Some state lawmakers questioned Tuesday why slot machine revenue allocated for racetrack improvements should be diverted to help fund the day-to-day operations of the Maryland Jockey Club, which reported losing millions at Laurel Park and Pimlico Race Course in recent years.
Referring to the Jockey Club's recent filing of unaudited financial statements for 2008 and 2009, Del. Frank S. Turner, a Howard County Democrat, said at a House committee hearing that he was "disturbed" that lawmakers did not have enough information about the tracks' operations.
"We don't know anything about 2010, and we're trying to make a decision," Turner said.
State law requires the Jockey Club to submit audited 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 Maryland Racing Commission for those two years.
Those documents, not independently verified, indicate that Laurel Park and Pimlico lost more than $14 million in 2009 and $12 million in 2008 — more than previously detailed by the Jockey Club. It was the first annual loss for Pimlico in a decade, which, historically, has been profitable because of the Preakness Stakes, the second leg of thoroughbred racing's Triple Crown.
About two dozen racing boosters, representing horse owners, breeders and the Jockey Club, testified in support of the proposal, saying the industry needs the slots subsidy to survive in the short term.
No one opposed the bill at the hearing before the House Ways and Means committee.
But Turner criticized the Jockey Club for not presenting a long-term plan for a viable racing industry in Maryland. "If I had a business losing $14 million and I came to the legislature [for help] but [didn't] have a long-term plan, I have a little problem with that," he said.
The proposal would extend a deal brokered by Gov. Martin O'Malley that guarantees 146 days of live racing in 2011 in light of the Jockey Club's financial problems. 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.
Under the bill supported by O'Malley, the Jockey Club would be eligible to receive slots revenue to use for operating expenses instead of capital improvements for another three years. In exchange, the Jockey Club must maintain at least the same number of racing days as this year and submit a business plan and monthly financial information, among other requirements.
The bill would provide similar help for the ailing harness racing industry and the operators of Ocean Downs racetrack near Ocean City and Rosecroft Raceway, which was recently purchased by Penn National for $11 million during the Prince George's County track's bankruptcy.
Alan Foreman, an attorney for the Maryland Thoroughbred Horsemen's Association, told the committee that the proposal was not for a bailout or a subsidy but a "redirection" of slots revenue that already had been set aside to help track operators with capital improvements. He said the industry would offer a long-term plan for racing by next year.
Lawmakers expressed concerns about oversight and the Jockey Club's revolving door of owners.
Canadian real estate company MI Developments and casino operator Penn National Gaming co-own the Jockey Club. But Penn National is considering selling its stake, and MI Developments shareholders are to vote this month on a proposal that would transfer its racing assets, including the Jockey Club, to the chairman and chief executive, Frank Stronach.
Separately, the Jockey Club's financial statements for 2008 and 2009 show it spent millions of dollars for lobbying related to slots issues.
For instance, Laurel Park spent $3.4 million for lobbying and other expenses related to the referendum that legalized slot machine gambling at five Maryland locations in 2008. In 2009, Laurel Park paid $1.5 million to the Annapolis law firm Rifkin, Livingston, Levitan & Silver, mostly for legal work related to the failed efforts to secure a slots license for the track. That is compared with $261,495 in attorney fees to Rifkin in 2008, according to financial documents.
Even without those gambling-related expenses, Jockey Club President Tom Chuckas said losses would be significant.
The Jockey Club plans to submit audited financial statements for the last eight months of 2010 by the end of the month. Financial disclosures for the first four months of last year will be unaudited because previous owner Magna Entertainment emerged from bankruptcy protection in April 2010.