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Long-suffering Maryland tracks still waiting for a casino bailout

Animal Kingdom’s trainer calls it a ‘terrible shame’

- The Washington Times - Tuesday, May 17, 2011

On Saturday afternoon, Maryland horse racing once again will take its place in the sporting world's spotlight with the 136th running of the Preakness Stakes at Baltimore's Pimlico Race Course. The other 364 days of the year, however, Pimlico and the Maryland racing industry aren't proving ready for their close-up.

Plagued by poor planning and without the expected revenue from slot-machine gambling, Maryland's storied racing industry has been left with fewer horses, smaller purses, aging facilities and no visible plan for long-term stability.

"The state of Maryland racing is not something that happened yesterday morning. It's been an attrition over the last 10, 12 years. There's not the level playing field," said Tom Chuckas, president of the Maryland Jockey Club. "Prior to the advent of the additional forms of gambling, Maryland was head and shoulders above our mid-Atlantic competitors."

Not anymore.

The introduction of slots and casinos in Pennsylvania, Delaware and West Virginia in particular has handcuffed Maryland racing, which for decades served as the hub for thoroughbreds in the region, thanks in large part to the Preakness.

"Maryland was a very good racing circuit for a very long time, so it's very sad," said jockey Rosie Napravnik, who rode Pants On Fire in this year's Kentucky Derby. "A lot of us have had to kind of move out of Maryland because there's no money there. It's very sad what's kind of happened with the racing there and the downfall."

What went wrong?

It was a battle fought in the General Assembly for years: Should Maryland allow casinos to aid budget shortfalls, help schools and bolster the horse racing industry? When voters in 2008 approved 15,000 slot machines at five locations, officials in the Maryland horse racing industry were delighted that the state seemed to have solved their problems, just as Pennsylvania had done in 2004. But there was a hitch.

"The way the slot law was written, the thoroughbred track was not named as a slot licensee," said Alan Foreman, general counsel for the Maryland Thoroughbred Horsemen's Association. "It allowed competing bids to come in."

Slots were approved in five locations: Anne Arundel County (where Laurel Park resides), Baltimore city, Cecil County in the northeast, Allegany County in Western Maryland, and Worcester County on the Eastern Shore. After years of drumming up interest in slots and millions of dollars invested in making them available in Maryland, Magna Entertainment (now known as MI Developments after a bankruptcy filing) - owner of Pimlico and Laurel Park and majority stakeholder in the Jockey Club - failed to include a $28.5 million license fee with its bid for slots at Laurel in early 2009.

Because of that error, a Baltimore-based company, Cordish Cos., secured the slots license at Arundel Mills for an operation that won't begin until next year. Although the horse racing industry is receiving some money from slots venues that are already in operation — 7 percent of the revenue for breeding and purses and 2.5 percent for capital improvements — the windfall has not been nearly as beneficial as having a casino at a racetrack such as Charles Town Races in West Virginia, Delaware Park and Parx in a Philadelphia suburb.

"Maryland, because it has taken so long to get slots up and running here, has really lost a lot of ground," said Cricket Goodall, director of the Maryland Horse Breeders Association. "We have to catch up."

A 'respite'

Catching up to regional rivals undoubtedly will take time. Without immediate slots revenue, Maryland can't do everything necessary to revive its horse racing industry.

There are some reasons for hope. In December, Gov. Martin O'Malley announced a deal that would ensure a full slate of live racing this year. That agreement, he said in a statement, "not only keeps Maryland's treasured Preakness Stakes where it belongs, but it helps protect the thousands of jobs that depend on our rich history of horse racing." With an industry that supports 28,000 full-time workers and contributes $1.5 billion to the state's economy, that's no small victory.

It enabled the Maryland Jockey Club to use money allocated for capital improvements to racetracks and other facilities for operational use - paying employees and keeping the races going. This system is allowed through 2013.

"We have some time to work out our issues. ... Right now, we've got a respite," Mr. Chuckas said. "For '11, '12 and '13, there's a foundation to keep racing moving forward. The challenge that we face is, what do we do after '13?"

The Preakness is safe for now, and the single biggest sports event in Maryland is expected to draw another big crowd and monster ratings Saturday, but the rest of the industry doesn't have many other reasons for optimism.

Breeding numbers down

Nowhere is the shortage of horses in the mid-Atlantic region more prevalent than in Maryland, Mr. Foreman said.

In 2003, 1,023 registered thoroughbreds were foaled in Maryland, compared with 1,039 in Pennsylvania. In 2009, just 586 foals were born in Maryland and 1,486 in Pennsylvania. Meanwhile, the breeding industry in West Virginia — which Ms. Goodall said was on the brink of extinction in the late 1990s — has rebounded.

It's no coincidence that West Virginia approved slots in 1994 and Pennsylvania followed 10 years later.

"You can see in those numbers the states that have slots and the states that don't. The states that have a lot of slots money, their production numbers reflect that," Ms. Goodall said.

Breeders receive incentive money when their horses born in a state place first, second or third in a given race within that state. Ms. Goodall said that Maryland's incentive pool of $3 million pales in comparison with Pennsylvania's $25 million, and that "many, many horses" moved north to take advantage of that money infused from slots throughout the state.

The uncertain futures of Laurel Park and Pimlico have reduced the breeding number in Maryland, Ms. Goodall said.

"In the horse industry, not much happens fast, especially in the breeding industry," she said. "How do you know? How do you plan? Granted, you have to be a risk-taker in any state. If you're breeding thoroughbred horses, it's a gamble and an expensive long-term commitment."

Following the money

Money - through slots or other means — drives horse racing just like any other sport. But it goes well beyond breeding and the races that fans watch every day.

In Maryland, the money isn't plentiful for either.

"It's clear in every state that has a healthy industry — it's money," Ms. Goodall said. "If you can't compete on both a purse level and an incentive fund level ... then you're not going to have that business. The business is going to follow that money."

Purses for races have fallen, and without incentive money for breeders and trainers to cultivate and run horses in Maryland, the competition has suffered. For the most part, the quality of horses and the sizes of fields have suffered. Pimlico, which opened its spring meet April 1, struggled for almost two weeks this month to field races with more than nine horses in the starting gate.

As Ms. Napravnik pointed out, jockeys and others in the industry pay attention to smaller purses.

Graham Motion, the trainer of Kentucky Derby champion Animal Kingdom, has been based in Maryland since the early 1990s. He said Maryland racing is still competitive, but is saddened by how a lack of money has affected the industry.

"It's a terrible shame," he said. "I just hope that eventually the slots stuff will get sorted out, because I think it's been very poorly handled, to be honest."

It's not even as simple as raising purses statewide, given the bigger problem Maryland faces.

'Dinosaur facilities'

Look around the mid-Atlantic region at Charles Town, Parx, Monmouth Park in New Jersey and Delaware Park and you see gleaming racetracks thanks to money from slot machines and table games. In Maryland, by contrast, Pimlico and Laurel are aging facilities unable to reap the benefits of legal gambling.

It's the "issue that hasn't been addressed," Mr. Chuckas said.

"In Maryland's case, you have to have an arena to run your horses," Mr. Foreman said. "You can't just have higher purses."

Although neither track could be considered dilapidated, he said, "they're dinosaur facilities that haven't been modernized."

Cracking paint and decades-old elevators and structures are staples of Pimlico - seemingly out of place for a track that houses the second jewel of the Triple Crown. Meanwhile, Laurel Park is unlikely to get a slots license years after the original bid snafu, given that the Arundel Mills casino will be built less than five miles away.

Without an immediate source of extra revenue, the state continues to rely on the Preakness to carry the industry for the year. Mr. Chuckas said that happens in Kentucky, too, with the Derby. But Churchill Downs and Keeneland in Lexington aren't struggling in the same ways as Maryland's tracks.

That leads to the current problem.

"Obviously, you'd like to improve the facilities, but how can you improve the facilities if you don't have the money?" Mr. Motion said.

Possible solutions

An influx of slots money with a casino at a racetrack would solve many problems, but legislators and those in the industry are aware that the process is complicated.

The state is requiring the horse racing industry to come up with a long-term plan for sustainability that "cannot take into account any slots revenue," Mr. Chuckas said.

The Maryland Jockey Club is considering a plan for fewer days of live racing, down from the current number of 146 days per year. Mr. Chuckas said that plan is not feasible unless other changes are made.

"The Maryland Jockey Club could create a plan that would make it profitable. That plan would call for a reduction in dates," he said. "They're looking for a year-round industry. ... [But] the current stream of revenues does not support year-round racing."

Mr. Foreman said a shorter racing schedule might be considered because the regional horse shortage is "becoming very acute."

The futures of Pimlico and Laurel Park could be uncertain as well after this "respite" that ends in 2013. Decisions on the future of the industry won't be made until this summer, and Mr. Chuckas said it's fair to consider "every thought and idea" on the table.

The most devastating possibility would be losing the Preakness, which would mean Maryland "would lose a place in history," Ms. Goodall said. Although that's unlikely given the race's paramount importance to the state, the Preakness' departure — even years in the future — could do irreparable damage.

"You'd never get another Preakness or even a comparable race to come back," Ms. Goodall said.

For now, though, Maryland is relying on the Preakness as the bastion of horse racing in part to keep the entire industry afloat.

'Shot in the arm'

Other states have found quicker, more efficient solutions to generate money for horse racing through slots, but the industry at large is in flux and in danger.

Decades removed from being the only readily available place to gamble, racetracks have fallen victim to slots and lotteries. More recently, many of their patrons have been placing bets on the Internet instead of visiting racetracks.

"It's obvious that the slots are a help," Ms. Napravnik said. "And they're kind of a little bit of a Band-Aid, because really what we need is horse racing fans and people betting on the horses. You don't see people in-house as much. The crowds, on a daily basis, aren't very big."

As much as Pimlico could use renovations and Maryland horse racing could use a boost, "everybody needs a shot in the arm," Mr. Motion said.

Those whose lives and careers depend on horse racing in the state hope help comes quickly before the industry in Maryland is unable to recover.

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