Racing subsidies could leave Md.

Baltimore Sun - United States

Report highlights possible outcome of slots referendum

By Gadi Dechter |Sun reporter

August 6, 2008

Harford County horse breeder Billy Boniface with his Kentucky Derby winner, Go For Gin, at Bonita Farm. If the slots referendum fails, he said, he would send the stallion to Pennsylvania. (Sun photo by Lloyd Fox / June 13, 2006)

A November slots referendum designed to keep millions in gambling dollars from going to nearby states would, if approved, likely end up sending millions in tax revenue to out-of-state racehorse owners, according to a new analysis by a taxpayer advocacy group.

In 2007, 58 percent of Maryland thoroughbred race winnings went to out-of-state owners, according to the report to be released today by the Maryland Tax Education Foundation.

If that trend continues, much of the $80 million in annual thoroughbred purse subsidies under the proposed legislation will continue to flow to non-Maryland horse owners and a small number of in-state breeders, said Jeffrey C. Hooke, a gambling analyst and president of the Bethesda-based nonprofit.

"If people think this referendum is going to save the Maryland racing industry, I think they're sadly mistaken," said Hooke, an investment banker who supports legalized gambling but not subsidies to private racing interests.

Hooke has studied Maryland gambling proposals for years and has criticized some previous plans as being too generous to the gambling industry. He said his think tank is not funded by either slots opponents or proponents.

Maryland horse breeders and pro-slots interests said Hooke's statistics merely reflect the slow exodus in recent years of racehorses to neighboring states that offer purses fattened by slots subsidies.

If voters approve expansion of slots here, they say, breeders will return to Maryland and local farms will again flourish, in turn boosting the regional economy and protecting green space from further development.

"If the referendum passes, then it will be easier to encourage people to bring top stallions ... to the state of Maryland," said James B. Steele Jr., president of the Maryland Horse Breeders' Association. "I know people who reluctantly left the state. I think some of them will come back."

In the November referendum, voters will decide whether to amend the Maryland Constitution to authorize 15,000 slot machines at sites in downtown Baltimore, Anne Arundel, Allegany, Cecil and Worcester counties.

The state's education budget would be the chief beneficiary of a slots-related windfall estimated at about $600 million a year, but the plan would also give as much as $100 million annually to the struggling horse racing industry.

A Sun poll in January found that a strong majority of likely voters oppose using state funds to prop up the racing industry, though most poll respondents did favor the slots referendum.

In a close vote, therefore, voter misgivings about track subsidies could affect the outcome, said Scott Arceneaux, senior adviser to Marylanders United to Stop Slots.

Hooke's analysis "shows that folks don't have enough information yet about what the cost of the amendment is," Arceneaux said. "This is a multimillion-dollar giveaway to out-of-state gambling executives" from companies like Canada-based Magna Entertainment Corp., which owns the Pimlico and Laurel tracks, and Penn National Gaming, which is interested in bidding for the Cecil slots license.

"The study is just pointing out that it involves out-of-state interests in the horse racing industry as well," Arceneaux said.

The amount of money that would go to out-of-state racing interests could be affected by changes under way in the Maryland horse industry. The Maryland Thoroughbred Horsemen's Association has decided to cancel several high-dollar open stakes races at Laurel Park through the end of the year. Those races allow out-of-state horses to compete.

Frederick W. Puddester, chairman of For Maryland, For Our Future, the pro-slots ballot committee, said Hooke's report skirts a key question for voters, which is whether to vote for a proposal that would generate hundreds of millions in additional education and health care funds, or risk plunging the state back into huge budget shortfalls. Slots proponents have not emphasized horseracing in their pitch to voters so far.

Puddester noted that last November, Hooke told The Sun he believed Maryland's slots legislation was "by far the most innovative and taxpayer-friendly proposal set forth in the 50 states."

Steele, the horse breeding association official, said the voting public should also consider that any expansion of gambling will cut into track betting, just as the state lottery has since its introduction in the 1970s.

State assistance to offset that impact is only fair, he said.

Horse breeders say subsidies are essential to stem a continued deterioration of Maryland's horse farms and harm to the thousands of workers and small businesses they maintain.