ANNAPOLIS – The racing industry’s claims that off-track slot facilities will jeopardize its survival are dubious, said a report due out today from the Maryland Tax Education Foundation.
The state should carefully consider market dynamics of slot legislation when crafting policy, the agency concluded. The foundation will present its findings at a 10 a.m. news conference here.
“It’s clear to me that the racetracks are still a very potent force on this issue. We’ve still got a lot of people and legislators believing that race tracks have some kind of special claim on slot machines, that the industry will go bankrupt without them,” said foundation Chairman Jeff Hooke. “Most of those arguments have little or no substance.”
But racing industry executives question Hooke’s methods and motives, after reviewing his three previous reports on gambling, the first of which was issued last Sept. before the governor’s election.
“I have some credibility questions with regard to Jeff. He’s a good numbers cruncher and all that, but previous things he has done have had very large holes in them,” said Tim Capps, executive vice president of the Maryland Jockey Club. “He makes estimates grossly over anything anyone has come up with.”
Hooke’s findings come just two months before the start of the legislative session, when slots are expected to be a hot-button issue.
Last session, Gov. Robert Ehrlich presented slot machines at local racetracks as a solution to both the state’s budget crisis and the decline of its racing industry.
The legislation passed in the Senate, but died in the House.
This year, Maryland faces a budget deficit of at least $700 million. The governor “still believes his proposal from last session is the best deal for the state,” said spokesman Henry Falwell, in a previous interview.
House Speaker Michael Busch, D-Anne Arundel, who led the fight against the legislation, could not be reached for comment on the report.
This summer, he suggested if the state chooses to support expanded gambling, it should retain tighter control over it, rather than giving the tracks a monopoly.
“I think everybody agrees,” Busch said in a previous interview, “that last year’s bill was not very well thought out.”
Hooke also supports more state control, calling it “the most practical option for the state of Maryland.”
But Capps said the racing industry is “unique.”
“It’s the only industry in the state in competition with the state while being regulated by the state. All we’ve said all along is to let us compete doing what we do and have the same competitive advantages tracks in neighboring states have.”
If the state goes with off-track slots, then based on the experience in other states, betting at tracks in Maryland may not drop at all, and fall-off will only hit 10 percent, according to the report.
The racing industry contends some people will leave tracks in favor of new slots parlors.
However, there isn’t much crossover between race track gamblers and slots enthusiasts, according to the report, which based its findings on venues and tracks in other states.
Race track owners have argued that if the state used money from slots to subsidize tracks’ purses – the money offered to winning horses – it would attract bigger equine stars and more gambling, which would translate into more jobs.
Although the study agrees, it found purses would need to increase by a considerable margin, taking away about 3 to 5 percent of the revenue from slots. That amounts to a $55 million to $95 million subsidy of the industry.
“The question is whether or not it’s really worth it,” Hooke said.
The industry said in a series of hearings that it employs about 30,000 people, said Hooke. Capps said that the correct number is closer to 17,000.
The study found the industry supplied only 8,300 jobs, and last year’s proposal would have created about 1,600 new ones. If new legislation calls for off-track slots, just 800 jobs will be lost.
Last session’s slots bill allocated $300 million annually to the racing industry and about $90 million additional for the increased purses. That would mean the state would spend about $34,375 to $68,750 per job, the report found.
“Most of these jobs don’t really pay that much . . . Yes, the subsidy will work, but it’s going to be very costly on a per-job basis,” Hooke said, “The track ownership option could work in theory, but I think the owners will never strike a reasonable bargain for the state.”