 2008 referendum on slots, if passed, would place:

» 4,750 slot machines in Anne Arundel County, presumably at Laurel Park

» 2,500 slot machines in Cecil County

» 2,500 slot machines in Worcester County, presumably at Ocean Downs harness track

» 3,750 slot machines at a Baltimore City location

» 1,500 slot machines in Rocky Gap State Park near Cumberland

Slots revenue would be divided:

» 33 percent to the license holder

» 48.5 percent toward education

» 2.5 percent to capital improvements to racetracks statewide for eight years; after eight years, would go to education.

acahall@baltimoreexaminer.com

Advertisement