Gambling expansion may be delayed

Thursday, March 27, 2003 | 11:08 a.m.

SUN WIRE REPORTS

Reflecting deep divisions in the looming debate over expanding legalized gambling in Pennsylvania, a House panel has voted 13-12 to endorse an 18-month moratorium on any such expansion.

And a Maryland study Wednesday bolstered arguments that the expansion of gambling in that state should also be delayed while the benefits to the state and slot machine operators are studied.

In Pennsylvania, Gov. Ed Rendell has proposed legalizing as many as 24,000 slot machines at as many as eight racetracks. He wants to tax the profits from the machines to eventually generate more than $750 million a year to help finance his plan to increase school funding and slash local property taxes.

Wednesday's vote by the Pennsylvania House State Government Committee moves the bill to the floor of the House, although it remains uncertain when it would come up for a vote.

The bill calls for the creation of a special panel to study the social and economic impact of any gambling expansion. The sponsor, Rep. Paul I. Clymer, R-Bucks, said his bill is an alternative for lawmakers to consider as the debate heats up.

Advocates of expanded gambling say enough studies have already been done.

"The issue has already been studied ... to the nth degree," said House Minority Leader H. William DeWeese, D-Greene. The proposed moratorium is "the last desperate act of gaming opponents who know they've lost the battle of ideas."

Separately, a study found a Maryland bill legalizing slots at racetracks is a generous deal for the track owners but could shortchange taxpayers.

The study by Robert E. Carpenter, an economics professor at the University of Maryland, Baltimore County, estimates that the proposal would give the track owners as much as $649 million more than needed to get them to invest in the giant gambling halls envisioned in the legislation.

The release of the report could raise questions about the measure -- the top priority of Gov. Robert Ehrlich -- at a time when the bill has been put on indefinite hold in the House by Speaker Michael E. Busch.

The report is critical of the Senate's decision to charge upfront total application fees of $15 million to the three Central Maryland racetrack casinos that would be home to 10,500 slot machines.

"The low price of the license set by the state in the current proposal, in combination with the current revenue distribution, will almost surely transfer several hundreds of millions of dollars of value from the people of Maryland to the casino owners," Carpenter concluded. "Simply put, the state has left a great deal of money on the table."

Ken Shea, senior managing director for Bear Stearns, disagreed with Carpenter's conclusion. "The operator's share is the lowest in the country except New York," where operators have balked at going forward with slots, said Shea, whose company provides investment banking services to the owner of Pimlico and Laurel racetracks.

The Senate bill allocates 39 percent of the slots proceeds to the track owners and 46 percent to education, with the rest going to other purposes. However, the Senate also cut the licensing fees from the $40 million each in the governor's revised bill to a $5 million "application fee."

Donald F. Norris, director of the institute and a UMBC professor of policy sciences, called Carpenter's report "excellent."

"What I particularly like is it's totally independent," Norris said. "He doesn't have an ax to grind."

The House speaker said the report bolsters his contention that the Legislature should set up a study commission to weigh the pros and cons of slots and report back next year -- as called for in a bill passed by the House.