Updated on 09/17/2011 2:00PM

Slots push Philly in with the big boys

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WASHINGTON - The legalization of slot machines in Pennsylvania is a momentous event for the horse racing industry, one that will change the face of the sport on the East Coast and produce reverberations throughout the country.

Of course, the installation of slots in racetracks is nothing new, but in most cases the devices have been used to bail out failing racetracks. Iowa's Prairie Meadows was the first; after it went bankrupt, legislators and voters approved slots in 1994 to keep the track in business. Similar scenarios played out at Delaware Park and Charles Town in West Virginia.

These operations have become profitable, though they have remained minor-league or mid-level tracks at best.

But the bill passed Sunday morning in Harrisburg virtually ensures that Pennsylvania will become a major racing state and that Philadelphia Park will become a colossus. Its ascension will almost surely be accompanied by a corresponding decline of the tracks in neighboring Maryland, which rejected slot-machine legislation this year and last.

The pro-gambling forces in Pennsylvania, led by Gov. Ed Rendell, decided that if they were going to legalize slots they were going to do it in a big way. The bill would allow up to 61,000 machines in the state, in 14 locations: five stand-alone slot parlors in major cities; two resorts; and seven racetracks (two of which don't even exist yet.) Rendell and his allies won a difficult political fight by arguing that slots could produce as much as $3 billion a year in revenue that would be used to reduce property taxes and fund economic development.

But the most extraordinary aspect of the measure was its generosity toward the racing industry. In Maryland's debate over slots, plenty of politicians wanted to cut racetracks out of the deal. Gambling opponents regularly demonized "greedy track owners." If such antipathy toward racing could arise in a state where Thoroughbreds are an important industry and the Preakness is a revered institution, it was hard to imagine that Pennsylvania politicians would care to help their state's racetracks. Philadelphia Park is a soulless betting factory; Penn National Race Course is minor-league, as are the state's harness tracks. And Pennsylvania doesn't have much of a horse-breeding industry, the recent success of Smarty Jones notwithstanding.

Yet the politicians in Pennsylvania are bestowing a phenomenal windfall on racing. In the slot bill that was being considered in Maryland, the industry was willing to settle for 5 percent of the revenues from slots. But tracks in Pennsylvania will get 12 percent of their gross slot-machine revenue for purses, plus additional money from the stand-alone slot facilities.

With Philly Park getting a 12-percent slice of a substantial pie, some people in the industry are estimating that the track will offer more than $500,000 a day in purses, propelling it in the same league with the top tracks in New York, California, and Kentucky. With these financial resources, it is going to be a magnet for top stables from mid-level tracks, particularly from Maryland, where purse money is only about $200,000 a day.

It is not only Philadelphia Park that will have an impact on its neighbors. Penn National, near Harrisburg, is a well established venue for cheaper horses; with slot-fueled purses, it is going to be an irresistible destination for horsemen with stables that don't have stock good enough for Philly. Moreover, the Pennsylvania legislation is going to create new tracks that have no reason to exist except as facilities for slots. (Erie has been the site of two failed tracks, but it is going to get another one.) This is a dubious idea - why create tracks that nobody wants? But even if the new operations have few fans, they will offer purses that can lure horses from tracks not blessed with slot money.

Leaders of the Maryland racing industry have moaned for years about the devastating effect of slot-fueled competition at Delaware and Charles Town, but those tracks now look like minor annoyances compared with what is coming from Pennsylvania. The introduction of slots at Philly Park and Penn National will be devastating to the Maryland tracks.

"We will be in an impossible competitive position," said Joe De Francis, president of Laurel and Pimlico, "if Maryland doesn't act." He expressed hope that the developments in Pennsylvania might be a catalyst for movement on slots at a special session of the state legislature, but it is more likely that Maryland racing is on a steep downhill slide toward permanent minor-league status.

This is the harsh new reality of racetrack economics: Tracks do not necessarily succeed or fail because of their own merits. Winners and losers in the business are being determined by a political process that is often irrational and unpredictable. Certainly, few people could have predicted that Philadelphia Park would emerge as the biggest winner of them all.

(c) 2004 The Washington Post