Maryland Groups Have 10-Year Deal for Racing
By John Scheinman
Two years ago, Frank Stronach walked out of a Maryland Racing Commission meeting under a hostile public assault by the state horsemen's association for his stewardship of the state's two major Thoroughbred racetracks, Laurel Park and Pimlico Race Course.
But on Dec. 14, with the help of the MRC and at the urging of Maryland Gov. Martin O'Malley, the two often-warring sides finally made peace, signing a comprehensive 10-year agreement that lays the foundation for the revitalization of the sport in the state. Once the king of the hill in the racetrack-congested Mid-Atlantic region, Maryland racing fell on hard times in the past decade as tracks in neighboring states were the beneficiary of alternative gaming-derived supplements for their purses and breeding programs.
Maryland was late to arrive on the gaming bandwagon, but with the passage in November of Question 7, authorizing year-round table games in Maryland and the awarding of a new casino license in the prime Prince George's County area, Laurel Park and Pimlico stand to receive enough state-approved revenue to increase purses to $350,000-$400,000 per day in the next few years, according to projections.
The 10-year deal puts to rest differences that have plagued track ownership, which claims to have lost about $10 million a year on operating costs, and horsemen, who have fought hard to protect a program that guarantees 146 days of racing a year.
"I'm very excited," MRC chairman Bruce Quade said. "The deal, ultimately, sold itself. It was a fair deal for both sides. We took a lot of time hammering out all the details. But, at the end of the day, the deal was solid."
The Maryland Jockey Club, the operational arm of The Stronach Group, will conduct a guaranteed 146 days of live racing in 2013 and a minimum of 100 days in each of the subsequent nine years. The Maryland Thoroughbred Horsemen's Association will have the opportunity to "buy" additional days of racing.
The horsemen also extracted concessions from the MJC to guarantee the number of stalls that will be available. The MJC initially guaranteed a minimum of 1,600 stalls, but the number had increased to 1,900 by the time all sides, including the Maryland Horse Breeders' Association, had signed the agreement.
The MJC promised to construct 300 new stalls at Laurel by Dec. 31, 2013, at which time the Bowie Training Center will be closed and its horsemen will move to either Laurel or Pimlico. Both tracks will operate year-round for training.
The horsemen had sought to have new stalls built to account for what they believe will be an influx of trainers as the program flourishes. The Stronach Group wanted to build on an as-needed basis.
Currently, there are 1,725 stalls available to horsemen with approximately 1,400-1,500 horses in training. Track management has long sought to close Bowie, which costs $2 million a year to operate as a training center.
"It has been the desire of (the MJC) for 15 years to close Bowie," said Alan Foreman, general counsel to the Maryland THA. "Our position is we will allow them to close Bowie provided they build sufficient stalls. There is an understanding we need to consolidate. You can't force the track owner to keep those facilities operating because he's losing money."
MJC president Tom Chuckas said stabling was the final issue on the table before an agreement could be reached.
"In 2013, we'll be constructing new stalls at Laurel," Chuckas said. "There are certain trainers at Laurel that want to go to Pimlico, and certain trainers at Bowie who have their preferences. We will do our best to accommodate everyone's wishes, and we'll do our best to make that happen."
Also as part of the deal, there will be a change in how pari-mutuel handle is divided up. The MJC will get an additional 3% for a total of 50%, leaving 44% for horsemen and 6% for breeders, Quade said. In addition, an incentive was put in for the MJC to open new off-track betting facilities in the state.
While the revenue split on existing facilities will remain the same–about 50-50 for the MJC and horsemen–new OTB parlors will provide the MJC with 70% of the revenue versus 30% for horsemen.
The tracks had been operating under a temporary deal, worked out with the governor's office, for the past two years. Chuckas said the two sides worked through "a lot of issues" the past 11 months.
During that time the Maryland THA went through internal turmoil. Yet, working with Quade and former racing commission chairman John McDaniel, the two sides came to an agreement.
"When my office helped broker a deal in 2010 that would temporarily sustain the industry, I was confident that all the parties would continue to work hard to reach an agreement that would preserve Maryland's racing heritage and industry," O'Malley said in a release. "I applaud the incredible work of all the parties in reaching a deal that retains racing industry jobs and preserves the future of racing in Maryland for years to come."
All parties began talking about the future in the aftermath of the announcement. Quade spoke of two task forces he has assembled, one to address the moribund breeding industry in the state, the other to focus on marketing and media.
Chuckas has until Feb. 1 to present a plan to the MRC and the Maryland Department of Budget and Management for capital improvements. The plan must be submitted by then in order for the tracks to realize 50% matching funds from the Racetrack Facility Renewal Account, which receives funding from video lottery terminals.
"I think it's fair to say Pimlico is getting looked at diligently," Chuckas said. "It's the home of the Preakness and Black-Eyed Susan. There are certain things we'll have to do to provide better amenities for our guests.
"We're not ready to announce what we're going to do, but we now have the opportunity to invest in capital improvements, which are badly needed."
Foreman, often one of the primary critics of Stronach in the past, spoke of him as an ally in the rebuilding of Maryland racing.
"There is a dynamic in the industry where gaming operators and (racetrack casinos) are showing less than a commitment to the racing side of the business," Foreman said. "Although we're going to have the benefit of the gaming revenue (from VLTs and table games), we're not going to have a slots facility at either of the tracks. It's good to have someone in the industry to go forward with that is focused on the industry."
Foreman spoke glowingly of the prospects for the future.
"From a horsemen's standpoint, not only will we have the opportunity to race, stable, and train year-round, our (VLT) revenues are going to grow and our purses are going to grow. I think Maryland is going to become the centerpiece of racing in the Mid-Atlantic. We'll have long-term stability, a very attractive purse structure, and some of the best racing surfaces in the country.
"It's also going to be attractive to breeders. Even in tough times, our (simulcast) signal has been strong in the winter in the national marketplace. The Pimlico meet is strong. All the elements are there."
The MJC has officially requested 146 live racing days at the two tracks for 2013. The racing commission will consider the plan at its Dec. 18 meeting.
Maryland has offered 146 programs a year from 2010-12, with live racing from January through late May and September through December. That schedule most likely will remain for next year.
Officials said there are "provisions in the contract for the horsemen to race additional days through a revenue-sharing program." Horsemen are expected to take advantage of it.
Chuckas said live racing would be generally held as it is now, in the winter, spring, and fall. When asked about year-round racing, including the summer months, he said much would depend on whether the horsemen want to add days.
The MJC owns the Bowie property. Chuckas said "the game plan is consolidation," but it's too soon to say what will become of the training center after it closes.
Bowie Race Course, a pioneer of winter racing in the Mid-Atlantic region, held its last Thoroughbred race in the summer of 1985. The grandstand/clubhouse was demolished years ago.
Tom LaMarra contributed to this story.
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