11/11/2010 1:24PM

Casino money creates more questions in Maryland

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Of all the problems besetting the Maryland racing industry, the strangest is this: The industry will soon have too much money.

That’s the opinion of many Maryland-based owners, trainers, and breeders if racing dates are cut significantly in the state under a plan initially supported by the Maryland Jockey Club, the owner of Laurel Park and Pimlico Racecourse.

A state law will begin directing as much as $60 million in annual subsidies from Maryland casinos to Thoroughbred purses and breeders’ awards. Under the statute, the Maryland Jockey Club is required to distribute the money. If racing dates are significantly cut, Maryland’s tracks could be doling out nearly $1.25 million a day in purses over 40 dates of live racing, along with more than $8 million in breeders’ awards, or at least $200,000 a day. Those levels would far exceed the daily purse distributions and breeders’ fund awards at any track in the country.

In fact, the 40-day meet was the only plan for Maryland racing next year, at least as of Nov. 3, when Tom Chuckas, the general manager of Laurel and Pimlico, said Laurel would not seek racing dates in 2011 and that Thoroughbred racing in Maryland would be limited to Pimlico. That would eliminate 120 live race dates annually. At the time, Chuckas and other Maryland officials said the Maryland Jockey Club had no choice but to close Laurel because the track would be unable to generate enough revenue to make ends meet, regardless of the effect the subsidies might have on betting figures.

That plan, however, now seems to be on hold. Frank Stronach, the chairman of MI Developments, the company that owns a half stake in the tracks, said this week he was unaware Laurel would be closed until he had read about the proposal in news reports. He promised horsemen’s officials to hold a full meet next year. According to the Baltimore Sun, Stronach made the promise in part because he believed the subsidies would allow Laurel to build up its business.

Stronach’s overruling of a plan the Maryland racing industry had discussed for months put the state’s racing industry under an unofficial gag order, and officials for the Maryland Jockey Club and MI Developments did not return phone calls seeking comment on their plans. But a Maryland racing official with knowledge of the company’s position said Stronach’s promise would probably force Laurel to hold some form of live race meet in 2011, regardless of the wishes of other management personnel. The official spoke on the condition of anonymity out of concern of jeopardizing the horsemen’s position with MI Developments.

The big unknown at the beginning of November was how long the Laurel meet would last. Horsemen – who privately grumbled about the plan to close Laurel even before Stronach spoke – said they will continue to argue that cutting the state’s race dates in advance of the subsidies would force many state trainers and breeders out of business by severely restricting the opportunities for local horsemen to earn purses while doing nothing to address their expenses.

In addition, a stratospheric increase in the amount of purses distributed per day in Maryland would create a situation in which the casino subsidies would almost certainly benefit out-of-state horsemen more than local owners and trainers, because high-profile outfits on other state circuits would be expected to dominate the 40-day meet and squeeze the local horsemen out, the horsemen said. That would almost certainly upset the legislature, since the subsidies were supposed to prop up the local racing industry, officials said, and could lead to a backlash against the racing industry.

“This whole thing is just backwards,” said one horseman, referencing the 40-day plan. The horseman requested anonymity so as not to antagonize officials at the tracks, who control stall allocations.

Cricket Goodall, the executive director of the Maryland Horse Breeders Association, said the situation surrounding racing dates in Maryland and the pending infusion of money from the casino subsidies was forcing her organization to rethink the ways in which breeders awards are distributed.

“I think it’s time that we maybe got a little more creative in how we approach it,” Goodall said.

Most breeders’ awards are distributed to horses who either win restricted races held at racetracks within the state or, in the case of Kentucky, to statebreds who finish in the money in the state’s open races. But Goodall said the sheer volume of subsidies being produced by slot machines in states in the mid-Atlantic had created serious imbalances that need to be addressed. One solution, Goodall said, may be awarding breeders’ awards to horses who race outside the state in open company or creating a new category like “mid-Atlantic-bred.” Such a program would unite states in the same geographic area, so that breeders would not feel compelled to relocate to a neighboring state that has a better breeding program.

“Those concepts are going to have to be thought about,” Goodall said, citing projections that racing dates will continue to contract because of declines in the foal crop. “No one’s really addressed those ideas because everyone’s always been so territorial, but we’ve got to start thinking more regionally to address these problems.”

Maryland’s statute sets aside as much as $100 million in casino revenue to the state’s racing industries, with $80 million going to the Thoroughbred industry and $20 million to the Standardbred industry. Of the $80 million, approximately 25 percent goes to racetracks for capital expenditures, but the tracks can use the money only if they agree to match it. Of the rest, 89 percent goes to purses, and 11 percent goes to breeders’ awards.

The money has already started flowing in. The one casino up and running in Maryland, a facility in Perryville owned by Penn National Gaming Inc. – which holds the other 50 percent stake in Laurel and Pimlico – generated $942,937 in October for purses and breeders’ awards at state racetracks through 1,500 slot machines. Much more money is on the way. A casino near Laurel that MI Developments unsuccessfully fought to stop in order to steer the casino’s license to itself plans to open a temporary facility in 2011, and the full 4,750-machine casino should be up and running by the spring of 2012.
What the racing industry in Maryland will look like then is far from clear.

“It’s hard to see into the future right now,” said Alan Foreman, the general counsel to the Maryland Thoroughbred Horsemen’s Association. “I think everyone needs to take a deep breath and come together to figure out a way we can all make this work. Otherwise, there might not be anything left.”