With or Without Slots, Racing Faces Uphill Battle

By George Berkheimer, STAFF WRITER

With six months remaining until a referendum on slot machines that could help subsidize dwindling purses, Maryland's racing industry officials, breeders, trainers and owners have a long time left to hold their breath. Meanwhile, competition from racing programs in surrounding states continues to eat away at Maryland's racing legacy, leaving many insiders wondering if the state can rebound from the damage that has already been done.
"Nobody really sees slots as a magic bullet," said John McDaniel, a Maryland Racing Commission (MRC) member and immediate past chair. "The racing industry has to perform and perform well, and it has to put on a desirable entertainment product if it's going to survive. The slots referendum levels the playing field, but beyond that, that's all it does."
If the Preakness is any indication, the interest is there. A record crowd packed Pimlico Race Course last year, and attendance has topped six figures for eight of the last nine years, including the past seven straight. Still, if interest for the everyday product can't be sustained, there could be dire consequences, not the least of which could be losing the middle jewel of the Triple Crown to another state.
Despite record turnouts for both the Preakness and the 22nd annual Maryland Million event last year, overall handle for the Maryland Jockey Club's products at Laurel Park and Pimlico slipped in 2007 after several years of hard won gains. Part of the reason, race organizers say, is that they can't compete with neighboring states that subsidize their purses with slots revenue.
And yes, they warn, Maryland's horsemen are being lured to greener pastures.

Market Forces
"Nobody's doing well now," said Alan Foreman, general counsel for the Maryland Thoroughbred Horsemen's Association (MTHA).
The problems aren't limited to Maryland, he said, and to his thinking there are any number of reasons why interest in racing is flat or declining nationally. But competition plays a significant role.
Skeptics argue that slots could turn into a stepping stone for the state to legalize casino gambling, but that's not something the racing industry would like to see.
Racing lost its monopoly hold on gamblers in Maryland with the arrival of the state lottery, Foreman noted, and has been doing poorly ever since. It can coexist with slots, he added, but "putting casino gaming in competition with racing will kill the industry."
Today, attrition is one of the industry's other big concerns. Increasingly, owners and trainers are buying property or stabling their horses near tracks in other states that offer larger purses, and breeders are sending mares out of state to be bred because doing so brings an economic advantage. "A Kentucky-born horse is more valuable than one born in Maryland," Foreman said.
"It's the first time in 40 years that we haven't had a stallion at my parent's [farm]," said Maryland Racing Commission Executive Director Mike Hopkins, whose family owns historic Elberton Hill Farm in Harford County.
Where are the Elberton Hill stallions now? "Pennsylvania," Foreman said.

Hard Times
Lou Ulman, a senior principal with the Offit Kurman law firm in Maple Lawn who is also a member of the MRC and a past chair, is among those who have suffered the negative consequences of declining purses in Maryland.
Only three years ago Ulman owned 20 thoroughbred race horses, either outright or in other partnerships. Today, that number has dwindled to nine that are all owned in partnership. Almost all of his horses are located in Maryland, but at least four run in races out of state, where purses are higher.
"It's becoming too expensive to keep them here," Ulman said, "and I believe we will be seeing more horsemen who will simply get out [of Maryland] if they can cut their losses."
That's not the route Ulman wants to take, but the choice might not be his to make.
"I wouldn't get out [of racing] totally," he said. "But there's always the chance that a trainer might move to another state and would take the horses with him."
If the incentive for staying isn't shored up, the industry "will leave [Maryland] one farm at a time, one horse at a time," McDaniel said. "It's not going to be like the Baltimore Colts packing up and leaving in the middle of the night ... but there will still be an economic and an emotional impact."
According to Foreman, somewhere between 15,000 and 20,000 people distributed throughout every county in the state owe at least part of their livelihoods to racing, from track employees, owners and breeders, down to blacksmiths and the farmers and haulers who provide hay and grain.

Effects of Competition
But back to competition. Magna Entertainment Corp., which owns Laurel and Pimlico, is one of the contenders for a slots license at Laurel Park. Slots opponents are quick to argue that another Magna track, Gulfstream Park in Florida, has been losing money since it began operating slot machines there in November 2006.
For the most part, Foreman said, the reason comes down to management. "Gulfstream is in a highly competitive market," he said, with a nearby Hard Rock Cafe, a harness track and a large dog racing track located no more than 20 minutes away, all vying for virtually the same customers.
"It may indicate that they may not be capable slots managers, and [Magna] may need to bring in the right people to run [the slots operation] right," he said.
Of course, that's assuming that the referendum passes.

Thoroughbreds at Rosecroft?
So far Magna's only in-state racing competition comes from Rosecroft Raceway, a harness track in Prince George's County. Even so, race schedules rarely overlap, and in 2006 the respective owners established a 15-year agreement to pool their revenues and split them, with 80% going to the thoroughbred tracks.
During the last legislative session, however, a new piece of legislation established a task force to study the feasibility of bringing thoroughbred racing to Rosecroft (HB 1506). The task force is expected to present its findings to Gov. Martin O'Malley by Dec. 31.
The MRC has not taken a formal position on this legislation at the moment, Hopkins said. Officials of the Maryland Jockey Club, which oversees thoroughbred racing operations at Laurel and Pimlico, did not respond to a request for comment before this issue went to press.
"They can study all they want," said Foreman, but in order for anything like that to happen, "first they'll have to build a mile race track, and that's a considerable investment. It's probably sending a message to Magna that if something happens, if they go under or can't make it with slots, there's another option out there."