11/08/2002 12:00AM

Tracks are hot, but racing is not

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DOVER, Del. - Here in the capital city of the nation's first state, gambling-industry heavyweights gathered to confer for three days last week to discuss the suddenly hot status of American racetracks. The heat has nothing to do with the pick six scandal consuming most horseplayers' interest these days, but with the increasingly clear direction that tracks will be taking in the years ahead - a direction perfectly embodied by the site of the conference, Dover Downs.

A few years ago, Dover was a forlorn harness oval with barely enough customers and handle to cover expenses. The racing hasn't gotten any more popular: Just this past Thursday, as the first live race of the day was run at 4:30 p.m., there were only 23 people watching from the enclosed grandstand. Yet because that racing still exists, Dover Downs is a bustling, sleek, Las Vegas-style gambling palace with profits in the millions. The track is merely the most deserted part of a "racino," the word for what more and more American tracks are about to become: slot-machine palaces with lucrative but sparsely attended races run somewhere out back.

It was no accident that the Dover conference, Racino 2002, began the day after Tuesday's elections. As expected, there was plenty for the conferees to celebrate, as the outcome of the Maryland and Pennsylvania gubernatorial elections virtually assured that the tracks in those two states are headed for racino status. New York already has legislative approval for slots at the tracks and Kentucky may come aboard this year or next.

States are starved for revenue and racetracks have become the somewhat unwitting beneficiaries of political convenience. Few politicians will come right out and say they want to plug budget holes with casinos, and voters are reluctant to approve referenda to legalize them. Permitting slot machines at existing racetracks, however, seems to make far fewer political waves, so suddenly a racing license is becoming a license to print money.

So racetracks, which for a generation have been a relative drag on the otherwise explosive growth of American gambling, are suddenly the darlings of financial analysts and huge casino corporations. When MGM Mirage announced last month it was not moving ahead with a $1.5 billion Atlantic City casino project, officials privately cited racinos as a more pressing and promising investment.

Churchill Downs Inc. and Magna Entertainment can talk all they want about their commitment to racing, but it's becoming increasingly likely that their aggregation of tracks had as much to do with one-armed bandits as with four-legged athletes. Hitting the racino jackpot in a single market will pay for a lot of unprofitable racing acquisitions.

Even with most of the slot revenue going back to state coffers, the slice that is returned to race purses can be transformative. In West Virginia, Charles Town and Mountaineer have gone from being racing's Appalachia to desirable ship-in spots where claimers race for purses twice as high as their price tags. Once lowly Delta Downs in Louisiana and Sunland Park near El Paso are putting on new $500,000 races for Triple Crown hopefuls. The sport needs such races like a hole in the head, but it's understandable that traditionally bottom-rung tracks suddenly awash in purse money want to put themselves on the national map.

Some of the rich tracks will get richer too, and they may have to. Gaming economists estimate that slots at Kentucky tracks would double purses there. One of the arguments lobbyists here said they plan to make to Kentucky legislators this year is that the state will begin losing horses to racino states if it doesn't become one.

There are legitimate longterm concerns about whether racino money will be fool's gold - at some point, states may grab the rest of the slot revenue instead of subsidizing racing beyond its means. In the short term, though, who's going to turn down a 100 percent increase in purses?

One message the racino conferees, many of them racetrack representatives from states soon to add slots, heard over and over this week was that you have to turn your track into a casino-class facility to lure customers. If Aqueduct just sets up some slot machines in the basement under the grandstand, people will drive right past them and go the extra miles to the opulent resorts at Foxwoods and Mohegan Sun or south to the full-blown casinos in Atlantic City.

Racinos will likely transform the appearance of American tracks the way slots have at Dover Downs, where it's almost impossible to find the Downs. You walk through a massive marbled lobby and past plush acres of slots with hundreds of entranced customers before seeing a sign for "simulcasting" pointing to a barren staircase. Two flights up and down a hall, you turn a corner and squint through the unexpected sunlight to see a racetrack, a tote board, some horses, and 23 people watching the races.