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Casinos put track owner in quandary De Francis opposes such gambling in Md., but hedges his bets; 'This is all-out war'; Addition of slots may be matter of survival for courses

THE BALTIMORE SUN

As the fight over legalizing casinos heads into the Maryland General Assembly this winter, thoroughbred race track owner Joseph A. De Francis is emerging as the man in the middle.

Hundreds of slot machines and video lottery terminals will open this year at race courses in Delaware, threatening to lure fans and horses away from his tracks, Laurel and Pimlico.

But if Mr. De Francis asks the legislature for slots to compete with Delaware, he may pave the way for casinos elsewhere in Maryland -- creating further competition for his struggling racing business.

At stake, he says, is the future of Maryland's horse racing industry, as much a part of the state's identity as the blue crab and the Orioles. He likens his dilemma to a choice between "bleeding to death slowly and a bullet in the head."

While this may sound melodramatic, recent history suggests Mr. De Francis has cause for concern. As casino gambling has swept across the nation in the past seven years, horse racing has suffered severely. Time after time, the simple, rapid wagering of casino gambling has drawn patrons away from the more complicated, slower-paced betting of the track.

"If casinos come to Maryland without them getting some part of it at the tracks, I think maybe they can survive for two years," said Bill Bork, who, as executive director of Detroit Race Course, saw betting at the track drop by 30 percent after a Canadian casino opened about 10 miles away.

Mr. De Francis consistently has opposed casino gambling, but is keeping his options open. He said at least 10 casino companies have contacted him regarding joint ventures.

So far, Mr. De Francis' position has been that if Maryland legalizes casinos, they should be only at the racetracks or off-track betting parlors. But some lawmakers and lobbyists say that is unlikely to happen. They predict Mr. De Francis will have to choose between running a casino in competition with others in Maryland or doing without slot machines.

These are difficult days for the state's horse racing business. Since 1987, track attendance has fallen by 18 percent. After years of decline, wagering finally rebounded last year as a result of off-track betting, intertrack wagering and simulcasting.

Some casino proponents have urged the state to legalize gambling halls and let them fight it out with the racetracks. In a favorable report on casinos this month, a panel of former presidents of the Maryland Chamber of Commerce wrote that "the state has no obligation to save a dying industry."

Mr. De Francis' response: "This is all-out war."

Casinos have yet to force a thoroughbred track out of business in the United States, but a handful of tracks have had to close temporarily and several have seen profits plummet.

When a casino opens near a horse track, the race course can expect to lose as much as 39 percent of its handle (the amount of money wagered), said Richard Thalheimer, who studies the racing industry at the University of Louisville.

"The only way you can compete with a casino is with another casino," said Mr. Bork, now president of Penn National race course outside Harrisburg, Pa. "It's as simple as that."

Nationally, a half-dozen tracks have responded to casino competition by adding similar types of gambling, usually slot machines.

Prairie Meadows, outside Des Moines, was Iowa's first track when it opened in 1989. The race course drew less than expected and was crippled when an Indian-run casino opened about 45 minutes away.

The solution was to install 1,100 slot machines. The once-bankrupt race course has become a huge money-maker. Profits are so large that Prairie Meadows expects to pay off its entire $85 million debt by next year.

As directed by the Iowa Legislature, the race course pumped roughly $1 million from the slot machines into purses this year, nearly doubling the purse total. The higher purses, in turn, attracted better horses. Just as important, the handle for its races this year was about the same as last year, an encouraging sign to track officials who feared a significant drop-off because of the slots.

Eyes on Kentucky

Many in the industry are watching Kentucky, the heartland of thoroughbred racing. Some tracks there are expected to ask the legislature next year for permission to offer some casino gambling to compete with the riverboats soon to begin cruising the Ohio River on Kentucky's border.

"The question is how big a hit we're going to take and what we're going to do about it," said Robert G. Lawrence, head of the equine industry program at the University of Louisville.

Delaware Park, a thoroughbred track just outside of Wilmington, plans to introduce 715 slot machines this year. Steve Kallens, the track's director of marketing, estimates that the slots will bring in at least $70,000 a day.

Mr. De Francis says he expects to lose 10 percent of his fans at Pimlico to Delaware Park, which is a 1 1/4 -hour drive away. He and others in the Maryland racing world are even more concerned about horses.

As purses grow, Delaware Park will attract better horses from Pimlico and Laurel, said Allan C. Levey, chairman of the Maryland Racing Commission. After Delaware's Dover Downs harness track opens 500 slots and video lottery terminals in early December, it will do the same to Delmarva Downs on the Eastern Shore, he said.

"To save the industry, I would recommend to [Mr. De Francis] that he go to the legislature and ask for slots," Mr. Levey said.

Officials at Bally Entertainment -- a Chicago-based casino company that manages Maryland's two harness tracks, Delmarva and the Rosecroft Race Course -- also are thinking about asking the legislature to approve 4,000 to 5,000 slot machines. First Mariner Bancorp Chairman Edwin F. Hale Sr., describes himself as a potential investor.

"If we don't get some help, I don't see the tracks surviving," said Bernard J. Murphy, Bally's vice president for corporate affairs and government relations.

Despite such dire predictions, not everyone thinks slots in Delaware will cripple Maryland racing. Josh Pons, president of the Maryland Horse Breeders Association, said the slot machines may take money from the same bettors with little net gain to the track.

Officials at Delaware Park insist their slot machines won't have -- much effect on Maryland, because slots and horse racing draw different types of fans. The typical racing enthusiast is an older man who studies the horses like the stock market, Mr. Kallens said, while the average slot player is an older woman more interested in rapid betting.

"It's two different groups of people," he said. "I don't see that crossover."

JTC

Argument questioned

If Mr. De Francis requests slots while opposing casinos, some Annapolis lawmakers say he will have trouble getting his way in the General Assembly.

"He's saying that 1,000 slot machines in some kind of a sports palace at a racetrack is different than a casino, and I am very honestly trying to figure out why," said one Maryland legislator, who declined to be identified.

It is a fair question.

Slot machines are the financial engines that drive casinos. In July, slot machines accounted for 70 percent of gross revenues at the 10 casinos in Illinois.

The reason is speed. In the time it takes to place a bet and spin a roulette wheel, a customer can yank the arm of slot machine a dozen or more times.

Mr. De Francis said he sees a difference between slot machines and a casino. Slots, he said, are a limited expansion of gaming and easier to regulate than table games. Mr. De Francis' critics say he just wants a monopoly on gambling.

"It is somewhat like the buggy whip manufacturers at the turn of the century insisting that their longtime operations be preserved by having the state assign them the sole right to distribute and sell automobiles," wrote casino lobbyist James J. Doyle Jr. in a recent letter sent to every member of the General Assembly.

If the legislature does legalize casinos, lawmakers are unlikely to leave racing to fend for itself based on the role it plays in Maryland's economy and identity.

The state estimates that the horse industry accounts for about 12,000 full-time jobs. Arrive in Baltimore-Washington International Airport and you may come upon a large photo of horses standing in a grassy field: "Welcome to Maryland, the Thoroughbred State."

Horse racing also has a strong emotional appeal for some lawmakers. State Senate President Thomas V. Mike Miller Jr., an industry supporter, represents a legislative district where, he will tell you, George Washington raised horses. "Thoroughbred racing is an integral part of Maryland history," he said.

As for slot machines, Mr. De Francis says he plans to postpone any decision at least until a state task force examining the potential effects of casinos makes a recommendation to the governor and legislature in December.

"The more time that is spent studying this issue, the more encouraged I am that the Maryland policy-makers will help us find a way out of this box," Mr. De Francis said. "We have a chance to be one of the handful of racing centers to survive this restructuring. We're not doomed to die."

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