Since taking office in January, the pair’s primary focus is getting legislation passed that would legalize slot machines at three racetracks in Central Maryland and at a new track proposed for Allegany County.
Besides helping to reduce a $1.3 billion budget deficit, the revenues from these machines, Ehrlich and Steele contend, would be used to revitalize the state’s horse-racing industry and finance the Thornton Commission legislation adopted last year by the Maryland General Assembly.
The legislation seeks to reduce inequities among the state’s public schools. It would pump $1.3 billion into schools by 2007.
Ehrlich’s original proposal, presented in January, called for 10,500 slots — slating 64 percent of the revenues for Thornton. It was heavily criticized by racetrack owners, legislators, anti-gaming interests, minority advocates, as well as by top Baltimore officials, including Mayor Martin O’Malley.
A long-awaited revised plan put forth last week increases the number of slots to 3,500 each at Pimlico, Laurel Park and Rosecroft racetracks and includes another 1,000 for a track planned in Allegany County. It also nearly doubles the share of proceeds to track owners to 46 percent. The Thornton share was cut to 44 percent.
In his second-floor office at the State House in Annapolis — used by Thomas Jefferson when the Continental Congress met in the early days of the United States — Steele, 43, discussed a wide range of economic development issues affecting Maryland, only hours before Ehrlich introduced his revised slots plan.
What are the economic development issues facing Maryland, especially as it grapples with a $1.3 billion budget deficit?
We’ve got in excess of $1 billion in debt. We have spent a lot more money than we have taken in. We have asked a lot of taxpayers in giving up those dollars. In return, there has been spotty success in leveraging those dollars into real economic opportunities for minorities, for women, for commnunities across the state.
My concentration will be in two areas: taking Maryland overseas, bringing the world to Maryland, and the other task is looking at our Minority Business Enterprise Program –looking at how the playing field is created for small, minority-owned businesses.
With that as a backdrop, my job is to leverage the assets and resources we have in the state, even in these tough economic times. The way we get ourselves out of this [budget deficit] is by measured spending, responsible spending. You have to spend for the needs of the people. We’re not going spend on projects that make a delegate or a senator or a governor look good — the pork barrel. You have to spend on the needs of the people. And the governor has set that out in his budget this year.
In addition, we have to take the assets that we have and leverage them — to look at communities and to create the incentives for business, major players, to come in and help us develop a strategy for revitalizing Baltimore, East Baltimore or West Baltimore.
We’re trying to look at the whole picture of economic revitalization, in light of what communities can do, what business can do — and what the government can do in partnership with the other two to bring about real growth, to take a deficit and turn it into a surplus — always mindful that the dollars that we leverage are dollars that the citizens of the state give us to create wealth.
In recent years, there’s been many complaints about Maryland’s Minority Business Enterprise Program, primarily surrounding how it really does not foster and grow minority companies. Is that your understanding, too?
True — and rightly so. It has not been effective. It is a massive structure, but with no substance to it: No real economic incentives, a bureaucratic approach that, basically, takes the steam out of any new entrepreneur, frustrates them; that complicates very simple transactions; and that, all-around, does not deliver the goods. The goods are contracts, access to capital, access to credit and access to resources that will allow a company to grow. What I’ve decided to do is to junk that. We’re looking to change the paradigm … and then create, substantively, the mechanisms that will lead to real economic opportunity and growth.
We then must translate it back into the neighborhoods. It’s not just enough to create these businesses, and give them access to credit and capital, but it’s also our responsibility to make sure that the incentives are there for them to invest back in the neighborhood. We want to take the boards off those boarded-up buildings and homes and businesses in Baltimore and allow businesses to come in to create jobs for young people and to create a sense of community identity that’s tied to the life and the quality of life of that community.
One major criticism of the MBE program, overseen by the state Office of Minority Affairs, is that participants cannot have a personal net worth of more than $750,000. This limitation easily could eliminate some entrepreneurs from the program. Do you agree?
Isn’t that ridiculous? You get one contract and you’re done. You’re done.
We’re looking at that. It’s an inhibitor; it’s a limiter, because you can have one contract — boom! — and that one contract could put you in a very good position, but then the next year, it’s a bust.
That [$750,000] is their personal asset. That’s their personal capital that they may be using to put their kids through school, that they may be using for things unrelated to their business. So to say that somehow they’re out of the running in terms of competing for contracts because of their net worth is a problem. It is an artificial ceiling that needs to be removed.
I’m not saying that there shouldn’t be a cap …, but $750,000 seems somewhat arbitrary, and, given the way wealth is created these days, you can hit that cap in very short order, but your business may not be fully prepared to emerge into the marketplace as a prime contractor. You just may not be ready.
You talked about lowering the state’s budget deficit. Is this why having slot machines at Maryland racetracks is so important?
The slots issue is driven by two horses, if you will [chuckle]: One is the governor’s desire to revitalize the horse-racing industry, which is one of the historic businesses in Maryland. The other is to fully fund our commitment under Thornton.
The legislature bought Thornton last year. Now, this year, they’ve gotta pay for it. The bill is due. Your grace period is up. Your bill is due — and the question is where do you get the money to pay for it. And, like all moments in life where you have to face certain realities, you have to come to the truth.
And the truth is that this is a revenue stream that is available to us now here in the state — as witnessed by the dollars that leave and go to other jurisdictions. Why should we fund the education of the kids of Delaware with Maryland dollars? That’s what we’re doing. Why should we fund infrastructure projects in West Virginia? Because that’s what we’re doing.
Our commitment is to take those dollars and fund education. We’ve put into place the mechanism to capture those dollars and make sure those dollars are allocated to the school boards of the counties and the city. That, to me, is a major first step. Is it the best step? That’s debatable. Is it the only step? No, certainly not, because even with slots, we still have quite a tango to do on the budget deficit. But it is a major first step in the right direction.
Unlike the lottery 30 years ago, this is not an empty promise. This is a promise that has been kept by the very design of the [proposal]. We have put in place the mechanism to make sure the dollars go to education. This just isn’t an empty promise, where we promised, “Give us the lottery and we’ll educate your child.” Well, that money went to the general fund, which we all know is that big, black hole. And once it goes in there, you never see it.
Do you believe, personally, that slots are good for Maryland?
They’re a revenue tool, just like any other revenue tool. I could dance all day on the moral issue of slots — and I could go to the Bible and pull texts that say “naughty, naughty, naughty” [waggling his finger].
But that comes up against some real practical realities: One, this is adult entertainment. Adults will do what adults want to do — and there’s not a law on the books that can stop an adult from spending money on slot machines. We can’t stop people from smoking. We can’t stop people from drinking. We can’t stop them from carousing. We can’t stop them from doing all the things that some of us think is not very good for them. This is another one. This is a reality.
The second reality is that the state’s already engaged in gambling — Pick 4, Pick 3, Lotto, Lottery … . To now come back and say, “We do not want to do [slots] because that’s going to weaken our community ?” I’m, like, “Well, lottery machines are at every 7-Eleven, every liquor store, every drug store, every gas station. You cannot walk out of your house without seeing, or being introduced to or lured to a lottery machine. But with this form of entertainment, you have to get in your car and consciously go there — and that’s different.
No slots, no Thornton, right?
Bottom line. Tell me where we are going to get $400 million. That’s the question to Marylanders.
When we ran, we ran on bringing slots here to pay for the education of our children, to revive the horse-racing industry, which we think has some redeeming value. Even now, in its worst state, [horse-racing] is still a $2 billion industry.
We are losing not just the money people are putting in the one-armed bandits, we’re also losing hotel revenue, restaurant revenue, retail revenue — because those people are enjoying themselves in a setting in which they’re staying overnight and they’re eating in restaurants. We’re losing those tax dollars.
Will slots lead to other forms of gaming in Maryland? Is this the Tower of Babel?
Well, it only becomes the Tower of Babel if you let it. Slots do not lead to casinos, so let’s kill that one right now. This is not about bringing casinos to Maryland. Slots at the racetracks will not lead to slots at the 7-Eleven.
This is very limited. It’s very focused, and it has two purposes. The governor has not deviated from that since Day One. Not deviated from it one inch.
It appears that, with so many interests having their hands out, the biggest proponets of slots could easily kill the proposal. True?
They could, but that’s not going to happen. Not going to happen. Members of the horse-racing industry are going to derive the benefit from these dollars to help with their purses, help with their infrastructure, help with their breeders’ fees and other expenses.
The state will get its portion. That portion is allocated — it’s already got a finger on it — and that’s for every child in the state in Maryland. They get the state’s portion. That’s it.
I don’t know what other people think they’re going to get, but I know who the players are in this, and I know what they’re going to get — and that’s the bottom line. That hasn’t changed. It’s not like there’s this whole phalanx of people standing in line waiting to get their share.
A group of influential African-American investors are vying for a piece of the state’s racetrack revenues. Do you see a role for them?
They would be a part of the ownership of the license — and to the extent that they are partnered with mainstream owners, they’ll get their piece. That’s a deal between the owner and the minority players. They work their deal. They cut their deal.
Our encouragement is — and, to be very blunt about it, no one was talking about it until I raised it. I put it out in a casual conversation, and it caught like wildfire. Members of the legislature were, “Well, we want to get our piece,” and that’s great. You’ve got the momentum, let’s keep it going.
But my thinking is consistent with real economic development. When you talk about economic development, you can’t just leave out segments of the community. It has to benefit everybody. Everybody, again, has to derive a benefit.
Minority entrepreneurs who can play on a $50 million bid or a $100 million bid … if you can do it, baby, welcome to the table. It’s yours. That’s the opportunity that we want to create, that we want to leverage.
But if you can’t, this is not about handouts. We’re not going to give it to you just because you’re black. Where is the benefit derived for you, for the majority player and the state? We’re looking to encourage and expand this as much for minority entrepreneurs as for others.
This has always been your position?
What I’ve been saying from the very beginning is that there should be an opportunity for minority entrepreneurs to participate in the ownership of these licenses.
Anyone can get a contract to clean the toilet. OK? Or walk behind a horse and clean it up. Anyone can do that. We’ve been doing that for about 300 years. OK? It’s now time for us to go beyond what we know how to do so well, to show that we can do other things even better — and that is to be a real economic partner for business and for the state.
Mr. Steele, 10,500 slot machines in primarily African-American communities? Do you really need that many slots?
Sixty percent of all revenue derived from the state lottery, net dollars, comes from two jurisdictions: Baltimore City and Prince George’s County …. If [10,500 slots] will have the economic impact, you do. If you want to be competitive, you do.
Even if it’s just to keep people from going to Dover or West Virginia?
Let me just deal with something here: Why do people think that the only folks who are going to be playing slots are black people? Where did this notion come from? Please show me the statistical evidence that suggests that, because you have Pimlico and Rosecroft in largely black communities, that the only people at those tracks are going to be black folks? Go to Rosecroft right now and see who’s standing at the window. Please people!
This is where the governor was coming from with “the race issue.” Why do we set up this false perception of our community that somehow we’re going to be little blind zombies drooling at the mouth with a dollar bill in our hand standing in front of a slot machine?
That’s not our reality. Black people are just as smart as white people when it comes to how they want to use their discretionary dollars. This notion that when we put these slot machines up in the black community, all the black folks are, all of a sudden, going to quit their jobs and spend all day in front of a slot machine is not real … .
? And not buy groceries ??
“… Yeah, I’m sorry, baby. We can’t eat this week because I feel lucky.”
That’s just stupid. It’s insulting. It’s ridiculous. ? We’re living paycheck to paycheck as it is.
It’s these notions that cloud the debate, creates misperceptions about us — about black people. It creates a false positive, if you will, in terms of how blacks are going to behave when these slot machines come on line.
I see the buses going up to the other tracks; they’re not loaded with a bunch of black folks. In fact, you probably can count the number of black people on an average day on one hand — or at least both.
It’s not this overwhelming, “Ohmygod, our po’ people will not be able to contain themselves.” That’s just not it. It’s not just it.
We are mature, smart adults who know how to make the most of our discretionary dollar, just like everyone else. That’s not it. It’s just not it.
