National casino and gaming companies are hiring lobbyists in Annapolis and plotting strategies to persuade lawmakers to allow them to do business in Maryland if the state legalizes slot machines.
Harrah's Entertainment Inc., which operates 26 casinos in 13 states, signed a contract with an Annapolis lobbying firm late last week. IGT Inc., the world's largest manufacturer of slot machines, also has retained local lobbyists. Both firms donated $4,000 to the campaign of Gov.-elect Robert L. Ehrlich Jr. (R), who has promised to expand gambling in the state.
Two other major players to emerge in the slots sweepstakes are Magna Entertainment Corp., the Canadian racing conglomerate that recently bought a controlling interest in Maryland's Pimlico and Laurel Park racetracks, and Centaur Inc., an Indiana casino company that has a deal to purchase Rosecroft Raceway in Prince George's County. Both companies want to bring thousands of slot machines to the horse racing tracks and have hired lobbyists to make their case, records show.
Ehrlich and key lawmakers have vowed to confine slot machines to racetracks and have said they prefer not to attract out-of-state gaming firms. So far, Ehrlich has limited negotiations on gambling to Maryland's horse racing industry.
Yesterday, though, an Ehrlich aide and Senate President Thomas V. Mike Miller Jr. (D-Prince George's) said leaders would consider allowing casino firms to run slots at racetracks if track owners don't ante up enough money to the state.
"If the current track owners are unable or unwilling to finance the licenses [for slot machines], we might have to look elsewhere to provide the best return for Maryland taxpayers," said Steven L. Kreseski, Ehrlich's chief of staff.
National casino companies are betting that, in one form or another, they are likely to gain a foothold in Maryland. Some have expressed interest in forming partnerships with track owners or buying the tracks outright, while others have said they are waiting to see whether lawmakers seriously consider the possibility of casinos at other sites.
"It's a potential new market for us, so we're keeping our eye on it," said Dennis Gallagher, associate general counsel for Harrah's, a Memphis-based company. "There might be some changes in Maryland that might present us with some opportunities."
Other leading figures in the gambling world are keeping a close eye on Maryland as well. Las Vegas casino magnate Steve Wynn has already made a visit to Annapolis, meeting top legislators and pitching his vision for a domed racetrack and casino resort.
Miller, Ehrlich and others have said they want to extract $300 million to $500 million in one-time licensing fees from track owners in exchange for the right to operate slots. Last week, the owners of five racetracks in Maryland told Ehrlich they were willing to pay $300 million upfront but expected the state to reimburse the money by taking a reduced share of future profits -- a proposal quickly dismissed by many legislators.
Miller said he was "very leery and very concerned about outside interests" coming to Maryland. But he left the door open, adding, "The question arises that if [track owners] won't pay them or can't pay them, will these licensing fees be auctioned off to the highest bidder?"
Harrah's and other Las Vegas high rollers hired lobbyists and testified in Annapolis in 1994 and 1995, the last time lawmakers seriously considered legalizing slots. Ehrlich revived the issue in this year's gubernatorial campaign, and many Democrats support his plan to use the proceeds to help erase a projected $1.2 billion deficit in next year's state budget.
Yesterday, Del. Howard P. Rawlings (D-Baltimore), chairman of the House Appropriations Committee, began circulating a draft of a bill that would authorize as many as 10,000 slot machines at four racetracks.
The bill would require track owners to pay $500 million in licensing fees and to turn over 50 percent of their proceeds from slots to the state in the form of a betting tax. Of the remaining proceeds, 8 percent would go to local governments, 8 percent would be dedicated for racing purses, and 34 percent would go to track owners -- much less than the owners have sought.
Rawlings's proposal would open the slot licenses to competitive bidding from any of the state's five commercial racetracks -- including Ocean Downs, a harness track near Ocean City. Local approval by county lawmakers or a referendum would be required.
Ehrlich and lawmakers from the Eastern Shore are strongly opposed to slots at Ocean Downs, but track owner William Rickman Jr., of Potomac, has implied that he might have to go out of business if he can't operate slots. Rickman declined to comment yesterday.
Rawlings said national casino companies "might not like my bill" because "we're very clear that we're not supporting expansion of gaming beyond slot machines and that we're going to limit it to racetracks."
Such restrictions have not prevented casino firms from operating in other states. For example, last month Harrah's bought a controlling interest in Louisiana Downs, a thoroughbred track in Bossier City, La., where it plans to build a casino. Harrah's runs a slots operation at a dog track in Iowa.
Sebastian Sinclair, a management consultant who advises gaming companies, said casino firms might lose interest in Maryland if lawmakers insist on squeezing too much money out of a slots deal.
"It may not be as lucrative as everyone might think," Sinclair said of proposals in Maryland for a 50 percent betting tax and steep licensing fees. "That's not to say it wouldn't be profitable, but it's far from a slam-dunk that you'd get a decent return on your investment. There are other investment opportunities -- namely in Pennsylvania."
Also keeping a close watch on Maryland is Reno, Nev.-based IGT Inc., which builds 70 percent of the nation's slot machines.
IGT has retained Annapolis lobbyists in hopes of landing a fat contract. With slot machines retailing for as much as $10,000 each and lawmakers talking about authorizing 10,000 of them, Maryland could instantly create a $100 million market.