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Baltimore City

Amid stalled improvements to Pimlico, Laurel Park horse racing tracks, owner could sell Laurel to a state-run authority

The Maryland General Assembly wanted the Old Grandstand at Pimlico demolished two months ago, a significant and symbolic step that would have illustrated progress on a yearslong project and a decadeslong dream to improve the historic racecourse.

Instead, the dilapidated grandstand remains.

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State legislation passed in 2020 sought to renovate both worn-down Pimlico and its sister track in Laurel with the aim of boosting the racing industry, developing Baltimore’s Park Heights neighborhood, and helping to ensure the Preakness — the second jewel of horse racing’s Triple Crown — stayed in Baltimore. The legislature followed up this year with a bill to prod stakeholders to get going on the Pimlico portion of the project, including starting the process of demolishing the Old Grandstand by Sept. 1.

But efforts are behind schedule and overbudget. Three reports to the General Assembly this fall blame high interest rates and inflation, disagreements among the responsible parties and the challenging, cumbersome nature of the projects.

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Further complicating the picture is that, according to one of the reports, the tracks’ owner has determined it must divest itself of not just Pimlico, as planned, but could sell Laurel Park to some type of state-run sports authority — rather than pay tens of millions of dollars in taxes on the Anne Arundel County track improvements.

“The land has to be owned by a nonprofit or the state. Otherwise, the capital gains tax will sink this project,” said Alan Rifkin, the attorney for the Maryland Jockey Club, which is owned by The Stronach Group, and operates the company’s tracks at Pimlico and Laurel.

Early Voting, ridden by jockey Jose L. Ortiz (white with red, center) breaks out of the gate May 21, 2022, as the field of nine horses began the 147th running of the Preakness Stakes at Pimlico Race Course in Baltimore.

Despite the challenges, Bill Cole, the former Baltimore Development Corp. president who represents the city in the negotiations to reach agreements on steps to advance the project, said he’s as confident as ever that it will be finished eventually.

But Alan Foreman, general counsel for the Maryland Thoroughbred Horsemen’s Association, expressed some doubt.

“I’m concerned about the viability of the projects,” he said. “I’m an eternal optimist, but there are significant challenges here, some of which are beyond our control.”

A $40 million tax issue

When the General Assembly approved $375 million worth of bonds in 2020 for the tracks’ improvement, stakeholders were aware that recent changes to federal laws might mean Stronach could face taxes on the state’s contributions.

In the case of Pimlico in Northwest Baltimore, Stronach agreed to give the track to the city and lease it for two months around the Preakness Stakes in each May.

But as a private company receiving state money for improvements at Laurel, Stronach would need to pay roughly $40 million in federal taxes, which Rifkin said is “just not tenable.”

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Rifkin said this spring that an initial effort to insulate the spending from the tax wasn’t successful and stakeholders were looking for a solution. He raised the prospect at that time of Stronach conveying Laurel to a government entity or another tax-exempt organization.

Now, a Maryland Economic Development Corp. report to the legislature says a public or nonprofit entity will need to buy Laurel Park for the project to proceed. It described the Jockey Club’s “unwillingness to make investments necessary to improve Laurel Park and allow government investment under the current ownership structure due to federal taxation concerns.”

“Industry participants further believe current ownership has shifted its general focus away from horse racing, training and breeding,” wrote the economic development corporation, known as MEDCO.

It is not yet known how much Laurel Park is worth; MEDCO wrote it is working to “establish the value of the real estate.”

MEDCO wrote that consultants are examining other racetracks, like Del Mar in California, that operate using a “state-authority model,” similar to a stadium authority. If an authority was established to own and manage Laurel’s operations, its board members could be “appointed by the governor and approved by the state Senate,” per the report.

The stadium authority’s report to the legislature also described the Jockey Club as being interested in selling Laurel Park, which would add “a significant acquisition amount to the already over budget facility.”

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Budget is ‘not realistic at this point’

Pimlico has been central to Baltimore’s fabric since it opened in 1870. Man o’ War, Seabiscuit and Secretariat all won at “Old Hilltop.“ But in recent years, Pimlico’s most prized event, the Preakness, has exposed problems such as faulty bathrooms, leaky roofing and potentially unsafe seating areas.

At Laurel Park, the MEDCO report found the roof and the plumbing, electrical, and heating, ventilation and air conditioning systems had “major deficiencies which place them beyond repair.”

However, The Stronach Group previously sought to move the Preakness to Laurel, prompting a lawsuit from Baltimore City to keep the race in town. The suit was withdrawn in 2019 after the two sides reached the agreement for Stronach to convey Pimlico to the city, while still hosting the lucrative Preakness.

The deal led to the legislature’s Racing and Community Development Act of 2020. It approved up to $375 million in bonds to renovate Pimlico and Laurel Park, and construction was expected to be completed within four years.

Charles Rash walks a horse through the stables at Laurel Park.

But rising interest rates have devalued the bonds to $284 million, according to a stadium authority estimate from June, while inflation has increased the cost of materials.

As of earlier this year, the projects were $175 million overbudget.

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“Our concept plan, we estimated, would cost $375 million to do both Pimlico and Laurel. And that is clearly not realistic at this point,” Foreman said.

Although some economists like Dennis Coates of the University of Maryland, Baltimore County, oppose spending public money funding the renovations rather than on things like schools and roads, the stakeholders eventually may request additional funding from the General Assembly.

Democratic Del. Sandy Rosenberg, who represents the Pimlico area, said the track’s importance would have to be considered as a factor in its favor, if that happens.

“The merits of what we’re trying to accomplish here will ultimately make the case for an additional expenditure beyond what was budgeted in the bill as enacted,” he said.

Little progress

The projects are challenging. They require construction at the tracks even as 1,600 horses are stabled there and racing continues. A key goal is for Pimlico to continue to host the Preakness Stakes each year.

Negotiations involve various combinations of the Jockey Club; the Maryland Stadium Authority, which will oversee the construction projects; racing industry representatives; the city of Baltimore, and Anne Arundel County, depending on which piece of the puzzle is being worked on.

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Plans to improve Laurel Park have become especially difficult, but the Pimlico plan also has progressed slowly. Of nine agreements that must be reached among the different parties before the stadium authority can proceed with construction there, only one has been accomplished, per the stadium authority’s Sept. 30 report.

As a result, not enough preliminary work has been completed to warrant beginning the grandstand demolition process, the report says.

The stadium authority wrote that it “believes that proceeding with this work will leave a false impression that the project is proceeding as planned.”

The project’s timeline is behind schedule, too. Summer 2023, after the May 20 Preakness, had been pegged for the construction start at Pimlico.

“This timetable is no longer realistic,” the stadium authority wrote.

Meanwhile, the Laurel Park project’s price has nearly doubled, in part because of several changes to the design by the Jockey Club and horsemen’s association.

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“The requirements and desires of both [the Jockey Club and the horsemen’s association] continued to fluctuate,” the authority’s report stated. “This has resulted in the development of numerous conceptual plans and estimates.”

While stakeholders are seeking to cut costs, they want to make sure the project is high-quality and long-lasting, Rifkin said.

“You don’t want to get to the point where you’ve cut so much that you’re left with a shell of a project that doesn’t meet any of the needs,” he said.

‘Interdependent’ renovations

Even though the Pimlico design has been mostly unchanged — and the bill passed by the General Assembly this year urged the stadium authority to begin making tangible progress there — the Pimlico renovation has always been tied to Laurel Park.

Laurel serves as the state’s primary year-round racing facility, and if construction were to begin at Pimlico before Laurel adds sufficient stalls, for example, horses and horsemen displaced by construction in Baltimore would have nowhere to go.

“If they leave the state, and this project gets muddled, are they going to come back?” Foreman said. “And that’s when you start to seriously consider: ‘Have you done something so detrimental to racing that it’s going to be completely changed?’”

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“It is critical to emphasize that the Pimlico and Laurel Park projects are interdependent and not independent,” the Jockey Club, horsemen’s association and the Maryland Horse Breeders Association wrote in a joint report to the legislature.

The stadium authority advised against beginning the Pimlico design process in September, noting ongoing negotiations between the parties, and because of the Maryland Jockey Club’s “history of actions, inactions and changes ... outlined in this report.”

It also wrote that, when confirming details of the Pimlico plan, the Jockey Club’s “responses were piecemeal and staggered.”

Noting that “the report speaks for itself,” the stadium authority declined further comment.

Rifkin, the Jockey Club’s attorney, said that disagreements in the planning process are “nothing that can’t be ironed out.”

“These are natural rhythms of complex stadium designs,” he said. “You can’t go to Home Depot and get an off-the-shelf design for a racing stadium.”

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Democratic state Sen. Jill Carter, whose district includes the Pimlico area, said she is “frustrated by the continuous discord that has stalled the redevelopment of Pimlico.”

“It’s unacceptable to have the hopes, dreams, and opportunities of the impacted people and neighborhoods continually squandered at a negotiating table,” she wrote in an email to The Baltimore Sun.

Adele Samaniego, center, of Manassas, Virginia, rides Cash at Pimlico Race Course on Oct. 30, 2022, in Baltimore. About 300 horses and their riders took part in "Canter for a Cause," which raised money to benefit the Thoroughbred Aftercare Alliance.

Confidence despite challenges

Even as a medley of obstacles compound a challenging undertaking that has only grown more complex, some leaders have urged the project forward with confidence.

“I’m optimistic,” Rosenberg said.

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“This is going to happen,” Carter wrote.

“We can’t let this fail,” Cole said. “Failing to do both of these projects is the worst case scenario for the industry.”

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Anne Arundel County supports and wants the project too, despite its complications, said County Attorney Greg Swain.

“We’re hoping that the funds will be there, and the momentum will be there, as well,” he said.

On Sunday, Pimlico hosted an event, Canter For A Cause, allowing amateur riders to trot their horses on the racetrack with proceeds benefiting the Thoroughbred Aftercare Alliance. “Follow in the hoofprints of racing’s greatest champions,” a promotional flyer read.

Pimlico remains cherished and historic, but it, along with Laurel Park, also remains in need of upgrades.

“We’re going to continue to try to work through these issues and come up with a solution,” Foreman said, “because we think it’s best for the city of Baltimore, we think it’s best for the state, and we think it’s best for the racing industry.”


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