No blank check for racing

Our view: O'Malley's legislation would prop up the Maryland Jockey Club for three years whether it tries to turn its business around or not

March 16, 2011

When Gov. Martin O'Malley proposed an emergency plan to subsidize Maryland's thoroughbred tracks this year, we supported it. Without subsidies, the number of racing days would have been slashed, and even the running of the Preakness was at legitimate risk. For better or worse, the slots bill Maryland's legislature and voters approved included subsidies for horse racing, and if the form those subsidies took — an increase in racing purses and bred funds — wasn't the right way to keep the tracks running, diverting them to direct operating support made sense.

But the legislation Mr. O'Malley is proposing to extend those subsidies for three more years goes way too far. It would offer the industry as much as it needs to cover its losses and remove any incentive for the Maryland Jockey Club, which owns Pimlico Race Course and Laurel Race Course, to transform itself into a viable business. Rather than saving horse racing, the legislation would likely just provide three years of taxpayer backing so that the Jockey Club could continue its quixotic (and extremely expensive) lobbying effort to get slots at its tracks.

Financial disclosure forms submitted by the Jockey Club claim that Laurel and Pimlico lost an average of nearly $10 million a year from 2007-2009. Those figures have not been audited, so they should be taken with a grain of salt. But it is certainly clear that during a period when the Jockey Club was pushing for slots in the legislature and at the ballot box, and ultimately failing to secure a slots license, its core business was steadily slipping. The disastrous partnership between Jockey Club parent company MI Development and Penn National Gaming did nothing to turn around the racing business, or even slow its fall.

State law authorizes the diversion of as much as $140 million a year in slots revenues to support the racing industry — $100 million in purse and bred funds and $40 million in matching funds for track upgrades. Because the slots program has been slow to get started, state analysts don't expect it will produce nearly that much revenue anytime soon, but even without the state's two biggest slots parlors running, they project the combined racing funds will total nearly $40 million in the fiscal year that starts July 1, with the amounts rapidly increasing after that.

The governor's bill gives up to $2.4 million a year to Maryland's standardbred tracks at Ocean Downs and Rosecroft (presuming new Rosecroft owner Penn National makes good on its promise to resume live racing) and as much as $1.25 million a year in capital improvement funds to the track at the state fairgrounds in Timonium. Laurel and Pimlico would then get however much of the rest they need to meet their operating expenses, so long as they hold a minimum of 146 days of live racing per year. In exchange, they get whatever cash they need to meet their operating expenses. The Jockey Club would have to submit a business plan showing its expected revenue and expenses for the year, and subject itself to audits. But the legislation doesn't require that the track owners do anything whatsoever to try to wean themselves from public subsidies, improve their business or even conduct it wisely.

Rather, given their track records, it seems likely that they will instead pin all their hopes on convincing the legislature to authorize a referendum expanding the number of slots locations in the state, and then to persuade voters to approve it, and then to lobby the local government to authorize the zoning for it, and then to fight off the referendum to overturn that zoning decision that their now arch-enemies at the Cordish Cos. would almost certainly back.

What else is one to conclude from the fact that in 2009, a year when the Jockey Club says it lost $14.1 million on racing operations at Laurel and Pimlico, it spent $659,050 on lobbying fees in Annapolis? (In fairness, it is apparently seeking to economize; the Jockey Club only spent $545,000 on lobbying last year, though Penn National partially made up for it by upping its lobbying effort to $97,200.) And what possible reason could Penn National have to spend $11 million to buy Rosecroft Raceway, which has been losing money for years, other than the hope of capitalizing on Senate President Thomas V. Mike Miller's desire to see expanded gambling there?

Maryland has committed itself to trying to save its historic racing industry, and to maintain the Preakness Stakes, but that commitment cannot be unconditional. This legislation offers a blank check to the same people who have failed for years to so much as suggest an idea for making horse racing viable on its own, and that cannot be allowed. The legislature should authorize Governor O'Malley's deal to keep the tracks running this year, but no more — not without forcing the Jockey Club to offer a plan for life without slots. If it can't, then more subsidies would be throwing good money after bad.

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