Track Owner Shut Out Of Slots Competition
Friday, February 13, 2009
A racetrack operator that has spent millions pushing to make slot-machine gambling legal in Maryland was disqualified yesterday from participating in the program for failing to pay a multimillion-dollar fee.
A state commission unanimously rejected two of six proposals to operate slot machines, including one for Laurel Park racetrack in Anne Arundel County. A bid by a New York-based company to put slots near a state-financed lodge in Allegany County was also disqualified.
An application by Baltimore-based Cordish Cos. to put slots at Arundel Mills mall, which was competing with the Laurel Park bid, was ruled eligible by the seven-member commission.
Representatives of the Maryland Jockey Club, which has been seeking the Laurel Park license, immediately turned to the courts to reverse the disqualification, and a hearing was scheduled for this month.
"There are many legal chapters left to be written on this matter," said Alan Rifkin, an attorney for the Jockey Club and the Laurel Racing Association, the legal entity that submitted the bid for the Laurel site.
Barring a court order, yesterday's actions mean that Laurel will not be among Maryland's five authorized slots locations, despite efforts in recent years by the track's Canadian owner, Magna Entertainment, and its affiliates. The fate of slots at Rocky Gap State Lodge and Golf Resort remained unclear, with the commission indicating that it might seek additional bidders for the Allegany site.
Final decisions about licenses are not expected for several months, but the events spelled more trouble for Maryland's slots program. The state now has only one bidder each for four of five available locations, a far cry from what Gov. Martin O'Malley (D) and other state leaders envisioned when voters approved a ballot measure in November authorizing as many as 15,000 machines. Fewer than half of those machines are claimed in the remaining bids.
Those bids include only one horse-racing track, Ocean Downs on the Eastern Shore -- a marked departure from proposals floated earlier in Maryland's bitter slots debate. In addition to the Arundel Mills proposal, bids are pending for nontrack sites in Baltimore and Cecil County.
"I think everyone's pretty amazed that Magna, which has been beating the drums for this . . . did not come up with a [qualifying] bid," House Speaker Michael E. Busch (D-Anne Arundel) said.
When bids for licenses were due Feb. 2, Laurel submitted a bid, without public explanation, that did not include a required $28.5 million license fee.
Attorneys for Laurel told Maryland officials this week that the state's bidding process was legally flawed because the rules were not clear about whether unsuccessful bidders could get their money back. They have announced that they have placed $28.5 million in escrow at a Maryland bank, funds that could be used to pay the fee.
A lawyer from the Maryland attorney general's office told the commission yesterday that it had no discretion to consider bids that did not meet minimum requirements, including the timely submission of a license fee. Lawyers for Laurel stood up in protest yesterday as the commission voted to disqualify the bid but were not acknowledged.
During his 2006 campaign, O'Malley advocated putting slot machines at racetracks. But legislation that emerged in 2007 included competitive bidding at five locations, with no guarantees that any track would get a license. The Anne Arundel site was defined most broadly, allowing bidders to suggest sites anywhere within two miles of the Baltimore Washington Parkway.
The proposal by Cordish envisions a free-standing casino at the mall whose interior would not be accessible to those younger than 21, according to company officials.
Joseph Weinberg, the company's vice president for development, said the casino probably would include an upscale restaurant and live music. Designs include space for a hotel that would not be immediately built, he said. There are several hotels in the area.
Weinberg said the company's aim is to integrate gaming with shopping and entertainment at the mall. The company has pursued similar mixes at other locations, including in Florida.
Regardless of where machines are, Maryland's horse-racing industry and track owners stand to benefit. Seven percent of proceeds are earmarked to enhance racing purses and breeder operations. An additional 2.5 percent is set aside for "renewal" grants to private tracks.
About half of the proceeds are reserved for education programs. Legislative analysts projected that those funds could reach $660 million a year once all 15,000 slot machines were operational. Lawmakers now expect only a portion of that revenue to be realized.
Before the tracks were fully owned by Magna, co-owner Joseph A. De Francis and the Maryland Jockey Club lobbied for years and spent thousands in campaign cash in their unsuccessful bid to bring slots to Maryland. In 1998, De Francis's companies gave $250,000 to the Republican National Committee, which was buying ads in the Maryland governor's race that year. In 2003, De Francis gave $245,000 to two national Democratic committees.
In 2003, former Republican governor Robert L. Ehrlich Jr.'s first year in office, a bill explicitly made two Magna-owned tracks, Pimlico in Baltimore and Laurel Park, eligible for slots.
As the battle over slots continued during the remainder of Ehrlich's term, tracks owned by Magna and others maintained favored status in subsequent legislation.
Since 2003, the company and affiliated entities have spent more than $4.4 million on lobbying, among the largest outlays by any interest in Annapolis.
Last year, Magna-controlled companies gave more than $3 million to the group spearheading passage of a ballot measure that authorized slots at five competitively bid sites. The contributions accounted for more than 40 percent of the roughly $7 million raised by the group.