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| USA Today May 19, 2005 Preakness Plays Big Role in Maryland Slots Debate By Gary Mihoces BALTIMORE — The black-eyed Susan is the official flower of the Preakness Stakes. Is the one-armed bandit its savior? That debate in Maryland mirrors others being waged across the nation. Saturday's 130th Preakness, the second leg of horse racing's Triple Crown, will be run as the state struggles for consensus on legalizing slot machine gambling and using some proceeds, beyond what goes to education, to subsidize racing and the horse industry. (Related item: Horse tracks, head to head) More than 100,000 fans are expected Saturday, but Pimlico track officials say that's the only day of the year they make money. Therein lies the allure of slots — and Maryland tracks are not alone. Nationally, tracks with slots have reaped the benefits of increased purses, better horses and glitzy new facilities. "Tracks like Mountaineer Park (Chester, W.Va.) were frankly marginal operations working on very thin margins. ... Delaware Park was closed for years and reopened with slots and boasts a very healthy purse structure," says D.G. Van Clief Jr., commissioner of the National Thoroughbred Racing Association. "If you look at the quality of horses that have been attracted to places like Mountaineer Park and Delaware Park, (it's) night and day from years ago." Proponents, led by Maryland Gov. Robert Ehrlich, a Republican, say slots will preserve horse farms, keep Maryland competitive with neighboring states that have slots at tracks and keep the Preakness located in a city rocked in 1984 by the loss of its NFL Colts to Indianapolis. "I will not stand for another Colts-type episode on my watch," Ehrlich says. In the other corner: Maryland House Speaker Michael Busch, a Democrat. The House passed a slots bill this year, just as the state Senate did with an Ehrlich-backed bill. But they differed. No compromise was reached. No slots — for now. "Nobody seems to want to address the inefficiencies in racing and what kind of business plan is going to make them self-sufficient," Busch says. "Soon as you start talking about that, the owners of the track start saying, 'We don't want to deal with that. We need slots.' " The controlling owner of Pimlico is Canada-based Magna Entertainment Corp., which has far-flung racing interests, including operation of 10 tracks in the USA. At a recent stockholders meeting, Magna announced a $4.1 million first-quarter loss. For last year, it announced a $95.6 million loss. "We had a very rough experience at our shareholders meeting because people are asking the questions about profitability, obviously," says Dennis Mills, a Magna vice chairman who says his firm is "dealing in hope" and not "threats" when it comes to Maryland. Nationwide push for slots The push for slots at tracks across the USA is ongoing, in many complex forms: • In November, Florida voters approved a state constitutional amendment to allow Broward and Miami-Dade counties to decide whether to have slots at racetracks and jai alai venues. • Earlier this year, voters in Broward gave their approval. Miami-Dade turned it down. The whole matter is back in the lap of the state legislature. •This month, New York's Court of Appeals overturned a lower court that had struck down a state law authorizing use of portions of revenue from slot-machine-like betting devices — video lottery terminals — to subsidize the money that goes to top finishers in a horse race and to support horse breeders. •In November, California voters rejected a referendum to allow card clubs and racetracks to install 30,000 slot machines. Churchill Downs Inc., which runs the Kentucky Derby and owns other tracks, including Hollywood Park in California, lobbied for that one. • In recent years, legislative efforts in Kentucky to allow slots at tracks have failed. But in February, The Courier-Journal of Louisville published a poll saying 56% of Kentucky residents favored allowing slots at tracks. • Delaware, West Virginia, Iowa, Louisiana and New Mexico have slots at tracks, and they're on the way in Pennsylvania. "I don't think it's necessarily the answer to all the problems," Van Clief says. "But what it has proven to provide wherever it has been approved and implemented is a very healthy alternative source of revenue." But do slots players, en masse, turn into horse bettors? "We all wonder.... Is it possible to mine the population of slots players for future racing fans?" he says. "There is some crossover. ... It would probably be better to say there is a minimal crossover, and any racetrack operation that has slots is looking for ways to mine that group." The bottom line, for tracks, is that cash crosses over. Interstate rivals Ehrlich and his allies say the reality for their state is that tracks in neighboring Delaware and West Virginia have slots. And last year, Pennsylvania adopted a law that authorizes 14 licensees to operate slots parlors, seven at racetracks. They're expected to be up and running next year. By Dale Sparks, AP Slot machines are credited with improving business at West Virginia's Charles Town Races & Slots. At a football banquet in Annapolis, Md., this year attended by Ehrlich and Speaker Busch, Ehrlich got a laugh when he joked from the podium that he and Busch were headed to Charles Town racetrack in West Virginia to play slots. "It's a line I've used for a couple of years ... but it's becoming a lot less funny to me," Ehrlich says. At a news conference last week in Annapolis, Magna's Mills stressed that his corporation wasn't threatening to pull the Preakness out of Maryland. "We've never threatened anything," he says. "We always found that collaboration and cooperation and peacemaking was the better way to go." But Ehrlich says possibilities such as Magna's moving the Preakness to another of its tracks are real. Upgraded payouts In 2002, Magna purchased a 51% controlling interest in the Maryland Jockey Club (which operates Pimlico and Maryland's Laurel Park racetrack) from Joe De Francis and his sister Karin, children of late owner Frank De Francis. Joe De Francis, who remains president of the Maryland Jockey Club and a minority partner, says slots could pump an estimated $70 million to $100 million annually into increasing race purses at both tracks and provide incentives for breeders. "The institution of slots in our neighboring states ... has totally changed the economics of the racing business," he says. "It has created a world of haves and have-nots. It's very analogous to the situation when they first started to create the new football and baseball stadiums with luxury seats and skyboxes. ... With slots now surrounding us, we can't remain a viable major league racing jurisdiction unless we get the playing field leveled." De Francis says Pimlico and Laurel lose money "364 days a year" and that those losses total $2 million to $3 million. "We make enough money Preakness Day to offset the rest of the year, so overall for the whole year we manage to stay slightly in the black," he says. Slots, he says, would enable old Pimlico to do more than put a coat of paint on its corrugated metal siding: "We'd tear it all down and build totally fresh." De Francis also says Pimlico could raise purses. He says the average daily purses at Pimlico and Laurel Park used to double those at Delaware Park. He says Delaware Park's daily purses, with slots, now exceed the average at his tracks. Tim Ritchey, trainer for Preakness favorite Afleet Alex, keeps his horses at Delaware Park. He used to split time between Delaware and Laurel Park. The bigger purses, he says, took him to Delaware. "Maryland is just out there treading water, and the lifeboat, unfortunately, for some of the trainers are West Virginia with slot machines, Delaware with slot machines, then Pennsylvania," Ritchey says. The Maryland tracks "need to have that advantage ... to give them a life raft to survive." Ehrlich and others stress it's about more than just the tracks. It's about saving an industry. Aris Melissaratos, Maryland secretary of business and economic development, says horses are a $2 billion a year industry in the state and about a third of that is racing. "The horse industry, the equine industry overall, encompasses about 600,000 acres of farmland," he says, "about $5 billion worth of assets, almost 20,000 jobs." Breeding more business Cricket Goodall, executive director of the Maryland Horse Breeders Association, says slots money would enable Maryland to increase the incentives it pays to farms to breed and raise horses. She says Maryland gives away about $4 million in such incentives annually, plus about $1.5 million paid out in stakes races restricted to Maryland breds. Goodall says Pennsylvania distributes about $15 million annually and that it may surpass $25 million to $30 million or more when slots are up and running. Her worst-case scenario? "That's what's starting to happen. We will lose numbers of horses, and we will ultimately lose farms," she says. Says Mills: "We believe that the future of the Maryland Thoroughbred industry and the Preakness are really in the hands of the speaker of the House, and so we reach out to him and ask him to be part of the peacemaking exercise." Busch has a different view. Magna "evidently lost $200 million the past two years internationally, and they expect an entitlement to the expansion of gambling to go to them," Busch says. "If every business in Maryland came in and said, 'We lost money last year, we need to have slots,' we'd be giving them out to Black & Decker and General Motors, Bethlehem Steel and everybody else." No compromise Busch, however, also realizes he and his colleagues are on the hot seat. For the third year in a row, the Maryland Senate passed a slots bill supported by Ehrlich and Senate President Thomas V. Mike Miller, a Democrat. It would have approved 15,500 slot machines at seven sites, including Pimlico and Laurel Park. In the House, after failing to make it out of committee the two previous years, a bill passed to authorize 9,500 slots at venues in four counties, with the possibility that Laurel Park could get slots through competitive bidding in Anne Arundel County. To become law, identical bills must be approved by both chambers. No compromise bill emerged. Ehrlich and Busch blame each other. "The House of Delegates passed a bill this year that would have created four locations ... and would have given Magna the chance to have slots at Laurel," Busch says. "For some reason, the president of the Senate and the governor didn't support the bill. ... Very controversial issue, defining issue for legislators. And instead of embracing that bill, they decided they didn't want it." Miller has called for a special session of the legislature to again address the issue. But the stalemate was welcomed by Barbara Knickelbein, one of the organizers of a 10-year-old group called NOcasiNO-Maryland. She got involved in the cause because she and her husband own property in Ocean City, Md., and were fearful slots would turn it into "Atlantic City South." She's flat-out against slots. "Gambling is a menace to society. It does cause damage," she says. Knickelbein says Maryland gets enough with its lottery: "It's already here. Stay addicted to that. The state doesn't need another gambling addiction." She is not sympathetic to Magna. "Magna wants the easy way out with the slot machines. ... Don't just cry on our shoulders that we have to give them slots." And yet she enjoys racing. "I love watching the Preakness. I watched the Derby. You know, the king of sports and the sport of kings." She plans to watch Saturday's race on TV. Ehrlich will be there. "It's the best day of the year for Marylanders," he says. Busch says he has gone a number of times but he'll stay home this year. "I haven't been invited, No. 1," he says. "But I will watch it on TV. I like the Preakness." 
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