Calling Penn National's bluff at Rosecroft

Our view: Gaming company has no real interest in racing at the Prince George's harness track but is making a long-shot bet on slots

July 07, 2011

When Penn National Gaming bought the bankrupt Rosecroft Raceway this year, it promised to resume live harness racing there for the first time in nearly three years. To be sure, the giant national gambling conglomerate made clear its intent to also seek slot machines or other kinds of expanded gambling there. But the commitment to resuming racing sounded unconditional: "As the largest operator of pari-mutuel facilities in the country, and the host to an industry high 1,300 live racing events annually, we are uniquely qualified and look forward to working with Rosecroft stakeholders to attempt to restore live racing," the company's CEO, Peter M. Carlino, said in a news release after the purchase was finalized.

But any hope in Maryland's beleaguered standardbred industry that Penn National is interested in Rosecroft as anything more than a possible venue for slots should have been dashed this week by the company's reaction to the conditional approval of its license at the Maryland Racing Commission.

Penn National applied for a license to race 20 days this year and 54 days next year. The racing commission voted 6-1 to approve a license, provided that the company guarantee to cover any operating losses the track suffers during that time, which Penn National estimated at $2.3 million. This was enough for Penn National to say that it will "explore our options" and for the head of the Cloverleaf Standardbred Owners' Association to declare the commission's requirement "onerous."

This may seem a bit of a head-scratcher. If Penn National wouldn't guarantee the track's losses, one might wonder, who would?

The key here is that Penn National, the huge, publicly traded corporation with $667 million in revenues in the first quarter of this year, does not, technically, own Rosecroft. A limited liability company (of which Penn National is the sole member) is the track's owner, and the operating agreement does not require the parent company to contribute any funds to the venture. That means Penn National could choose to cover Rosecroft's operating losses, or it could let its subsidiary go bankrupt at any time. The racing commission has traditionally required its licensees to be able to cover a track's expenses for two years, and without a guarantee from Penn National, the shell company that owns Rosecroft can't.

"They've admitted they're looking for alternative gambling, but the application is to race, and we're looking to make sure they race," Racing Commission Chairman Lou Ulman said.

What's so shocking is that the horsemen would object to that. Certainly, it's possible that the conditions the commission imposed will cause Penn National to walk away from its plans to resume racing, but without the conditions, the horsemen would likely have found themselves in the same position a few months later.

Absent any legal commitment to cover losses, Penn National's interest in racing at Rosecroft would likely last precisely as long as the hope of expanded gambling legislation was alive in next year's General Assembly session. And any such bill would face long odds; given the difficulty of getting the state's original slots legislation through the House of Delegates, it's hard to imagine much appetite for expanding a program that isn't even fully up and running.

Lawmakers might be particularly disinclined to help Penn National since the reason the state's largest casino, at Arundel Mills mall, isn't yet open is that the company bankrolled the petition drive and referendum effort that delayed the groundbreaking there by several months, costing the state, Anne Arundel County and the horseracing industry tens of millions of dollars in tax revenue. They would probably be even less well disposed to the idea if Penn National walks away from its promise to resume live racing just because the racing commission is trying to make sure the company actually sticks to it.

It's easy to sympathize with the standardbred industry centered around Rosecroft, which has been jerked around for years by a series of owners and prospective owners, none of whom have managed to put the track on solid footing. But the racing commission did the right thing. It may not be possible to make a harness track a viable, stand-alone enterprise, given the waning popularity of the sport and the ever-increasing array of options for gambling. But it's certainly not possible with an owner whose interest is in taking a gamble on the long shot of getting slots or table games. Standardbred owners may blame the racing commission for jeopardizing the chance for live racing at Rosecroft this year, but all the commission did was to prevent them from being strung along yet again.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.