Maryland's racetrack owners and horse breeders expressed strong dissatisfaction yesterday with Gov. Robert L. Ehrlich Jr.'s proposal to bring 10,500 slot machines to the tracks, saying the plan wouldn't leave them a big enough share of gambling proceeds and would do little to benefit horse farms.
"It's got to be a win-win deal or nobody will want to do it," said William Rickman Jr., owner of a proposed track in Cumberland that would be allotted 1,500 slots under Ehrlich's plan. "If people really want to get this done, then the state will have to get a correct share, the tracks will have to get a correct share and the horsemen will have to get a fair share."
Other track owners declined to comment or did not return telephone calls, but their lobbyists worked furiously all day to persuade lawmakers in the General Assembly to amend the governor's bill, which would impose one of the highest gambling taxes in the nation on slot machines.
Joseph A. De Francis, a minority investor in the Pimlico and Laurel Park racetracks, alluded to the industry's unhappiness in a meeting yesterday with delegates from Baltimore. "This is truly a once-in-a-lifetime opportunity for all of us, and we need to make sure it doesn't slip from our fingers," he said.
Under Ehrlich's plan, four racetracks across the state would be permitted to operate a combined 10,500 slot machines -- about half as many slots as in Atlantic City. In return, track owners would pay one-time licensing fees totaling $350 million and give the state 64 percent of their slot machine revenue.
The tracks would keep 25 percent of the money, with the remainder going to racing purses, horse breeders and local governments to offset the costs of hosting the casino-style operations.
Maryland's share of the profits from slots would be twice the rate collected by Delaware and West Virginia, two neighbors that legalized the machines in the 1990s.
Ehrlich is banking on the gambling profits to lift the state out of a financial mess that includes a projected $1.3 billion budget deficit in the next fiscal year. And while the governor has cast himself as a loyal friend to the horse industry, he is betting that it won't balk at the strict terms of his deal and leave the state empty-handed.
"We're confident they'll be on board," Ehrlich said. "Is everybody going to get what they want? No. But we're the first administration in years to pay attention to the needs of horse farmers and the racing industry."
His budget is built on the assumption that the tracks will agree to pay the licensing fees by March 2004 and that slots will be in operation immediately thereafter. If that doesn't happen, the state will be forced to find $400 million elsewhere and $600 million the next year.
Yesterday, Ehrlich's aides were received skeptically by the Senate budget committee, where lawmakers questioned whether Ehrlich's slots plan could be implemented in time to balance the budget.
Senate President Thomas V. Mike Miller Jr. (D-Prince George's) predicted that track owners would come around and consent to the $350 million in licensing fees. "We will know in the next couple of weeks whether the owners will buy in," he said.
Still, Miller is hedging his bets. He has introduced a bill that would raise $30 million by enacting a corporate tax, a bill he opposed last session. Miller said the revenue will be needed if money from slots doesn't materialize.
Gambling experts differed over the merits of Ehrlich's gambling proposal, with some questioning its economic feasibility and others arguing that track owners would still benefit handsomely.
William N. Thompson, a professor at the University of Nevada in Las Vegas, said Maryland's gambling tax on slots would be one of the highest in the nation, but he predicted the racetracks would still earn millions.
"It's free money for the tracks. For them, it's gravy," he said. "I don't disagree with the notion that the tracks shouldn't keep very much, because what the hell, they're just renting space. What costs do they have?"
Jeff Hooke, chairman of an anti-tax group that has lobbied the state to offer gambling licenses to the highest bidder, said the racing industry's complaints were predictable. "No matter what number the governor would come up with, they'd bellyache," he said.
But financial analysts questioned whether Ehrlich was overreaching. They pointed out that New York authorized slot machines at racetracks in 2001 but has failed to find any takers because track owners would get only about 25 percent of the proceeds -- about the same rate as Maryland's.
"It's going to make it real tough" for racetracks to justify the investment, said Sebastian Sinclair, president of an investment firm that specializes in the gambling industry. "The question is, can you make the operations profitable? You probably can, but barely."
Although racetrack owners said they would be forced to spend as much as $200 million apiece to spruce up their properties to attract gamblers, Ehrlich's bill does not require them to do so. Nor would it require the racing industry to spend any of its profits on marketing, a provision criticized by some lawmakers.
Ehrlich's plan is less generous to the horse industry than one he floated during his campaign in the fall. Under that proposal, the state would have received 50 percent of the revenue from slots, not 64 percent.
Racing and gambling interests contributed more than $80,000 to Ehrlich's campaign and hoped he would legalize slots as a way to revive Maryland's ailing horse industry, whose reputation has waned in recent years.
"If this bill is supposed to be about horse racing, these numbers don't reflect it," said Gerard E. Evans, a lobbyist for the Maryland Thoroughbred Association.
Staff writers Nelson Hernandez and Lori Montgomery contributed to this report.