Md. Jockey Club loses tens of millions in 2008-2009

Track operator seeking state's approval in slots subsidy

March 14, 2011|By Hanah Cho, The Baltimore Sun

The Maryland Jockey Club, the financially strapped operator of the state's major thoroughbred tracks that is seeking state assistance to stay afloat, lost tens of millions of dollars in recent years, including at the once-profitable Pimlico Race Course, home of the Preakness Stakes.

The Laurel Park and Pimlico tracks lost more than $14 million in 2009, according to data recently submitted in unaudited financial statements to the Maryland Racing Commission. Combined, the tracks lost nearly $12 million in 2008. The statements show the first annual losses at Pimlico in the past decade despite the fact that it hosts the Preakness, the state's largest sporting event.

The financial reports paint an even more dire picture than Jockey Club officials had described. The new financial disclosures come as the General Assembly considers a proposal that would divert slot-machine revenue earmarked for track improvements to help fund the day-to-day operations of the Jockey Club for several years. In exchange, Laurel Park and Pimlico would not curtail live racing but at a minimum would maintain a schedule similar to this year's. A House committee is set to hold a hearing on the proposal Tuesday.

Industry insiders and racing analysts say the financial situation at the tracks underscores the need to put slots at the facilities, which would not be allowed at either location under the law. And some say the future of the industry is so tenuous that it might need an even bigger public subsidy than is currently being considered.

"The horse racing industry can't operate by itself without slots revenue or some massive public subsidy," said James Karmel, owner of Gaming Atlantic, a Bel Air-based gaming consulting firm.

The proposed state legislation would extend for another three years a deal that Gov. Martin O'Malley brokered late last year to guarantee 146 days of live racing at Laurel Park and Pimlico in 2011. The state agreed to provide $3.6 million funded by slots revenue, while the state's horsemen and breeders groups agreed to contribute $1.7 million.

Even if the tracks receive the slots subsidies, "in the current environment, the outlook for live racing in Maryland is bleak," Karmel said, adding that the tracks are hemorrhaging money in part because of the expense of running races. "The best opportunity for Maryland racing is to minimize live racing and keep the tracks opened for simulcasting," he said. "They're not making enough money."

The state's racing industry has been struggling for years, hampered by the sport's waning popularity and by growing competition from tracks in Delaware, West Virginia and Pennsylvania that permit slot-machine gambling and table games such as blackjack. The industry lobbied for years for slots, arguing that revenue from alternative gambling would offset falling horse-race wagering. Supporters finally got their wish when voters approved slots at five locations in 2008.

But last fall, Anne Arundel County voters approved a ballot measure allowing a planned slots casino at Arundel Mills mall, forestalling the possibility of expanding slots gambling at Laurel Park because the law allows for only one slots license in the county. That prompted the Jockey Club's corporate owners to propose significantly curtailing this year's racing schedule, which horsemen and trainers said would have jeopardized the industry's viability.

O'Malley helped resolve the contentious standoff at least for another year, while industry stakeholders work to find long-term solutions for racing's future.

Tom Chuckas, president of the Jockey Club, said in an interview Monday that the new financial data confirm the financial struggles at the tracks. He pointed to a drop in wagering revenue from 2007 to 2009: $48 million to $37 million at Laurel Park and $35 million to $27 million at Pimlico.

"You have got almost $20 million in revenue" that disappeared during that time, Chuckas said.

John Franzone, a longtime member of the state racing commission, said it's not surprising that the tracks performed as badly as they did. "Those years, it's a reflection of the economy in general," he said. "Everything was so off."

Previously, the Jockey Club said that Laurel Park had been losing $4 million to $7 million annually for several years and that Pimlico had turned a profit.

State law requires the Jockey Club to submit financial reports annually, but the racetrack operator failed to provide them in 2008 and 2009 because of the bankruptcy of the tracks' then-owner, Magna Entertainment Corp. The Jockey Club recently filed unaudited statements with the racing commission for those two years, which means the tracks' finances have not been independently verified by auditors.

It will submit financial disclosures for 2010 by the end of the month.

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