House seeks plan to aid horse racing without slots

Md. would offer purse subsidies, other measures to help industry

September 09, 2005|By Andrew A. Green and David Nitkin | Andrew A. Green and David Nitkin,SUN STAFF

Leaders in the House of Delegates are working on a plan to subsidize horse racing in Maryland without legalizing slot machines, an idea that gained credence this week when the company that owns the Pimlico and Laurel Park racetracks unveiled its own proposal to boost profits without expanded gambling.

Canada-based Magna Entertainment Corp. said it would slash the number of racing days at its two Maryland tracks, arguing that by reducing costs it would increase purses and attract better horses and more bettors.

Magna for the first time put a dollar figure on what it would take to attract top-quality horses to Maryland: purses of about $303,000 per day, up from the current $194,000.

That's the kind of specific figure that House Speaker Michael E. Busch, the chief slots opponent in the General Assembly, has been looking for. He has repeatedly asked the racing industry to plan for its future without relying on what he calls a large government-backed giveaway in the form of slots.

"Tell us what it takes to make racing whole and competitive and efficient," Busch said yesterday. "What's Plan B?"

Busch and others are working on legislation that would include purse subsidies and other measures to help the horse industry. One goal would be to make sure that the number of racing days at the Pimlico and Laurel race courses are not cut as drastically as Magna proposed.

The company said it wants to cut racing days at Pimlico from 60 to 18, and at Laurel from 136 to 94.

Magna said yesterday that purse subsidies alone would not be enough to maintain a year-round racing schedule, and Gov. Robert L. Ehrlich Jr. rejected the idea as a "Band-Aid."

Still, Magna's numbers - contained in a report issued this week - suggest that to keep purses competitive for a full, 196-day racing schedule, the company would need an extra $21.5 million.

That's roughly a third of what the company would get in direct purse subsidies under the governor's most recent slots plan, not counting tens of millions more in profits they could reap from operating the machines themselves.

Magna officials say a purse subsidy is no substitute for a slots plan, which would provide them with a large and steady revenue source for their operations.

"The problem with a yearly appropriation is it's just that. You can't build a long-term business plan based on that," said Paul Cellucci, the former Massachussets governor and a Magna vice president. "We are losing money in Maryland, and a purse subsidy doesn't address that."

Cellucci and other Magna officials say that purse subsidies go to horse owners and trainers, not the owner of the track.

Pimlico and Laurel, they say, make money on horse operations by collecting a small fraction - currently between 8 and 9 cents on the dollar - of every bet. Higher purses have only an indirect benefit on company cash flow by attracting fuller and better fields of horses that could bring in bigger crowds.

By offering purse subsidies, the Assembly would be returning to a horse-racing assistance plan that it followed for years - the state gave thoroughbred tracks $6 million a year until 2001.

Lawmakers have stepped in to help the industry in other ways, authorizing revenue enhancements such as simulcasting and off-track betting.

"We want to ensure [horse racing] continues to thrive in Maryland, but we want it to be accountable," Busch said.

Ehrlich said previous subsidies didn't save the industry and new ones won't either. Instead, the governor said, the industry needs long-term change with slots as a foundation.

"Until things change in Maryland, and I'm talking about real change, not a Band-Aid one- or two-year fix, I'm expecting a contraction, a most likely continuing contraction, of the horse racing industry," Ehrlich said.

Senate President Thomas V. Mike Miller, a longtime supporter of both slots and racing, was lukewarm to the idea of a return to taxpayer-funded racing subsidies.

"I personally would support the proposal, but it makes no sense when there is just money laying on the ground in Delaware, Pennsylvania and West Virginia that's being dropped there by Marylanders going across state lines to play slots," Miller said.

The governor's slots plan would have authorized 15,500 slot machines in Maryland, with 6,000 at Laurel Park and Pimlico. General Assembly analysts say those machines would have provided Magna with close to $200 million a year in slots proceeds, plus roughly $60 million as a purse subsidy for horses at thoroughbred tracks.

Jeffrey C. Hooke, a former investment banker who has studied the value of slots licenses, estimates that 20 percent of the $200 million could be profit for Magna after capital and operating expenses for slots parlors - or perhaps more than $40 million a year.

Cellucci called those profit estimates "wildly high."

Doug Reed, director of the Race Track Industry Program at the University of Arizona and a Towson native who worked at Maryland tracks, said Magna's plan for fewer racing dates and higher purses could benefit horse owners and Magna, but not lower-paid workers.

"Does the lower end need to be sacrificed for the greater good? Does everyone have a right to make a living from this business?" Reed said.

Sun staff writer Bill Ordine contributed to this article.

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