Penn National supports curtailing racing operations

The future of Laurel Park was further clouded Tuesday, after the racetrack's minority owner said it still supports plans to eliminate live horse racing there.

Penn National Gaming, which owns 49 percent of the Maryland Jockey Club, the umbrella group for Laurel Park and Baltimore's Pimlico Race Course, had agreed to a plan to significantly curtail the club's horse-racing operations. Then Frank Stronach, chairman of Jockey Club's parent, MI Developments, reversed course in an interview with The Baltimore Sun this week, saying he would work to save the tracks.

Penn National officials said they were surprised and "taken off guard" by Stronach's comments, according to Eric Schippers, the company's senior vice president for public affairs.

The disagreement is the latest development to beset the state's beleaguered horse racing industry. The Jockey Club said last week it would move forward with plans to turn Laurel Park into an off-track betting site next year after Anne Arundel County voters passed a ballot measure approving a slot-machine casino 10 miles away at Arundel Mills mall.

The Jockey Club also said it would close a Bowie training center and run a 40-day meet at Pimlico around the Preakness Stakes — a schedule that racing boosters said would be too short to sustain the industry in the state.

"Without slot machines, unfortunately, the status quo can't work from a business perspective," Schippers said in an interview. "We're a public company with responsibilities to our shareholders. Continuing to endure the level of losses, post-election, without making any necessary cuts is difficult to justify."

Penn National had entered into the joint venture to operate the Jockey Club in anticipation of slots possibly going to Laurel Park instead of the mall, and the company hasn't given up on the prospect of expanding gambling at the track.

Penn National continues to explore its options, including lobbying to change the state constitution to allow a second casino in Anne Arundel County, said Schippers, noting the company believes the market can support two slots parlors.

But that change would entail a lengthy and uncertain process. Penn National's ownership of Hollywood Casino Perryville also complicates the matter. State law doesn't allow one company to hold more than one slots license.

Laurel Park has been losing $4 million to $7 million annually for several years, Jockey Club President Tom Chuckas said last week. While Pimlico is profitable, its income comes almost entirely from the Preakness, the second leg of the Triple Crown. In the past, Pimlico has provided financial assistance by transferring money so that Laurel Park can continue to operate.

Even with slots revenue augmenting race purses and funding capital improvements at the state's tracks, the Jockey Club said that financial support is not enough to sustain its business.

But Stronach pledged Monday to hold races at the two thoroughbred tracks next year on a schedule similar to this year's — a combined 146 racing days. The Bowie training center, however, would still close. Saying he doesn't believe in making "rash decisions," Stronach told The Sun that he would work to strike a deal with the horsemen and state officials to save Laurel and Pimlico.

Reached Tuesday, Stronach declined to comment on Penn National's position. He said he would issue a news release in the "next few days" and answer questions then.

Dennis Mills, MID's chief executive officer, did not return messages Tuesday. Chuckas was not available for comment.

Penn National officials plan to discuss the Jockey Club's' future with MID "hopefully in a productive and constructive way" before the Nov. 29 meeting of the Maryland Racing Commission, Schippers said. The Jockey Club had planned to submit its new operating plan to state regulators, which must approve any changes to the racing schedule.

Under their joint venture, MID owns 51 percent of the racing operations, while Penn National owns the remaining share. Any major decision involving the racing operations requires the unanimous approval of the five-member board, led by an MID majority, according to regulatory filings.

Penn National paid $26 million for its stake in the Jockey Club and for a 51 percent interest in any potential gaming rights at Laurel Park. Penn National and MID each also agreed to contribute $6 million to the working capital of the Jockey Club.

Grant Govertsen, an analyst and partner at Las Vegas-based Union Gaming Group, said it makes sense for Penn National to want to cut operations at the Jockey Club, given passage of the ballot measure allowing zoning approval for Baltimore-based Cordish Cos. to move forward on plans to build a 4,750-machine slots parlor at Arundel Mills mall.

"Since it appears that Cordish is now locked and loaded with respect to slots at Arundel Mills, it doesn't make sense for Penn to be an operator of a horse track with no possibility for slots," Govertsen said. "Going forward, Penn's focus will be on improving operations at Hollywood Perryville, which got off to a great start in September, as well as their numerous other growth opportunities around the country."

Schippers said Laurel Park's losses are "significantly larger" than some of Penn National's other racetracks without slots. The company has curtailed racing days and cut staffing and marketing costs at those racetracks while it works to expand slots gambling in those locations, he said.

Meanwhile, Halsey Minor, the technology entrepreneur who founded CNET Networks, said Tuesday that his company Minor Racing has offered to buy some of MI Developments' racetracks, including the Jockey Club, for $150 million to $170 million.

Minor said the proposal was submitted to the special committee of MID's board of directors, which is also considering a bid by an entity controlled by Stronach to buy out the entire company. Board members could not be reached to confirm Minor's offer.