More than halfway through this year's Maryland General Assembly session, and a month after he introduced and then withdrew a bill to allow slot machines at four racetracks in the state, Republican Gov. Robert L. Ehrlich Jr. still has not settled on the basics of his proposal. Many important details are up in the air, including how the profits would be divided.
In his original plan to install 10,500 machines at four racetracks -- which would make them among the biggest "racinos" in the country -- the governor proposed that the revenue be distributed as follows:
* 64 percent to a public education trust fund;
* 25 percent to racetrack owners;
* 8 percent to boost the prizes at the tracks and to the horse breeders (remember, the measure isn't just geared to bridge the billion-plus budget shortfall; it also aims to save the racing industry);
* 3 percent to the local governments where the racetracks are located -- an amount which, in the first year, wouldn't even cover the costs of anticipated road improvements around the Pimlico track.
The track owners, local governments and horse breeders all objected to their share of the take. But it's the track owners for whom the governor seems to be trying to sweeten the proposal, perhaps by reducing their upfront licensing fees or increasing their portion at the cost of education's share.
The governor's original plan estimated that the slot machines would generate $1.3 billion in "take" a year (that's the amount left over after the gamblers have been paid and the state's expenses for operating the machines have been deducted). So how much money would go to the track owners? Here's the math:
* 25 percent of $1.3 billion is $325 million.
* $325 million a year, over the 20-year license period, equals $6.5 billion.
* Subtract the one-time licensing fees of $350 million and the tracks would split $6.15 billion over 20 years.
Sounds like a lot of money, but racetrack backers say it's not enough to offset the costs of building and operating the facilities to house the slots. The facilities, they say, would have to be snazzy enough to compete with those at Charles Town in West Virginia, and Dover Downs in Delaware. (The racetracks would not have to pay for the slot machines themselves, each of which costs about $10,000, because the state intends to own or lease the machines.)
Neither West Virginia nor Delaware demands that the casinos give up 75 percent of the take, they note. In West Virginia, the racetracks keep about 47 percent (the exact amount is determined by a complicated formula). In Delaware, racetracks keep 49 percent.
And in New York, where the state would keep 75 percent of the take, with the rest being split by the tracks and the breeders, no one has applied for a racino license. A similar reluctance on the part of Maryland's racing industry certainly wouldn't do anything for the state's deficit, the owners point out.
According to news reports, a consultant hired by the governor at the cost of $100,000 has agreed that the tracks need more money to make the plan viable. The Maryland Tax Education Foundation, however, says that slot machine facilities are highly automated and have lower operating expenses than other forms of entertainment. It put the cost of building a 100,000-square-foot facility at Pimlico at $50 million (the 80,000-square-foot facility at Dover cost about $31.5 million). That's far less than the $600 million total for all facilities that the racetrack owners have floated.
MTEF thinks that the plan is more profitable than the governor's estimates and contends that the tracks could pay higher license fees. It predicts that each machine would bring in $600 a day, compared with the $217 a day estimated by the Ehrlich administration.
If one thing is clear, it's that there's work to be done on the numbers. Some legislators have dismissed the whole debate, noting that time is running short, many questions remain, and there might be other ways to balance the budget.
"Look, $600 a machine, $217 a machine, it doesn't matter," House Majority Leader Kumar Barve (D-Montgomery) told the Baltimore Daily Record. "The real question is . . . what's the freaking rush?"
-- Elizabeth Chang, for Outlook