Gov. Martin O'Malley plans to introduce emergency legislation Wednesday that would give the state authority to acquire Maryland's bankrupt horse racing tracks and the Preakness through eminent domain, officials confirmed.
However, legal experts say the bankruptcy filing by the tracks' owner could prevent the state from exercising that power.
Debate on the bill, which has the backing of the General Assembly's presiding officers, could begin as soon as Thursday afternoon in a joint hearing of Senate and House of Delegates lawmakers.
The last-minute legislation was prompted in part, O'Malley aides said, by reports last week that a Pikesville developer was interested in razing Pimlico Race Course - where the Preakness began in 1873 - and turning the Northwest Baltimore property into a shopping center.
The bill is designed to "expand the tools available to the state to ensure that the Preakness remains in Maryland," said Shaun Adamec, an O'Malley spokesman. He emphasized that condemnation would be a tool of last resort. "The bill is a way to protect the options available to the state," he said.
The legislation is the latest attempt by the state to establish control over the fate of the Preakness in the wake of bankruptcy filings by the tracks' Canadian owner in early March. Both the state and city have filed formal objections in U.S. Bankruptcy Court over Magna Entertainment Corp.'s proposal to auction all of its assets, including Pimlico and Laurel Park, and the state's largest single-day sporting event: the second jewel of the Triple Crown.
Maryland has a law on the books giving it the right to purchase the Preakness if it is offered for sale, but bankruptcy experts have cast doubt on whether a federal judge would respect the so-called right of first refusal.
Bankruptcy also poses a formidable challenge to eminent domain, because the state's right to condemn assets in the name of public interest are automatically halted when a debtor has federal bankruptcy protection.
"There is an automatic stay" of any condemnation during bankruptcy, said E. Stephen Derby, a retired federal bankruptcy judge affiliated with the Baltimore court. "The state would have to get relief from the automatic stay."
The timing of Maryland's proposed law "would be a factor" in the judge's decision on whether to lift the stay, Derby said. He said courts tend to frown on parties to a bankruptcy that attempt to "come in and improve their position" by asserting rights created without approval of a court.
