04/03/2003 1:00AM

Maryland slots bill is defeated

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A bill legalizing slot machines at Maryland racetracks was soundly defeated in a House committee on Wednesday, sounding the death knell for the effort this year and possibly well into the future.

The committee voted 16-5 to reject the bill, which was supported by the Republican administration of Gov. Robert Ehrlich as a way to raise hundreds of millions of dollars for the government and had been approved by a Senate committee.

The rejection was a resounding victory for House Speaker Michael Busch, a Democrat, and a blow to Magna Entertainment, which purchased a majority share in the Maryland Jockey Club late last year with the hopes that slots would be legalized. The MJC operates Pimlico and Laurel, which would have gotten slots under the legislation.

An aide to Gov. Ehrlich, Paul Schurick, said that in the wake of the defeat, the governor would stick to his campaign vow to drop support for slots for the remainder of his four-year term. Ehrlich took office earlier this year.

Racing officials said they expect the effort to legalize slots to be renewed next year in the state legislature, but they conceded that this year's effort had probably represented the racing industry's best shot to control the debate.

"There's no question the expansion of gambling will be on the table next year," said Tim Capps, the executive vice president of the MJC. "The question is whether or not expansion of gambling is going to be limited just to the tracks."

Ehrlich's proposal would have allowed 3,500 slots each at the MJC's two tracks and at Rosecroft Raceway while allowing another 1,000 slots at a track to be built in western Maryland.

Ehrlich's initial plan was attacked by opponents because racetracks would have received a larger share of the proceeds than the government. Racetracks had responded by saying they would be unable to afford the capital investment needed to build slots parlors without significant shares of the revenues.

But even with revisions that sliced the tracks' share by 5 percentage points, the criticism continued unabated, largely because the revision also slashed the amount tracks would have to pay as license fees to the state, said Alan Foreman, general counsel of the Maryland Thoroughbred Horsemen's Association.

"The perception was that the racetrack owners were the only ones who were going to benefit from the package," Foreman said.

Stock in Magna Entertainment Corp., the majority owner of Laurel and Pimlico, dropped 31 cents, or 6.6 percent, to $4.39 on Thursday.

Before the committee meeting in which the bill was voted down, representatives of Magna were criticized by the Maryland Racing Commission for failing to describe how the company planned to spend $5 million on backstretch improvements by Aug. 31. Commissioners had pressed Magna to spend at least $15 million on capital improvements at Laurel and Pimlico when they approved Magna's purchase of a majority share in the two tracks last year.

Magna officials said on Thursday that they would have no comment about the developments in Maryland.

During the meeting, Ed Hannah, Magna's general counsel, told commissioners that Magna had not yet decided how to spend the $5 million because the company was waiting for the slots issue to be resolved, according to Lou Ullman, the chairman of the commission. The commission eventually gave Magna until May 7 to present a plan, Ullman said.

"Maybe now that slots aren't an issue, they can start to focus on what they are going to do," Ullman said.