Maryland Jockey Club Reports Pimlico Losses

Track operator files unaudited financial statements for 2008-09.

The Maryland Jockey Club has filed reports with the Maryland Racing Commission showing that Pimlico Race Course, home of the Preakness Stakes (gr. I), incurred rare losses in 2008 and 2009.

According to the unaudited financial statements from the MJC, Pimlico and Laurel Park had combined losses of more than $14 million in 2009, and almost $12 million in 2008.

Broken down by track, Pimlico had a net loss of $2.6 million in 2009 and $901,566 in 2008. The MJC’s other track, Laurel, posted net losses of $11.5 million in 2009 and nearly $11 million the previous year.

The unaudited reports are the first detailed look at MJC’s financial standing for the last two years. The racetrack operator’s former parent, Magna Entertainment Corp., was mired in bankruptcy proceedings during the period and did not file the reports required by the state regulatory body.

The MJC was among the assets transferred from MEC to MI Developments last year. Like MID, MEC was controlled by prominent horse owner and breeder Frank Stronach. Now, the MJC is owned by MID and Penn National Gaming Inc.

Historically, due to the success of the Preakness, second leg of racing’s Triple Crown, Pimlico is profitable while Laurel loses money.

“The entire operation is a concern,” MJC president Tom Chuckas said March 15. He noted that the tracks had been significantly impacted by downturns in both the U.S. economy and horse racing in this country.

While MJC incurred some hefty charges associated with its unsuccessful efforts to secure alternative gaming at its operations, including legal and lobbying fees, the tracks still would not have been profitable during the 2008-09 period due a sharp decline in wagering revenue, Chuckas said.

According to the statements, gross wagering revenue at Pimlico fell from $34.8 million in 2007 to $23.1 million in 2009. At Laurel, wagering revenue declined from $44.2 million in 2007 to $33.8 million in 2009.

The bottom line at Pimlico was further impacted by a dropoff in non-wagering revenue, from $10.6  million in 2008 to $7.9 million. While the financial statements did not break down the numbers specifically for the Preakness, the operation was negatively impacted by sharp decline in attendance for the race in 2009 after the MJC dropped its long-standing policy of permitting patrons to take their own alcohol into the infield.

“The Preakness is the money-maker that carries Pimlico through the year,” Chuckas said.

Release of the unaudited statements preceded an appearance by Chuckas later March 15 before a state House committee conducing a hearing on whether the MJC should receive operating subsidies from slot machines.

Under deal brokered by Gov. Martin O’Malley, the MJC in 2011 could receive $3.6 million in slots revenue in exchange for agreeing to conduct 146 days of live racing.The  MJC also is receiving a $1.7 million contribution from the state’s horsemen and breeders this year.

Chuckas said the company believes the subsidies, combined with efforts by MJC to curtail costs, would allow it to reach break-even or have only a slight loss this year.

The MJC is exploring ways in which it can regain profitability without any subsidies, Chuckas said. “Ideally, the Maryland Jockey Club would like not to take any funds from the state," he said. "We would like to make this a profitable enterprise without a state subsidy.”

Though he does not know the specifics, Chuckas confirmed discussions have taken place over a desire by PNGI to withdraw from its 49% ownership stake in the MJC. Chuckas said the discussions have been between Stronach and PNGI president Peter Carlino, and that he did not know the status of the ownership arrangement.