By Hanah Cho, The Baltimore Sun
7:15 PM EDT, April 2, 2012
The Maryland Jockey Club, the financially strapped operator of the state's major thoroughbred racetracks, substantially cut its losses last year thanks to state slots subsidies but still falls short of becoming financially stable.
Laurel Park and Pimlico Race Course in Baltimore lost a combined $5.3 million in 2011, according to financial statements submitted to the Maryland Racing Commission. That's down from a $20 million loss in 2010.
Overall, revenue for the two tracks increased slightly to $67.9 million last year, from $66.9 million in 2010.
The Jockey Club's improved bottom line can be attributed in part to $3.6 million in slots revenue that was diverted to the company's day-to-day operations from a fund for racetrack improvements. The track operator also received a $1.7 million contribution from the state's horsemen's group as part of a complicated deal that rescued the state's racing industry from near collapse at the start of the 2011 racing season.
At that time, Jockey Club officials said the financial assistance would allow the tracks to sustain a year-round racing schedule and to break even after years of bleeding millions of dollars.
Without the combined $5.3 million in assistance, the Jockey Club's losses last year would have been nearly $11 million, indicative of the challenges the tracks and the sport still face today, said Tom Chuckas, president of the Jockey Club.
"There's still a long way to go," Chuckas said Monday.
Over the past several decades, the tracks have struggled as the sport's popularity waned. Wagering on races and attendance have been falling steadily amid increasing competition from other forms of gambling. Maryland's racing industry has been hit hard as states such as West Virginia, Pennsylvania and Delaware offer slot-machine gambling and table games like poker, including at some thoroughbred racetracks.
Maryland's slots gambling program, legalized in 2008, has been slow to start, with only two of the five parlors now open — one in Cecil County and another on the Eastern Shore. Maryland voters approved legalized gambling in part to support the racing industry with slots revenue. Almost 10 percent of slots revenue is split between a fund for race purses and another for track capital projects.
Racing supporters had also hoped to see a slots parlor at Laurel Park, but a misstep by the Jockey Club's owner at the time prevented the track from obtaining the sole slots license in Anne Arundel County. Instead, Baltimore developer Cordish Cos. is set to open the first phrase of the state's largest casino at Arundel Mills mall in June.
Given the sport's struggles, critics say the state cannot continue to prop up racing when other unmet needs exists.
Del. Luiz R.S. Simmons, a Montgomery County Democrat, wants slots revenue allotted for the racing industry to be diverted to an account for school construction under legislation that he proposed for the second straight year. The potential revenue ranges from $15.3 million in fiscal 2012 to $101.3 million in fiscal 2017, according to the Department of Legislative Services.
Citing a report from the department, Simmons said the horse racing industry's small contribution to Maryland's economy has likely declined.
"We have let many businesses much larger than horse racing and industries much more significant wane and in some cases disappear without public subsidies," Simmons said.
Racing industry officials, including the Maryland Racing Commission, oppose Simmons' bill, which also has not garnered much support in the General Assembly.
This year, the Jockey Club is expected to ask the state for up to $6 million in slots subsidies under state law that redirects slots revenue to help the tracks' operations for two years. In exchange, the Jockey Club would maintain a 146-day live racing schedule in 2012 and 2013.
Moreover, the Maryland Thoroughbred Horsemen's Association, which represents owners, agreed to make a larger contribution of $4 million this year.
That $10 million should allow the Jockey Club to reach the break-even point this year, Chuckas said.
After several years of growing deficits, Laurel Park trimmed its loss to $4.9 million last year, down from $14 million in 2010.
Pimlico, the host of the Preakness Stakes, significantly narrowed its losses to $422,951 in 2011, from $5.7 million the previous year.
While Pimlico has been historically profitable because of the Preakness, which is the state's largest single sporting event, the track began reporting a loss in 2008 as the recession ate away at discretionary spending such as horse betting. Attendance and bets at the Preakness began bouncing back in 2010, Chuckas said.
While wagering revenue at both tracks is showing signs of improvement, albeit small, Chuckas said the Jockey Club "continues to reduce costs where we can."
In the meantime, Jockey Club officials are meeting with breeders, horse owners and regulators every two weeks to devise a business model for the industry that is sustainable, unlike the temporary slot subsidies.
"What is the answer for a model that is self-sufficient and reliable?" Chuckas said. "That is the million-dollar question."
Copyright © 2014, The Baltimore Sun