Jockey Club ups ante, but some call it bad bet

THE BALTIMORE SUN

The world's toughest game is about to get tougher.

Betting on thoroughbred racing becomes more expensive today for fans in Maryland. With the blessing of the governor and General Assembly, the Maryland Jockey Club has raised the takeout - the money withheld from every wager.

The takeout on races at Laurel Park - and next spring at Pimlico - rises from 17 percent to 18 percent on win, place and show bets; from 19 percent to 21 percent on exactas and daily doubles; and from 25 percent to 25.75 percent on trifectas and superfectas.

Although the increases appear to be minimal and the motive behind them admirable - helping to finance long-needed renovations at Pimlico and Laurel Park - charging customers more to gamble is a bad idea, say students of betting economics. They say the move is especially risky when bettors have so many alternatives, such as the lottery, slot machines and wagering on races from other states with lower takeouts.

"When you increase the takeout, people wind up with less money in their pocket," said Maury Wolff, an economist and professional gambler from Alexandria, Va. "They bet less simply because you're taking more money out of circulation.'This was a bad business decision for the overall health of the game. I can't for the life of me figure out how they came up with it. I think it's going to backfire on them."

Richard Thalheimer, a professor in the Department of Equine Business at the University of Louisville who has researched the effect of raising takeout, said it will reduce the amount bet on Maryland races.

"Every study shows that at today's level of takeout, customers are very sensitive to increases in the takeout rate," he said. "Every alternative becomes more attractive."

The takeout goes toward track profits, state taxes, purses for races and financial incentives for horse breeders. The idea of raising the takeout came from the Maryland Jockey Club, whose president and CEO Joe De Francis runs Pimlico and Laurel. It will be a primary means of financing $60 million in upgrades at the two aging tracks, which have been criticized repeatedly for deterioration and lack of amenities.

"We embraced this very reluctantly," De Francis said. "We are not enthused about it. Any time a business is forced to raise prices to its customers it's not a happy event."

De Francis said he saw no other way of effecting meaningful renovations to his racetracks. The increased takeout applies only to races at Pimlico and Laurel Park. Takeout on out-of-state races simulcast into Maryland will not be affected.

"We argued for slots for years, but that argument failed," De Francis said. "The state has made it very clear it's not interested in spending taxpayers' money to build a new facility or upgrade existing ones. Our corporation has put every single penny we possibly can into fixing up these facilities. We have looked under every rock and behind every tree for additional money. ... It's like owning a restaurant that needs a major overhaul. Part of paying for that is a very, very minor increase in menu prices."

Here's how the menu at Laurel Park reads today compared to yesterday. Yesterday's $10 win ticket returns $9.60 today. Yesterday's $50 exacta ticket returns $48.80 today. And yesterday's $200 trifecta ticket returns $198 today.

Over the course of one year, De Francis said, the increased takeout is expected to raise about $1.8 million. That will come directly from the pockets of Maryland horse players.

As stipulated by a state law passed this year, every dollar from increased takeout goes into a fund that will finance the sale of bonds for track renovations. The Maryland Racing Commission will oversee the fund, and the Maryland Economic Development Corp., a state agency, will sell the bonds.

The racing commission and Maryland Stadium Authority must approve every expenditure by the Maryland Jockey Club. Also, the MJC must spend $9.5 million of its own money for improvements between Jan. 1, 1999, and the initial sale of bonds. It also must spend more than $25 million for marketing and promotion during the next five years.

De Francis says that proceeds from bond sales will finance about half of his $60 million revitalization plan for Pimlico and Laurel Park. His corporation will pay the rest, he says.

With the takeout increase as its centerpiece, the plan calls for tearing down old barns, building new ones (including a state-of-the-art stakes barn at Pimlico), constructing an outdoor paddock at Pimlico, redesigning entrances, landscaping and remodeling track interiors.

De Francis acknowledges that raising the price of betting involves "some level of risk. If money wagered on Maryland racing plummets, this whole thing falls apart."

But he said he believes the result will merely be a "marginal dropoff in business." The increases don't put Maryland out of line with takeout rates at other major tracks, De Francis said.

Wolff, the Alexandria economist and gambler, disagrees. He says his studies have shown that for every percentage-point rise in takeout, the handle drops 7 percent to 8 percent.

"It's a competitive world out there," Wolff said. "Horse players can play anywhere they want. This is another good reason to choose somewhere other than Maryland."

One gambler in Laurel Park's Kelso Club, the track's private room for its biggest bettors, complained yesterday about the increased takeout - but said that isn't the biggest problem with Maryland racing.

Vince Campanella, a 55-year-old bettor from Fulton, said that he bets about $3,000 per day on Laurel races. The higher takeout will cost him anywhere from $15,000 to $18,000 per year, he said.

"I'm not pleased about it, obviously," he said. "My first reaction is that I'll bet less on Maryland races and concentrate more on New York and California."

He said a consideration at least as important as takeout is the number of horses in each race at Laurel. Larger fields produce higher odds and more betting opportunities, he said.

"The fields here are horrible," Campanella said. "It's pathetic. You've got six-, seven-horse fields every race. I'm passing a third of the races already because of it."

John Franzone, chairman of the Maryland Racing Commission, said that he understands.

"All the things they say are valid," Franzone said. "But what's their option? If we're going to grow the sport in Maryland, there's a lot that needs to be done to both of these facilities. There's got to be an investment to upgrade these facilities to make them viable."

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