11/09/2007 12:00AM

Slots clear first hurdle in Maryland

EmailThe Maryland state senate passed a bill late Thursday night that would allow voters to decide whether to approve up to 15,000 slot machines at five locations in the state, including two racetracks, through a referendum late next year.

The bill, which passed by a margin of 31-15, is expected to be debated on Monday in the house of delegates, which has so far indicated that the measure will pass. The legislation is supported by Gov. Martin O'Malley, a Democrat, as part of a larger strategy to raise money for the state, which is facing an estimated $1.4 billion shortfall next year.

The Maryland racing industry has unsuccessfully sought approval for slot machines for five years, and the apparent consensus in the state legislature is the closest the industry has come to realizing its goal. Maryland racing interests contend that the state's racing and breeding industries cannot compete with neighboring states where local monopolies for racetracks to operate slot machines have been used to subsidize horsemen and enrich track owners.

If approved by the house, the referendum would ask voters to amend the state's constitution to allow slot machines at locations in Allegany, Anne Arundel, Cecil, and Washington counties, along with another location in Baltimore. Under that language, slot machines would be authorized at two tracks - Laurel Park, which is owned by Magna Entertainment Corp., and the harness track Ocean Downs, which is owned by Bill Rickman, the owner of Delaware Park. Delaware was one of the first tracks in the U.S. to receive authorization to operate slot machines.

Although the referendum language contemplates a casino location in Baltimore, the home of Magna's Pimlico Race Course, city leaders have said that they favor a stand-alone site near the city's redeveloped waterfront.

The referendum does not contain language detailing how revenues from the slot machines would be carved up. Legislative leaders and officials in O'Malley's administration have estimated that the machines will generate $700 million annually for the state.

Prior to the bill passing, senate Republicans attempted to alter the referendum language so that Rosecroft Raceway would be in line to get slots, rather than Ocean Downs. Both tracks are unprofitable. In September, Rosecroft's owners, Cloverleaf Enterprises, reached an agreement to sell the track to Penn National Gaming Inc., the large casino and racetrack operator.

Senate Republicans also attempted to force a straight up-or-down vote from the senate on legalizing the machines, rather than putting the issue to voters, but failed. Crafting the issue as a referendum insulates legislators from political fallout over the controversial issue, and also gives supporters and opponents a long run-up to fund advocacy campaigns and lobby legislators.

Magna, which purchased a majority share in Laurel and Pimlico in 2002, has lost $375 million over the past three years and is in the process of selling some of its racetracks to pay down $500 million in long-term debt. Earlier this year, Magna exercised options to buy out its minority partners in the tracks. The options were included in the 2002 deal and will give the former owners of the tracks a large share of the pre-tax earnings of any slot-machine operations for 20 years after slots come on line.