The push toward slot machines sure seems to have stalled around these parts. Jeff Hooke deserves some of the credit.
“I am not opposed to gambling. I gamble myself,” says Hooke with a laugh. “I’m just a volunteer, trying to make the world a better place.”
By day, Hooke is an investment banker in Tysons Corner. But in his off hours, he’s a foe of some very powerful sorts who have been trying to board the one-armed-bandit gravy train. Hooke, from an office in his Chevy Chase, Md., home, does pro bono work for a group called the Maryland Tax Education Foundation. And in that capacity, he has become an expert on the value of the slots licenses that various states have been granting in recent years.
This just in: The licenses are valuable. Incredibly valuable. Slot machines are basically reverse ATMs, it turns out. A study conducted by Hooke and Thomas Firey, who edits an economics journal at the Cato Institute, concluded that the 11,500 slot machines proposed in Maryland would generate $1.7 billion in revenue annually. On the open market, says Hooke, the single license to operate a slots emporium at one of the five proposed sites, Rosecroft Raceway in Prince George’s County, could be worth as much as $700 million. Licenses at two other potential locations—Laurel and Pimlico, neither of which is as close to Washington as Rosecroft—should sell for $500 million each, he says.
Recent activity in other states seems to back Hooke’s findings: After Illinois handed out nine casino licenses free of charge, that state put a 10th license, for an outpost near O’Hare Airport, up for auction in March. It fetched $518 million. A 50 percent interest in Chester Downs, a Philadelphia-area trotters track that hasn’t been built yet but has been granted a slots license, sold this summer for $250 million.
“It’s not the horse-racing part of that business that brought in [$250 million],” Hooke says.
Firey says that the dollar amounts, high as they were, provided him with only the second-biggest shock of his research effort. The biggest?
“It was remarkable that in the whole slots debate, nobody [in the Maryland legislature] was thinking: What does this marketplace look like? How big is it?” says Firey. “If you don’t ask those questions, how can you make any sort of reasonable public policy? We thought there was a desperate need to get people to look at these figures before just handing out licenses for slots. If nothing else, this study showed [the lawmakers] how much they didn’t know, and made people in Annapolis think about what they didn’t know.”
Orioles owner Peter Angelos—or, officially, his family—was among the bigger names hoping to grab a slots license in Maryland, by purchasing Rosecroft. Though he has long owned Thoroughbred horses, Angelos has no background with Standardbred racing or the trotters of the sort that run at Rosecroft. Yet for months, Angelos was linked to a proposal to build a “racino”—racing and a casino—at the site, provided slots became approved for the state’s tracks.
But last week, with slots activity in the statehouse on hold for the remainder of the year, local news outlets reported that the Angeloses had pulled out of the purchase of Rosecroft.
“I was surprised [Angelos] backed out,” says Hooke. “Because I think that the chances that slots will eventually come to Maryland is still high. But he’s a very powerful person and somebody much closer to this situation than I am, so I suppose this shows that he thinks slots are not a sure thing anymore.”
Angelos did not return messages left at his Baltimore law offices.
Horse racing and slot machines are at opposite ends of the gambling spectrum. Turf players consider themselves the most cerebral of gamblers. They’ll spend all morning studying breeding data and crunching numbers before plunking down $2 on a filly named Fat Chance in the fifth at Aqueduct. No amount of research will improve a slots player’s chances; his game is pretty much limited to dropping a coin and pulling a lever or inserting a bill and pushing a button.
Yet somewhere along the line, racing and slot machines became joined at the hip as far as state regulators were concerned. In the early ’90s, the first licenses for slot machines in West Virginia and Delaware were awarded to racetrack owners. Pennsylvania has handed out eight slots licenses to existing or proposed horse-racing enterprises around the state. Maryland was leaning in the same direction. The Maryland horsemen’s claim that their industry would collapse without slots at the tracks was the lead argument for granting track owners the licenses free of charge.
“The racing industry just repeats and repeats the same myths that all the tracks are going out of business, that they’re all losing money, that the [amount being wagered] is going down,” Hooke says. “I call them myths. Some less polite people would call them lies. There’s nothing to back up the claims that they’re losing money. But my focus has been on another side of this. If the state is legalizing a business for the first time, then they should try to get as much profit as possible for the state, instead of giving the licenses to conduct this new business away to a handful of rich, powerful people like racetrack owners, people like [Angelos].”
Mike Gathagan, director of broadcasting and communications for Pimlico and Laurel Park, referred all questions regarding the slots situation to the Toronto offices of Jim McAlpine, CEO of Magna Entertainment Corp., the parent company of the Maryland tracks. McAlpine did not return phone calls for this story.
Racing’s no longer the only sport trying to get a piece of the action, however. Baseball’s historic anti-gambling front seems to be crumbling of late; the Angeloses aren’t even the first baseball family to try to buy into slots. Marian Ilitch, wife of Mike Ilitch, the primary owner of the Detroit Tigers, has partnered with gaming giant Mandalay Resort Group to open MotorCity Casino, a full-service Michigan gambling outlet. A June report in the Detroit Free Press said the Tigers removed her name and photos from the team’s paperwork when her casino ownership became an issue.
The NCAA’s moralists pooh-poohed former Georgetown coach John Thompson when he tried to buy into slot machines in a Las Vegas airport in the mid-’90s. But for a decade the organization has sanctioned the Las Vegas Bowl, a Christmastime football game in Sin City. The game is sponsored by the Golden Nugget Casino and the Hard Rock Hotel and Casino, and now promotes both gambling outlets.
Compared with its peers, however, the NBA has taken a big lead in partnering with gambling enterprises.
Just look at the Connecticut Sun.
When the WNBA’s Orlando Miracle ran into fiscal unfitness, the distaff league—which is a subsidiary of the NBA—began looking for a new locale. The WNBA had teams only in NBA cities to that point. But it broke that pattern and chose Connecticut. Not Hartford, a woman’s-basketball hotbed and home of the NCAA’s dominant women’s basketball program—the University of Connecticut. Instead, the league chose a place an hour down the road, Uncasville. That’s the base of the team’s new owner, the Mohegan Sun casino. The squad plays its home games at the casino complex. The franchise, the only franchise in WNBA not owned by the league, even shares a logo with the casino.
Hooke doesn’t see that tide turning anytime soon. And while he says that he finds slots personally distasteful, he can make no moral argument against casinos, racinos, baskinos, or any other sort of gambling.
“I just think that to be fair to the taxpayers, these gambling licenses shouldn’t be given away,” he says. “They should go up for bid on the open market. It’s that simple.”
He says he’s got nothing personal against Angelos, either. But this isn’t the first time Hooke has gotten into a fight involving the Orioles owner, who has also long been the state’s most powerful personal-injury lawyer. Working pro bono on behalf of a group called the Maryland Taxpayers Association, Hooke argued to state officials that Angelos didn’t deserve the $1.1 billion he was billing the state for his work in the settlement with the tobacco industry. Hooke’s side won, though Angelos hardly lost.
“I just wanted to put a spotlight on the fee,” Hooke says. “So we just put together some research that showed the $1.1 billion fee was excessive. That’s a lot less than he was asking for. But Peter Angelos still got $150 million out of it. I don’t get any Christmas cards from him, but he came out OK.” —Dave McKenna