March 7, 2003
  
  Support for Gov. Robert L. Ehrlich's effort to expand gambling in Maryland was eroding in the General Assembly yesterday as lawmakers expressed disappointment at a revised proposal that would give racetrack owners more money than schools.
  
  The governor's centerpiece legislation, already facing an energized opposition, ran into a new wave of criticism over Ehrlich's use of potentially misleading numbers to describe how the proceeds from slots would be split.
  
  Meanwhile, the bill won the endorsement of the chief executive of the company that owns Pimlico Race Course and Laurel Park.
  
  Jim McAlpine, president and chief executive of Ontario-based Magna Entertainment Corp., said Ehrlich "beat us down" but gave enough for the company to make a profit.
  
  "You have to get a return," McAlpine said. "You can't just throw capital at the wall and not worry about getting any return on it."
  
  Ehrlich's new plan calls for putting 11,500 slot machines at four racetracks, including 3,500 each at Pimlico, Laurel and Rosecroft.
  
  Wednesday night, Ehrlich announced that he had negotiated a deal that would reduce the schools' share of slots proceeds from 64 percent to 59 percent and give the track owners 29 percent.
  
  But yesterday, legislative analysts, comparing the proposal with Ehrlich's original bill, calculated that the change would give schools 44 percent of the proceeds and the tracks 46 percent.
  
  The reduction for education prompted several lawmakers who previously supported slots to say they would oppose the revised legislation.
  
  "I came in ready to vote for slots," said Sen. Paula C. Hollinger, a Baltimore County Democrat. "There's nothing left in there for people like me to vote for."
  
  Sen. Nathaniel J. McFadden, once a vocal slots supporter, said he wouldn't support the changed version.
  
  "The only reason I considered this bill was the number in there for public education," the Baltimore Democrat said. "These numbers are now below my threshold."
  
  McFadden and Sen. Lisa A. Gladden were among the lawmakers who were upset because the governor's revised plan includes no targeted money for the redevelopment of the area around Pimlico, where Ehrlich is proposing 3,500 slots operating 365 days a year.
  
  Gladden, a Democrat whose district includes the track, said Ehrlich is quickly losing support for his slots bill - including her own.
  
  "He's on his own. He's got to change these numbers," she said.
  
  And an influential group of predominantly African-American ministers opposed to slots pledged to increase pressure on Baltimore lawmakers.
  
  "There is no justification for any member of the city delegation to vote in favor of this legislation," said Rev. Gregory B. Perkins, who heads the Interdenominational Ministerial Alliance of Baltimore and Vicinity. "If they do, they are selling us out."
  
  Del. Obie Patterson, who represents the district that includes Rosecroft, said he was "just flabbergasted" by the proposal. "It's causing me a lot of heartburn. I don't know how I can begin to sell these numbers back in my district," the Prince George's County Democrat said.
  
  Patterson, who has been open to the idea of slots, said House Speaker Michael E. Busch's idea of studying the issue for a year is looking increasingly attractive.
  
  A spokeswoman for Prince George's County Executive Jack B. Johnson said the revised proposal of a local government share of 3.8 percent - up from 3.2 percent - would not cover the county's costs of providing increased services. "There's a lot of fuzzy math going on," said spokeswoman Nancy C. Lineman.
  
  Raquel Guillory, a spokeswoman for Baltimore Mayor Martin O'Malley, said the city is still studying the changes.
  
  When Ehrlich announced his revised slots bill at a hastily called news conference Wednesday night, he said his administration had negotiated one of the nation's best deals for education.
  
  But when the numbers were questioned, administration officials conceded they had arrived at that figure by leaving out $350 million in racetrack operating expenses that had been included in the original bill.
  
  James C. DiPaula, Ehrlich's budget secretary, said there was no intent to mislead anyone and he was sorry if anyone didn't understand the new split.
  
  Busch, who was briefed before the news conference Wednesday night, said he was one of those left confused by Ehrlich officials. "I thought at the time they negotiated a pretty good deal, but obviously I didn't have the accurate numbers," he said.
  
  Busch noted that the governor's decision to reduce up-front licensing fees to be charged to the tracks leaves his budget out of balance by $230 million.
  
  While Ehrlich suggested Wednesday night that he would work with lawmakers to plug that gap, Busch said the administration bears the responsibility for finding cuts or new sources of money.
  
  House Minority Leader Alfred W. Redmer Jr., who attended the same briefing as Busch, said he understood that Ehrlich aides had made changes but added that officials didn't go through the "nuances" of the split.
  
  But the Baltimore County Republican expressed optimism that the revised bill would pass: "I am beaming with confidence."
  
  Lawrence Klatzkin, an investment analyst with New York-based Jefferies & Co., said Ehrlich's new plan is a better deal for racetrack owners than his original proposal, which was rejected by the industry.
  
  Still, Klatzkin said, the cash flow margins for the racetrack casinos are "nothing to write home about."
  
  "It's not a great margin, but on the other hand it does make money," he said. "It's probably as good as they can get and probably worth the racetracks' time. Before, it was a no-brainer. It didn't work."
  
  McAlpine gave a similar appraisal. "This is the lowest percentage for any operator with a coin-in, coin-out [slots] facility in the country," the Magna executive said. "From that standpoint, [Ehrlich] did beat us down. We've spent quite a bit of time reassessing this, and at these levels we believe we can still go forward."
  
  Not every segment of the racing industry was as pleased as racetrack owners.
  
  Richard J. Hoffberger, president of the Maryland Thoroughbred Horsemen's Association, said the projected $52 million that the new plan provides for purses falls far short of what racing needs.
  
  "We're not happy with what we see," Hoffberger said. "It's not what we discussed, and it's not what we were looking for."
  
  He stopped short of saying the horsemen would oppose the bill if it didn't provide the $70 million they want.
  
  Thomas Bowman, president of the Maryland Horse Breeders Association, said he believes the industry will eventually back Ehrlich's plan, recognizing the administration tried as hard as it could. "These guys have been asked from the beginning to come up with a dollar-and-a-half out of a dollar," he said.
  
  Senate President Thomas V. Mike Miller, a staunch supporter of slots, said he believes the governor's numbers will be usable. "We're going to find a way to make them work or adjust them," Miller said.
  
  The Prince George's County Democrat expressed confidence that the state can solve its projected $1.3 billion budget shortfall through a mix of slot machine revenue, spending cuts and taxes.
  
  Nevertheless, he expressed frustration with the way the administration has handled slots and other issues. "Upstairs, it is like a band of wandering gypsies," Miller said.
  
  Ehrlich officials insist their proposal is based on a consultant's study by KPMG LLC. So far, they have declined to disclose the firm's analysis, calling it a "working draft" and promising release of a finished report next week.
  
  The delay has prompted slots opponents to prepare a lawsuit demanding access to the analysis and other documents, saying the administration is dragging its feet in responding to requests under Maryland's public records act.
  
  "The legalization of slot machines in Maryland is a matter of high public interest," states a draft of the complaint to be filed today in Anne Arundel County Circuit Court. "If records exist about industry participation in the drafting of [Ehrlich's] legislative proposals, plaintiffs are entitled to examine such records."
  
  Sun staff writers David Nitkin and Ivan Penn contributed to this article.
  
  Copyright (c) 2003, The Baltimore Sun
  
  Link to the article: http://www.sunspot.net/bal-te.md.slots07mar07.story
  
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