Maryland's horse racing industry wants to put more slot machines at each of its major tracks than can be found at the MGM Grand casino in Las Vegas and would be willing to pay the state $300 million in licensing fees for the right to do so, according to a proposal the group has given to Gov.-elect Robert L. Ehrlich Jr.
The racing industry is asking Ehrlich (R) to divide at least 18,000 slot machines among five racetracks in Maryland -- a number that far surpasses previous plans floated by the incoming governor. Ehrlich has said he supports about 10,000 slots at four racetracks.
The written proposal also suggests that the state reserve nearly half the profits from slots for racetrack owners. According to gaming experts, 18,000 slot machines could generate about $2 billion in revenue each year.
The proposal was hatched in a series of secret meetings held by Maryland's racetrack owners, horse breeders and other racing interests during the past three weeks. Ehrlich, who has accepted more than $60,000 in campaign contributions from racing and gambling interests, had asked the group to put aside its history of infighting and come to a consensus on the issue.
The group finalized its written recommendations Wednesday night after meeting in private at an Annapolis hotel. The parties involved declined to comment, saying Ehrlich's staff had asked them to keep their deliberations confidential. A copy of the proposal was obtained by The Washington Post.
In an interview yesterday, Ehrlich called the proposal unacceptable, primarily because it calls for legalizing slot machines at Ocean Downs Racetrack, near Ocean City. In his campaign, Ehrlich promised to prohibit slots on the Eastern Shore, citing local opposition.
"We have certain parameters, and they've violated those parameters," he said. "Slots at Ocean Downs is a stopper, period."
But Ehrlich said he was optimistic that differences between his position and that of the racing industry could be resolved. "The negotiating tactic is you start with what you want and then you work down," he said.
Under a complicated formula spelled out in the proposal, racetracks would keep roughly 45 percent of the profits, with a similar amount going to the state.
Much smaller percentages would be set aside for horse breeders, racing purses and a variety of other interests, including the Maryland State Fair and the University of Maryland Animal Science Department.
Key lawmakers on both sides of the gambling issue criticized the proposal, calling it a bad deal for the state.
Sen. Thomas McLain Middleton (D-Charles), a leading foe of gambling, said the state risked entering into a bad deal because of a rush to find money to erase a projected $1.2 billion deficit in the next fiscal year.
"If they don't watch out, the state is going to be at the mercy of whatever these guys want to give us," he said. "If you're going to negotiate with these people, you have to negotiate from a hand of strength. But Maryland is becoming like a junkie that needs a quick fix."
Del. John A. Hurson (D-Montgomery), who has supported racing interests in the past, questioned why Ehrlich asked the group to suggest a deal in the first place.
"It's insane to let the industry write this bill," he said. "They're not the only people involved in this. We need the time to do this right."
Thomas Bowman, an Eastern Shore veterinarian tapped by Ehrlich to lead the meetings, said the proposal "was advisory and nothing more."
"The purpose of this project is not to dictate legislation in any shape or form," said Bowman, president of the Maryland Horse Breeders Association.
The issue of gambling is expected to fuel a fierce debate in this year's session of the General Assembly, which convened Wednesday. Lawmakers must either slash public spending or pass large tax increases to balance the budget, so the possibility of a huge windfall from slots has led many legislators to push for their legalization.
Ehrlich and other leading lawmakers have insisted that slots be confined to tracks so the state's ailing horse racing industry would benefit. Others have suggested that the state could make much more money by allowing casinos to take root in other places. A third faction opposes expanded gambling under any conditions.
In their letter to Ehrlich, the racing industry representatives said their proposal would "allow the development of first-class, state-of-the-art racing and gaming facilities from which all Marylanders would benefit." The group also said Maryland would reap comparatively more from the deal than other states that allow slots at tracks.
The owners of the state's three major tracks -- Laurel Park, Pimlico in Baltimore and Rosecroft Raceway in Oxon Hill -- agreed to pay upfront licensing fees of $75 million each. In return, they would gain the right to place 4,500 slot machines at each location.
The MGM Grand casino in Las Vegas, in comparison, has about 3,500 slot machines.
William Rickman Jr., the owner of Ocean Downs and holder of a racetrack under construction in Cumberland, agreed to pay $37.5 million in licensing fees for each of his venues. He would be permitted to have 2,250 slots at each site, according to terms of the proposal.
The racetrack owners, however, asked that they be allowed to deduct the cost of their licensing fees over a four-year period. So while the state would receive $300 million next year in fees, it would effectively have to pay back that money over time.
"It's a horrible deal for the state, and I don't see how the governor and legislature would agree to it," said Jeff Hooke, leader of a nonprofit advocacy group called Project $1.5 Billion, which argues that the state could earn at least that amount by selling licenses to full-fledged casinos. "I expected a low-ball offer from them, but I didn't expect it to be so bad."
Hooke cited an example from Illinois, where lawmakers sold an operating license to a casino in suburban Chicago for $615 million. He said Maryland could demand the same amount from the state's three major tracks, given their proximity to major population centers along Interstate 95.
The addition of thousands of slots would transform Pimlico, Laurel and Rosecroft, three tracks where attendance has steadily dwindled in recent years. Each site would need a building the size of two Wal-Marts to house 4,500 slots, also known as video lottery terminals.
Slots would also transform the communities surrounding the tracks, resulting in a huge influx of traffic. The racing industry's proposal suggests that the state reserve money to make improvements in those neighborhoods, but it does not offer specifics.
The track owners declined to discuss their recommendations to Ehrlich.
Staff writer Lori Montgomery contributed to this report.