Gambling bill seeks to hold racing harmless

“Do no harm” to the racing industry: that, according to Joseph Bryce, Governor Martin O’Malley’s Chief Legislative Officer, was among the goals in the pending legislation that would expand gambling in Maryland.  Whether they’ve accomplished that goal, however, is less clear.

O’Malley called the Legislature into a special session, which convened yesterday, to consider expanding gambling the state.  Among the key steps his legislation envisions are adding a sixth casino site, near Washington, DC in Prince George’s County, and allowing table games at all six locations.  While the allowable sites for the sixth location do include the Rosecroft harness track, most analysts assume that the National Harbor resort will receive that license.

Additionally, the legislation would rejigger how the proceeds from slot machines are divided, in large measure to appease slots and would-be casino operators and to ease the way for the sixth site.  The reconfigured splits of proceeds would increase the share retained by slots operators, currently just one-third, to as much as 50 percent.

Under existing law, seven percent of slots proceeds are deposited into the “Purse Dedication Account,” which supports increased purses.  In addition, the racetrack owners are eligible for 2.5 percent of the proceeds, on a matching basis, for capital improvements under the Racetrack Facility Renewal Account (RFRA).  Both accounts are capped, the former at $100 million annually and the latter at $40 million annually.  The RFRA funds are available for a period of eight years.

O’Malley’s proposed legislation, which passed the Senate’s Budget and Taxation Committee by an 11-1 margin yesterday, makes a handful of changes that impact racing.  It would:

• reduce the share of slots proceeds going to the Purse Dedication Account from seven percent to six, leaving intact the $100 million cap (which most analysts think may never be reached);
• reduce the share of slots proceeds going to RFRA from 2.5 percent to one percent;
• reduce the annual cap on RFRA moneys from $40 million to $20 million; and
• increase the availability period of RFRA moneys from eight years to 16.

The first of those provisions — the reduction in funds going to the PDA — would take place only upon the granting of a slots license in Prince George’s County; thus, if no license is awarded, there will be no change in funds going to that account.  The changes to RFRA, however, occur October 1, 2012.

In testimony to the committee, Bryce indicated that the administration’s plan in drafting the bill had been to leave racing’s actual dollars untouched.  For the Purse Dedication Account, they seem to have accomplished that.  In fact, the Fiscal and Policy Note accompanying the bill projects that the account will receive an estimated $13.8 million more under the Governor’s plan than under current law during the first five years of the bill’s implementation.

The reduction in RFRA funds, however, troubles some in the racing community.  Under the proposed bill, available moneys under that account would decline by more than $60 million in the first five years of implementation.  With the future of the Bowie Training Center increasingly cloudy, those funds, which could support the building of new stalls to replace those at Bowie, take on added importance.  Add to that the years of deferred maintenance at Laurel and particularly Pimlico, and it becomes clear that those funds could play a key role in the hoped-for rebirth of Maryland racing.

Bryce indicated in his testimony that the Governor’s team would revisit the RFRA issue over the next several days to ensure that they have, in fact, held racing harmless.

On top of all that, the future of the legislation is not entirely certain.  While the Senate is expected to pass the bill easily, perhaps as early as today, the House has been a more difficult nut to crack.  Many members of the House fear the political wrath of their constituents if, shortly after raising taxes on many Marylanders, they then reduce taxes paid by casino operators.  That dynamic prevented an earlier Gaming Expansion Working Group from reaching consensus — all three House members on the Group opposed the final recommendations.  And while most assume that Governor O’Malley would not have called the special session without strong indications that he would have the votes he needs, the bill’s future will ultimately rest with a chamber that has been dubious about this endeavor from the get-go.