Race for slots at tracks heats up in Pennsylvania

Marc Levy

Tuesday, Dec. 3, 2002 | 9:43 a.m.

GRANTVILLE, Pa. -- For 20 years, as attendance at the Penn National Race Course has dwindled, Lee Savant has enjoyed squinting through binoculars from the grandstands, watching the horses finish and marking the winners on his racing form.

"To me, it's exciting," said Savant, a 59-year-old retired telephone cable splicer who spends one night a week at the track near Harrisburg. "I like it when two horses get in the stretch, and they pin their ears back ... It's the epitome of a true athlete."

But Savant and other enthusiasts haven't been enough to sustain the tracks. Instead, racing supporters in Pennsylvania and neighboring states are looking to slot machines as the economic salvation for dying tracks such as Penn National, after watching slots reverse declining purses and attendance at tracks in other states over the past decade.

It is an idea that has gained momentum in the past year as states look for ways to avert serious budget deficits and pro-slots governors were elected in Maryland and Pennsylvania. Conscious of the looming competition, legislative proponents are eager to make their states' tracks the most attractive to gamblers.

"It's just who's going to get there the fastest with the most," said Rep. Thomas C. Petrone, an Allegheny County Democrat who has sponsored a bill in Pennsylvania to legalize slot machines at the state's four existing racetracks.

Still, the opposition to expanding legalized gambling in Pennsylvania, Maryland, Ohio, New York and New Jersey remains an obstacle for those who hope to duplicate the success of slots at tracks in Delaware and West Virginia.

"That is not the way to deal with economic development," said Robert C. Jubelirer, a Blair County Republican who is Pennsylvania's lieutenant governor and Senate president pro tempore.

Jubelirer's stance is similar to anti-gambling groups and government watchdogs, who say that allowing slots at more tracks will hurt the rest of society, where less money will get spent outside of casinos, and the costs of treating gambling addiction and attendant social ills will rise.

One of the addicts is government, they say.

"Once you have state and local governments addicted to that revenue stream, what other things will they do for the gambling industry to appease them?" asked Barry Kauffman, the executive director for Common Cause Pennsylvania.

Saving horse tracks aside, some politicians see merit in taxing slot-machine revenue to help ease budget shortfalls.

For instance, Pennsylvania's governor-elect, Ed Rendell, wants to raise $500 million to help boost public school funding. Maryland's governor-elect, Robert L. Ehrlich Jr., wants to raise about $800 million annually, also to fund education. Both men say their states' deficits could be as high as $1.8 billion.

"It's just like any other business," said Bennett Liebman of the Program in Racing and Wagering Law at Albany Law School in New York. "If you wish to maintain drive-in movies and you could attach it to slot machines, you'd do it."

Proponents of slots at the tracks like to cite a January 2001 study by Pennsylvania State University that said that adding slots to the four existing tracks would increase the state's 7,000 horse-racing industry jobs to 24,500.

Optimism that slots are coming to Pennsylvania has resulted in a rush to obtain two remaining harness-racing licenses and one remaining thoroughbred-racing license. The state has already issued three harness licenses and five thoroughbred licenses.

The success of tracks with slots has been so sweeping that many consider the idea a cure-all for the racing industry. Revenue from the slot machines route more money into the purses, which in turn draws better horses and more bettors, analysts say.

"There is a very definite feeling in the racing industry that you need (slot) machines to compete for the (better) horses," said Eugene Christiansen, a New York City-based gambling industry analyst. "It's like in sports. If you don't have access to good players for your team, it would be bad for you."

The draw of slot machines is undeniable.

At the Mountaineer Race Track & Gaming Resort in Chester, W.Va., purses at the horse races ballooned from $4 million in fiscal 1993 -- the year before slots won state Legislature approval -- to $34 million in fiscal 2001.

Gamblers plunked nearly $7 billion into about 7,000 slot machines at West Virginia's two dog tracks and two horse tracks in fiscal 2002, generating prizes worth nearly $6.4 billion. The slots returned net revenues of $596 million, including $230 million for a state with a budget of about $9.5 billion, or less than half of Pennsylvania's.

Across the borders in Maryland and Pennsylvania, where slots are not at the horse tracks, purses in 2001 were below 1993 levels, according to an analysis by The Innovations Group, a New Orleans firm that studies the gambling industry.

Similarly, as the supply of slot machines rises in some places, demand is expected to drop in others.

A study by The Innovations Group found that, based on projections for 2005, slots in Maryland and Pennsylvania would take nearly 23 percent of West Virginia's slots business, or $198.3 million annually, and 28 percent of Delaware's slots business, or $179.2 million, if existing facilities remain the same.

Casinos in Atlantic City also would lose patrons if slots are approved in Maryland and Pennsylvania, although the impact could be smaller, the study said.

Still, Steven Rittvo, the president of The Innovations Group, said he believes that a large percentage of the Pennsylvania and Maryland markets remain untapped because many people don't want to drive the long distance to another state or fight crowds to gamble.

With a relatively high tax on the slots revenue, Rittvo said he thinks that both Rendell and Ehrlich could achieve their goals -- a prospect that makes even proponents cautious.

"This is not a bottomless kind of pot that will keep bubbling forth wealth forever," Petrone said. "The worst thing is to expect this to solve everything in lieu of taxes. That would be extremely dangerous."