Marylanders to cast their vote on racing industry’s future.

The future of Maryland’s Thoroughbred industry hinges on a referendum to appear on the ballot in the statewide general election that will take place on November 4.
The referendum will allow voters to decide FOR or against the slots program crafted in a special session of the state legislature in November 2007.

Technically, it’s a two-step process. Two slots bills passed the legislature and were signed by Governor Martin O’Malley.

House Bill 4 amends the Maryland constitution, authorizing the state to issue up to five slots licenses, for a maximum of 15,000 video lottery terminals (slots), within five specified areas of the state. The constitutional amendment is the question that voters will decide in the referendum.

When the referendum is approved, the accompanying legislation, known as Senate Bill 3, will take effect. This bill establishes the specifics of the slots program, and allows the state to proceed with its implementation.

Of paramount importance to the racing industry: Breeders and horsemen (Maryland-bred Fund and Maryland Thoroughbred Purse Account) will receive a proportionate share of revenue from each of the five slots sites.

Only two race tracks are eligible for slots licenses: Laurel Park (in Anne Arundel County) and Ocean Downs (a harness facility in Worcester County, near the state’s largest beach resort, Ocean City).

However, Laurel and Pimlico are eligible to receive matching grants for capital improvements whether or not Laurel becomes a slots site. Timonium is slated to receive an annual $1 million allocation for five years with no matching fund requirement.

Areas in which slots sites may be located are:
• Allegany County, on state property located within Rocky Gap State Park.
• Anne Arundel County, within two miles of Mary­land Route 295.
• Baltimore City, in a non-residential area within a half-mile of Maryland Route 295 on property owned by the city on date of application for VLT operator license.
• Cecil County, within two miles of I-95.
• Worcester County, within one mile of Route 50 and Route 589.

The program could move quickly after the referendum passes, because the deadline for submitting bids for VLT operation licenses is February 1, 2009.
Licensees will be required to pay a fee of $3 million for each 500 VLTs included in their bid (these fees accrue to Edu­cation Trust Fund).

Slots licenses will be awarded by a Facility Location Commission composed of seven members; elected officials are prohibited from serving. The governor will appoint three individuals to this commission, and the Senate president and House speaker will each name two appointees. VLTs are to be owned or leased by the state.
A nine-member State Lot­tery Commission will ultimately oversee the program.

Here’s The question.
Note: Language to appear on the ballot does not mention horse racing. But the racing industry’s share is set by law if the referendum passes.
Question 2?–?Constitutional Amendment

Authorizing Video Lottery Terminals (Slot Machines) to Fund Education
Authorizes the State to issue up to five video lottery licenses for the primary purpose of raising revenue for education of children in public schools, prekindergarten through grade 12, public school construction and improvements, and construction of capital projects at community colleges and higher education institutions. No more than a total number of 15,000 video lottery terminals may be authorized in the State, and only one license may be issued for each specified location in Anne Arundel, Cecil, Worcester, and Allegany Counties, and Baltimore City. Any additional forms or expansion of commercial gaming in Maryland is prohibited, unless approved by a voter referendum.
(Enacts new Article XIX of the Maryland Constitution)

DOLLARS AND SENSE
Seven percent of the revenue from slots will go to Maryland’s racing industry.
Of the racing industry’s share, 80 percent is directed toward Thoroughbreds and 20 percent to Standardbreds.

The Thoroughbred portion will be split on an 85-15 percentage basis between the purse account and Maryland-bred Fund.

Maryland’s Department of Legislative Services estimates that total revenue from slots in fiscal year 2013 will reach nearly $1.362 billion.

If that estimate holds true, purses at Maryland’s Thoroughbred tracks will be enhanced by $59.4 million and the Maryland-bred Fund will expand by $7.3 million.

If not slots, then what?— ballot committee leader states the case
Fred Puddester is chairman of For Maryland For Our Future, the ballot committee that is leading the lobbying efforts for the slots referendum to take place in Maryland on November 4.

A career financial guru, Pud­dester served as Secretary of the Maryland Department of Budget and Management under former Governor Parris N. Glendening, and currently is senior associate dean of finance and administration at Johns Hopkins University’s Zanvyl Krieger School of Arts and Sciences. He joined the Krieger School in 2007 after serving for seven years as the university’s executive director of budget and financial planning.

Before going to Hopkins, Puddester worked for 21 years in Maryland state government. He holds a bachelor of arts degree from the University of Vermont and a master’s degree in public policy from Rutgers University.

Earlier this year, Governor Martin O’Malley appointed Puddester to serve as chairman of the Maryland Stadium Authority. Puddester serves also as a member of the State Inter-Agency Committee on School Construction and as a public member of the General Assembly’s Spending Affordability Committee.

Puddester was interviewed by Mid-Atlantic Thoroughbred editor Lucy Acton in late August.

Obviously, one of the most important things people in the Maryland horse industry are interested in finding out from you is?–?what can we do to help the referendum succeed?

You can help by telling everyone you know why it’s important to vote FOR slots.
The main point to be made here is that more than half of the money is going to go to fund education?–?which is critically important. That’s a point that’s not fully known out there in the public yet. We have to make sure folks really understand that.

Another important point to mention is that what we’re really doing is recapturing money that is being spent by Marylanders, but just going out of state.
The nonpartisan legislative staff that looked at this constitutional amendment has estimated that over $400 million is being spent by Marylanders in West Virginia and Delaware. That doesn’t even include the new facilities that have opened in Pennsylvania. What we’d like to do is keep that money in Maryland?–?build schools in Maryland instead of building schools in Pennsylvania, West Virginia and Delaware.
Of course it’s critically important for the horse industry. Our breeders, our owners and trainers, are just getting killed by the amount of money going to the racing industries in surrounding states. They really need the revenue from slots for their survival.

There was a recent study?–?a very misleading study?–?that indicated that a lot of the horses who race in Maryland are owned by people from out-of-state. The argument was made that this money from the slot machines is actually going to go out of state.

Nothing could be further from the truth. While the horse owner may be from out of state, the breeders, the trainers, the people who take care of the horses, are all here in state. And in fact if we had higher purses, we would be able to attract more business and activity for the horse industry here in Maryland.
If you followed this researcher’s logic, then you wouldn’t want to have a JPMorgan move 1,000 finance jobs into Maryland because JPMorgan is a New York company. Of course we’d love to have that happen, because it would create jobs for Maryland citizens, and spur economic activity for our retail outlets and improve the economy of the state in many ways.

The slots program will also, importantly, protect our state budget. The governor and the legislature addressed what is called the structural deficit last fall. And they did so by making some very difficult and sometimes unpopular choices. They raised taxes. They cut the budget by $1.9 billion. Then they passed this constitutional amendment [to establish a slots program].

If we don’t pass this referendum, it’s going to leave a $660 million hole in the state budget. My experience of 21 years in state government, in the budget arena, tells me there are only two other ways to solve that $660 million deficit?–?that is to raise taxes, or cut the budget.

With people trying to deal with higher gasoline and food prices, high interest rates, now is not the time to place an additional tax burden on them.

When it comes to cutting the budget?–?the governor and legislature have already cut the budget by $1.9 billion. And while the public may not generally know this, more than two-thirds of the budget in the state goes to education and health care. If you were to try to cut $660 million from the budget, it would obviously mean cutting education and health care; that does not seem like the way we should go.
Those are the reasons why it’s critical to support this referendum.

The ballot language, as crafted by Maryland’s Secretary of State, John McDonough, focuses on education with no mention of the racing industry or other entities that will share in the proceeds. [A court ruling later added one word, thus the final language states that the primary purpose is raising revenue for education.] Would you comment on that?

The constitutional amendment passed by the General Assembly was very specific that the primary beneficiary of the revenue generated would go to education. That is the plain language of the constitutional amendment that passed the legislature. The Secretary of State had little or no leeway in drafting the language. He is required to stick to the wording in the bill that passed.

Opponents suggest that the voters will be confused by the language and even go further to say that Marylanders are “ill-informed.” I think this is a great disservice to the citizens of this state. People have been reading about and studying this issue for over a decade. I am confident, unlike the opponents of the referendum, that they are in fact a very informed group when it comes to this proposal. Further, I am confident when they weigh the alternatives to the referendum, namely higher taxes or massive cuts to education and other state programs that help our neediest citizens, they will be supportive of the referendum.

How are the lobbying efforts going?
Quite well, I think. We have a broad coalition. It’s a grassroots coalition that has reached throughout the state. In addition to the horse industry, we’re supported by the teachers, the Maryland Association of Counties?–?those are the local elected officials who, by the way, have to balance a budget every year; they understand the financial aspects of this referendum. The Maryland Chamber of Commerce is behind us, the Washington Board of Trade, the Realtors, the Retail Association . . . law enforcement organizations have joined the coalition. All of these organizations have been very supportive?–?going out and talking to groups. We have a field operation that’s going door-to-door, giving out information and trying to let people know exactly what’s at stake.

Once again, what that stake is–?if we don’t pass this referendum, it’s either cuts to education and health care or higher taxes.

How many people are working on this referendum effort?
Hundreds. There’s a core group that meets on a regular basis. We have a growing field staff. It started out small, but obviously it’s growing. A lot of people in these various groups I mentioned, all over the state, are helping us.

If there’s a particular group that wants to have a forum?–?they want a pro-referendum person and an anti-referendum person?–?obviously I can’t be at every one of those events, so we rely on the Chamber (of Commerce) and the Teachers’ Association.

The beauty of it is, it’s not just me going out, but it’s the small businessman who understands what an additional tax burden would mean both to himself and to his customers. It’s a local teacher who sits in a classroom, who understands what this referendum means to education funding?–?how it will affect the numbers of kids in her classroom.

Will the lobbying effort become more intense as the referendum gets closer?
Yes. What you probably haven’t seen a lot of yet is the field effort, with people going door-to-door. That will intensify as we go into the fall.

Likewise, you are likely to see more presence in the media?–?especially television and radio.

How will the field visits work? Will the volunteers spend time talking to prospective voters?
We’re actually doing that now. The percentage of people you get to talk to is lower in the summer, because people are on vacation and out doing things. But it’s better than we thought, the percentage of people we’re actually talking to. They leave the literature, as you would do in any political campaign. There’s been a generally positive response; the folks we’ve gotten to talk to have been pretty positive.

More positive than you expected?
Yes, and we’re very encouraged by that.
For Maryland For Our Future is a ballot committee, is that right? Can you explain how it works?

There’s a special category of committees that are set up to support ballot initiatives. That’s what this is. It’s not a particular candidate who is running for office but rather a referendum. So this would be a question on the ballot, and that’s what ballot committees are set up to support.

Can you talk about the constitutional amendment, how that works?
The legislature decided to put this in the constitution. To me that decision makes sense. There are a lot of people who are concerned about what they call the slippery slope. That is we’ll start with slot machines and end up with something more expansive. Well, if you have it in the constitution, that means you can only change it by going back to the constitution again, which I think is very unlikely.
What we’ll have on the ballot is the authorization of 15,000 slot machines, highly regulated, at five specific locations. And that’s it. That’s all we’re really going to see.

But the slots program really will have a measurable impact throughout the state.
One other aspect of this has to do with open space. One of the benefits of supporting the horse industry is recognizing the value the industry brings by keeping so much open space in our communities.

It has been estimated?–?and this is an amazing statistic. We’ve had a land preservation program in the state budget since 1969. That’s close to 40 years now. What that program is supposed to do is keep the land in open space. The state has been buying land. Yet, the open space that is preserved by the horse industry is more than all the land that has been purchased by the state.
The importance to what I would call the Maryland way of life, when we have these open spaces and they don’t end up being townhouses and strip malls, cannot be underestimated.

Another thing you hear: The estimate of how much money this would raise is too high. That’s a criticism I hear frequently. When you press opponents on that, they can’t tell you why they think that way. They just say, “It’s too high.”
Well, there are two interesting things about that. The people who did the estimate are a nonpartisan staff unit of the General Assembly. These people have been studying this issue for almost a decade. They are fiscal analysts, economists. It’s ironic that the state comptroller (Peter Franchot) is one of those who has criticized the estimate, because these same economists and fiscal analysts actually help him do the estimates of state revenues for income tax and sales tax. I have a lot of respect for these people; I think they do a good job.

I’ve analyzed the numbers. I did revenue estimates for almost two decades in state government, and was at one time actually on the Board of Revenue Estimates, as Budget Secretary.

I think the estimate is conservative. I think the benchmarks they used in terms of actual activity, when you compare them to Pennsylvania and Delaware and West Virginia, are actually low. So if anything, I think this will actually outdo them.
Another thing you hear is how it’s going to impact businesses in the neighboring communities. I think all you have to do is go over to Delaware and you’ll see that slots have actually increased economic activity. Slots have not negatively impacted the community around them.

In terms of things like crime?–?Tom Perez, Secretary of the Maryland Department of Labor, Licensing and Regulation, did a study last year, including Delaware and West Virginia, and his study indicated there was no increase in crime in the communities where these facilities were located. Now, the opponents will go back and dig up old studies across the country that indicate there is increased crime. But what I look at is an apples to apples comparison. Show me what happened in a community recently, nearby, around a facility that is contemplated in this referendum. To me, that’s exactly what Secretary Perez did; he looked at neighboring states, last year, looking at facilities just like those contemplated in this legislation, and he found no increase in crime. That, to me, is an apples to apples comparison.

I’m not worried at all about an increase in crime. Once again, we get back to one of the main points here, which is that a big percentage of the players going to Pennsylvania, Delaware and West Virginia are in fact Marylanders.

In your talk last May at the Maryland Horse Breeders Association’s general membership meeting, you described how important it is to question slots opponents on their facts.

As I’ve gotten into this, I’ve found that’s one of the frustrating things. I’ve found they don’t often have facts; they just make statements. They say the revenue estimate is too high, yet they can’t tell me which assumption that these nonpartisan experts who have been studying this issue for decades have got wrong.

When I ask them: “What’s your alternative?”, they don’t have one. They know that the alternatives are cutting education funding or increasing taxes. But with one exception, they don’t say that. I did get to do a debate with Hilary Spence, who is a former county elected official in Talbot County. And at the debate in Kent County, Hilary did say: “I think we should increase taxes.”

You’ve got to give her credit for intellectual honesty. She admits it’s one of the other two solutions. She didn’t think you should cut education. But some of these people are against this, but want to ignore the fact that if you don’t have this, not only is the horse racing industry in peril, and with it the open space and all those jobs and related economic activity, but also the state budget is in peril.
How do you counter people who oppose slots on so-called moral grounds?
I’ve never been a person who wants to tell someone else what to do.
I just keep coming back to the fact that $400 million is already being spent by Marylanders, but unfortunately it’s building schools in Delaware and West Virginia. It’s not building schools here.

So while there’s a half-dozen trailers outside the elementary school in my neighborhood, some kid is sitting in a brand-new school in Delaware, paid for by Marylanders’ money. I think we need to keep that money at home.
I respect people who are against this on moral or religious grounds. And I’m not going to criticize anyone for that. I’m not going to challenge their moral or religious beliefs. How­ever, I will challenge them to tell me what the alternative is.
If you’re against this, I think it’s imperative that you say what your alternative would be. Are you for increasing income tax on Marylanders? Are you for cutting education and increasing classroom sizes? Are you for cutting health care for the less fortunate citizens of our state? Because those are the choices.
I respect people who are against it, but I think they have to indicate exactly how they would plug the $660 million hole in the budget.

Maryland already has a lottery, as do some 45 other states throughout the country. So it’s not unusual for a state to have a large amount of its revenue coming from this activity. It’s already happening. To suggest that it’s not happening avoids the facts.

How have your efforts been impacted by the reluctance, or apparent reluctance, of Magna (Laurel Park/Pimlico owner Magna Entertainment Corp.) to support the referendum?

I think at the end of the day we will have a budget sufficient to fund an aggressive campaign to educate the people of Maryland on the importance of this referendum.
We’ve gotten a lot of support, in terms of people and money, and we continue to get that support; I won’t single out one organization or another. Like the anti-referendum people, we will disclose our financial backers and the dollar amounts of their contributions, as called for in the legislation. That will happen in October.
Remember, this is a two-step process. The first step is get­ting the referendum passed, which authorizes the five facilities.

It’s an entirely different process, provided in law, to actually do the selection of the slots sites. A commission will be appointed to oversee the slots program, the commission will accept bids from potential licensees, and that process will unfold?–?assuming, of course, the referendum passes.

Do you expect it to pass by a wide margin?
I’m not good at predicting. As Yogi Berra said, “Prediction is very hard, especially about the future.” But I’m confident that after we get our message out, a majority of residents will support the referendum.

This is an issue that’s been in the public for some time. Unlike, let’s say, an election, where the candidates get nominated and shortly thereafter there’s an election, and there may be a lot of undecided voters, given that they’re just learning about the candidates, this issue has been discussed for a number of years. It’s been in the media for a number of years, and I think most people have made up their mind. I don’t think there’s a lot of undecided people out there.
But you are still educating people. You obviously believe there’s still an opportunity to reach voters.

Not everyone has decided. But what’s important for those few people who have not decided is that they understand the alternatives. That they realize this is not just some abstract concept?–?but an issue that, for better or worse, will have a real and measurable impact on just about everyone in this state.
It’s a compelling case.