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MD Racing Makes Case for Shift in VLT Funds

A Maryland House committee took testimony on racing-related legislation March 15.

The Maryland horse industry made its case March 15 for legislation that would shift gaming revenue from capital improvements to racetrack operations. Lawmakers, meanwhile, sought assurances the state will have documentation on how the money would be spent by the tracks.

The bill, pushed by the administration of Democratic Gov. Martin O’Malley, would shift a small percentage of video lottery terminal revenue that goes to a racetrack facility renewal account so it can be used for operating expenses. It also calls for short-term loans from the Maryland Economic Development Corp. to support racing.

“We need to stabilize the industry,” Alan Foreman, chief counsel for the Maryland Thoroughbred Horsemen’s Association, told members of the House Ways and Means Committee. “This is not a subsidy. The slots legislation contemplated a slots facility at Laurel Park, but the operator isn’t going to get that license.

“It is not a bailout. It’s a redirection of money.”

O’Malley proposed the legislation as part of a racing industry agreement that would assure 146 days of live Thoroughbred racing in Maryland through 2014. The redirected funds would provide a bridge until the industry develops a long-term plan for viability.

“The Maryland Jockey Club supports the governor’s bill,” MJC president Tom Chuckas told the House committee. “The bill does not represent an ultimate solution. It’s a backup plan that gives us the time we need.”

Chuckas also referenced various legislative proposals to expand gambling in Maryland through additional VLT licenses and table games.

“We hope we will be included (in any expansion),” Chuckas said. “Without it Maryland racing may no longer exist at all.”

The VLT law authorized five gaming locations, one of which was to be Laurel Park in Anne Arundel County. But the MJC, which at the time was wholly owned by bankrupt Magna Entertainment Corp., failed to meet the deadline to submit a licensing fee and was disqualified.

The license was awarded to Cordish Cos., which is building a large VLT casino near the Arundel Mills Mall not far from Laurel. Officials have said it’s doubtful the state would allow another gaming hall—at Laurel Park—so close to the mall.

There are other options, however. The MJC owns Pimlico Race Course in Baltimore and the Bowie Training Center, which sits on a large piece of undeveloped land between Baltimore and Annapolis.

Regardless of where the VLT facilities are located, racing gets almost 10% of annual revenue from the machines. Purses and breed development get 7% (80% Thoroughbred and 20% Standardbred), and 2.5% goes to the capital improvement fund in question in the O’Malley legislation.

Joe Bryce, O’Malley’s chief legislative officer, said the bill is necessary for horse racing to have a chance to regroup in the wake of near shutdown in 2011. In response to lawmakers’ questions, he said tracks must submit a business plan on how the VLT money will be spent as well as monthly reports that would be reviewed by state officials.

The bill covers every track in the state. The Maryland State Fair at Timonium, which offers only seven days of live racing now, is eligible for VLT purse funds and would get $1 million a year for five years from the racetrack facility renewal account, according to the legislation discussed March 15.

Max Moesner, who runs the state fair, said Timonium raced 42 days in 1974 but in 1983 lost 32 days that were shifted to the major tracks in the state. He said pari-mutuel handle on Timonium races has dropped 45%, from $17 million in 2002 to $9.4 million in 2010.

“We face the same problems as the other tracks,” Moesner said. “We support (the legislation). We just ask that we be included.”

Timonium is a wild card as far as racing dates go. Industry sources claim the track doesn’t want to race many more days, while horsemen would prefer to race at Laurel, which has a turf course, rather than on Timonium’s five-eighths-mile dirt track in the summer.

Two harness tracks—Ocean Downs, which has VLTs, and shuttered Rosecroft Raceway—would each get $1.2 million a year from the VLT purse fund to cover operating expenses. Rosecroft, which will be owned by Penn National Gaming Inc. pending resolution of a lawsuit, would also get a $4 million loan from MEDCO, a state agency, to help restore live racing at the Washington, D.C.-area track.

Lawmakers inquired about the status of a cross-breed simulcast agreement that must be restored if Rosecroft is to be permitted to import Thoroughbred signals. The Maryland Racing Commission pulled the plug on the operation last year when owner Cloverleaf refused to pay an agreed-upon amount to Thoroughbred racing interests.

Cloverleaf has blamed the MJC and horsemen for its problems and has filed several lawsuits.

Cloverleaf president Kelly Rodgers told the House committee “lawsuits can be dismissed at any time. We had to try to protect ourselves. All we need is a reasonable and fair simulcast agreement.”

Foreman said he had to limit his comments because of ongoing litigation and because PNGI still owns a 49% interest in the MJC, creating a potential conflict of interest. PNGI chief executive officer Peter Carlino is trying to get MJC principal Frank Stronach to buy out PNGI, which last year paid about $23 million for its share of the MJC.

“We have spoken to Penn National Gaming about the cross-breed agreement and hope to find some common ground,” Foreman said. “But given the financial condition of the Thoroughbred industry, it’s not going to be in a position to continue to subsidize Rosecroft.

“We did not close Rosecroft, and we did not create the situation we’re in now.”