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State tracks are prospering Horse racing: Despite the threat of doom, Maryland withstands the advent of Delaware slots.

Betting is at record levels. Profits are up. And the popularity of Maryland racing among out-of-state customers -- a crucial constituency in the new world of electronic wagering -- never has been higher.

Can this be the same industry that now says it is doomed by Gov. Parris N. Glendening's decision to block casino gambling at the racetracks?

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No doubt the long-term future is murky for the state's storied thoroughbred industry. The tracks have failed to attract new fans and are running out of ways to squeeze money out of existing bettors. A potent competitor has emerged just over the border: Delaware Park, fortified with millions of dollars from newly legalized slot machines.

But many of the traditional measurements of racing health in Maryland are on the upswing or at least holding steady. And the predicted catastrophe from Delaware's slots has not yet materialized, and some say the threat is exaggerated.

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In fact, unlike at other junctures when the tracks have won concessions from the state by demonstrating hardship, this crisis comes at a time of relative prosperity for racing.

But Pimlico Race Course and Laurel Park president Joseph A. De Francis, whose stewardship of the tracks has drawn criticism, says his current run of good luck can't last and he needs urgent state aid.

"You have to look over a longer horizon than just last year. If you look back at a seven-year period of our history, it's marked by wild swings. We were on the verge of bankruptcy in 1993," De Francis said.

Not so last year: The Maryland Jockey Club, operator of Pimlico ** Race Course and Laurel Park, reported record revenues and wagering totals. The combined profit of the tracks -- $4.1 million -- was the highest since their ownership was merged in 1987.

"I see the financial conditions of the tracks as having improved a lot. Last year's financial results showed a definitely improved situation," said John Mosner, a retired banker and long-term chairman of the Maryland Racing Commission.

Mosner, who has retired from the racing commission, said Delaware is a threat. But the tracks have regained their footing from a disastrous period early in the decade during which they lost $10 million, he said.

The improved results are due to a vast technological expansion that has brought more racing to more fans, chiefly through televised "simulcasts." Maryland race fans now have their choice of betting on 11 live races and 50 or more simulcast races a day beamed in from tracks across the country. Because the tracks take a cut of each bet, more betting means more money.

Maryland's races are now also being beamed to other tracks, bringing back money for Pimlico, Laurel and local horse owners. And a network of five off-track betting parlors from Frederick to Cambridge and now Virginia has opened over the past three years.

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No impact from Delaware

From a financial standpoint, the changes, combined with an improved economy, have been akin to hitting the daily double: Since 1993, the tracks' revenues have increased 17 percent, betting has soared 19 percent and operating income has gone from a loss of $3.46 million to a profit of $6 million.

Of course, Delaware Park, a former lightweight among the region's racetracks, didn't open its mini-casino until Dec. 29, or begin its horse racing meet until April 13. And it operated at half-speed for a couple of months, not hitting its legal maximum allotment of 1,000 video gaming machines until July 13.

But at the completed meet most directly affected -- Laurel's June 15 to July 21 summer session -- the amount of money bet was up slightly from the year before and average daily wagering was up more than 7 percent, according to figures released by the tracks.

Overall this year, the average daily handle of bets placed at the state's tracks and off-site wagering parlors is virtually unchanged from last year's record pace.

"Right now, so far, we haven't seen any significant decrease in business" at Maryland's tracks, said Kenneth A. Schertle, executive director of the Maryland Racing Commission.

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The handle figures don't include one of the brightest spots for Maryland racing: a big jump in wagers placed on telecast versions of its races by out-of-state gamblers. That "export" business is up about 50 percent, to $166 million, through mid-summer.

De Francis says the exports have made up for drops in admission and a pronounced shift from live handle to simulcast racing, which is less profitable. Total revenue this year is running about even with last year, and he thinks the tracks will show a profit for 1996, although it's running about $1.5 million less than at this point last year, he said.

This year was hurt by the loss of seven days to snow last winter, something he earlier estimated cost about $1 million.

"Unfortunately, we are now headed back down in another valley. . . . We don't have the equity, we don't have the resources to survive another deep valley," De Francis said. Among the tracks' urgent concerns: about $35 million in recently restructured bank debt.

Critics say De Francis should do more to help himself and the tracks. Promotion and better management of the facilities, whose condition has drawn criticism in national publications, would stem the slide in attendance, said Del. John Morgan, a Howard County Republican whose district includes part of Laurel Park.

"It can be a very successful business. Other tracks are showing growth," Morgan said. "Heck, at Laurel if they would just pave the parking lot, it would help."

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Louisville's Churchill Downs yesterday reported a $12 million profit for the most recent quarter. Regionally, Monmouth Park in New Jersey and Pennsylvania's Philadelphia Park and Penn National tracks, presumably all affected in some way by Delaware, have increased purses this year.

Penn National, which steadily has been opening new off-track betting facilities, last month posted profits for the first half of the year that were 21 percent higher than the same period a year earlier.

Penn National would love slot machines but doesn't view them as a matter of survival, said the track's chief financial officer, Robert Ippolito. "The last few years we've been doing just fine with our off-tracks," he said.

Delaware builds base

De Francis fears Delaware Park's purses will continue to grow, eventually attracting Maryland horses. So far, there is little evidence of that. Although De Francis says he is struggling to fill races, his tracks are, on average, running more races and paying more in purses than Delaware, according to a review by the Thoroughbred Times magazine.

Through the first 79 days of the current meet, Delaware Park was paying an average of $149,741 a day in purses -- more than twice last year's rate. After several purse increases, Delaware now estimates it is paying about $152,000.

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By comparison, the recently completed Laurel meet paid an average of $173,121 a day. The first 10 days of Pimlico's current meet paid an average of $160,812 a day, according to the Thoroughbred Times.

The trend is working against Maryland: Delaware's purses have doubled and Maryland's have fallen about 10 percent this year. And because it runs fewer races a day, Delaware paid slightly more per race: an average of $17,656 to Laurel's $17,464 and Pimlico's $16,244, according to figures from the Times.

Meanwhile, Delaware is bulking up fast. In the first seven months of operation, Delaware Park's electronic wagering devices collected a staggering $732 million. Of that, about 90 percent was returned to winners, and about $30 million went to the track and $6 million to horse owners via purses.

"They are now the linchpin of the region. It has affecting shipping patterns," said Timothy T. Capps, executive vice president of the Maryland Horse Breeders Association, which represents horse owners.

Horses from New York, Pennsylvania and other breeding states that might be drawn to Maryland are instead being diverted to Delaware, he said.

"The one thing that is clear is what it has done for them. What it has done to others is less clear," Capps said of Delaware's slots. "We're dying by razor cuts rather than by slash."

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However, there is a strong incentive for Maryland-based horses to run in Maryland. The state's breeders fund last year diverted about $5 million from wagers and paid it out in bonuses and purses for Maryland-born horses. And the tracks and affiliated training center at Bowie maintain close to 3,000 stalls free of charge for horses running here.

Capps acknowledged that a strong new track in the region may be a boost to Maryland's breeders, who already have enjoyed healthy increases in prices at recent auctions.

But the long-term health of that business is dependent on strong in-state tracks, he said. And simulcasting and off-track wagering already has yielded about all the growth it can.

One major Maryland trainer, Graham Motion, opened a 15-stall operation at Delaware this year for the first time. But he said it's mostly horses he would have shipped out of state anyway.

He's impressed with the impact the new gaming dollars have had on Delaware and hopes Maryland follows suit. "The actual caliber of racing is about on par now," said Motion, who has a 50-horse operation. "It's definitely had an impact on Maryland racing."

Maryland's track officials have taken steps to keep trainers and their horses in the state. They are offering purse bonuses for races that go off with full fields and have told trainers who enjoy the free stables not to expect such kindness if the animals run elsewhere.

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Horsemen also report improved service from the Maryland tracks.

Richard Thalheimer, a Lexington, Ky.-based consultant, performed a study for Maryland's racing interests and estimated that the thoroughbred wagering outlets in the state eventually would suffer a 5 percent to 20 percent reduction in betting, depending upon how close they are to Delaware Park.

"It wouldn't be the end of the [Maryland] tracks," he said. But it could set in motion a downward spiral as horses opt for Delaware, leading to a drop in betting here and in demand for Maryland's telecast signal, he said.

From Delaware Park's perspective, Maryland is exaggerating the threat. "These trainers will run their horses where they can win. They are not going to ship the horses for a few thousand dollars," said Chris Sobocinski, a spokesman for Delaware Park.

The track hasn't increased its stable capacity, which remains about 1,400 stalls.

But he acknowledges Delaware Park plans further increases in its purses, and only has begun to market the racing program, which has seen its live handle and racing attendance fall -- despite the elimination of admission charges -- since slot machines were brought in.

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Eventually it plans to pump money into the physical appearance of its track and could even emulate Atlantic City casinos, which run free or reduced-cost buses from Baltimore, Sobocinski said.

But, he said, "We don't want anybody to blame us until it is proven that we are affecting them."

Maryland vs. Delaware

The introduction of electronic wagering machines has boosted profits and purses at Delaware Park. Maryland, however, retains several advantages in the battle:

Maryland has two major thoroughbred tracks owned by the same company. Together they run a total of about 250 days a year of live racing, and are open for simulcast betting most other days. They are linked to a network of satellite wagering outlets.

Delaware Park runs a live card of 130 days from April to November and, because of the state's tiny population, has not bothered with off-track parlors.

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Maryland is home to one of racing's biggest events, the Preakness Stakes, as well as a large network of breeding farms. Delaware's breeding industry is nearly non-existent: Its mares typically give birth to two or three thoroughbreds a year, compared with more than 1,000 in Maryland. Delaware Park's biggest race each year is the Grade III Delaware Handicap.

One area where the two states compete on equal footing is the rate of state wager taxes: They are among the lowest three in the nation.

Pub Date: 8/16/96


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