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Maryland legislature probes horse racing panel’s oversight of subsidies for racetracks

The Maryland Racing Commission recently notified the legislature’s joint audit committee that most of the public subsidies spent on racetrack upgrades were awarded to the Maryland Jockey Club without the approved spending plans required by law.

The commission’s executive director, Michael Hopkins, wrote in a letter to lawmakers that preliminary plans submitted by the Jockey Cub and an accountant’s oversight of spending approvals gave horse racing regulators the authority needed to award $17.5 million to the company for renovations at Pimlico Race Course and Laurel Park.

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Yet an attachment to Hopkins’ Aug. 21 letter shows that two-thirds of those grants were awarded without a plan.

State officials previously said that grants from 2015 to 2017 were awarded properly even while acknowledging that the commission never actually approved either of the Jockey Club’s two preliminary plans, one in 2013 and an amended version a year later.

Both plans envisioned evenly spending grants from the Racetrack Facility Renewal Account, known as RFRA and funded by the state’s share of slot machine gambling revenue, between Pimlico and Laurel as had happened before 2015. The jockey club’s first plan budgeted $15.5 million for Pimlico and $14.8 million for Laurel; the 2014 plan showed slightly less than half of all capital spending going to Pimlico.

Ultimately, nearly 90% of subsidies went to Laurel, while the 149-year-old Pimlico continued to deteriorate, a Baltimore Sun investigation found in February. A subsequent review of state records showed the commission approved the RFRA spending without receiving or approving plans with specific timelines and without ever trying to recoup money when the spending changed course.

The nine-person commission at its June meeting delayed voting on a $4.4 million grant to the Jockey Club for upgrades at Laurel because no plan had been submitted. The commission also stated that millions in subsidies for 2018 should not have been awarded because of the lack of a plan.

Jockey Club officials said they cannot submit a plan until after talks about Pimlico’s future between city and industry officials are completed. Company executives said spending had been shifted to Laurel because the Maryland Stadium Authority in 2016 began a state-mandated study on how best to renovate Pimlico and how to pay for it.

The legislative audit committee in late July requested multiple documents from the commission about RFRA spending.

“In light of a June 2019 Baltimore Sun investigation, we have concerns related to the Maryland Racing Commission’s oversight and use of money awarded from the Racetrack Facility Renewal Account,” states a letter from the audit committee signed by its chairs, Del. Shelly Hettleman and Sen. Craig Zucker.

The committee asked for an inventory of grants awarded to the Jockey Club since July 1, 2013, including an “indication of the approved capital construction spending plan under which each disbursement was made."

Hopkins’ letter explained to the committee that the commission’s auditor signed off on the expenditures and that the Jockey Club kept the regulators apprised of any changes during the commission’s open, monthly meetings.

“Although later RFRA requests were not a part of the original capital construction plan or amended plan, the [Maryland Jockey Club] brought to the Commission’s attention the capital improvement projects at monthly meetings," Hopkins wrote.

In addition, he noted, a January 2018 state audit of the Department of Labor, Licensing and Regulation’s racing division did not find any problems with RFRA spending.

The legislative committee also asked about any “consequences” for projects that were late or did not conform to a plan.

“The commission has not asked for the return of any funds,” Hopkins wrote.

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He told the commission that “the only disbursement of RFRA funds for a project yet to be substantially completed is Barn #4, the Stick Barn at Laurel Park."

The Sun reported in July that the commission approved giving $1.7 million to the Jockey Club in November 2016 to build a three-story structure at Laurel Park to house racetrack workers as well as thoroughbreds — a project company officials said would be completed the following summer. The facility remains unfinished.

“The disbursement was for materials only, thus satisfying disbursement requirements,” Hopkins wrote to the committee.

Minutes of the commission meeting from November 2016 state that the panel approved an “advance of funds” that represented half of “an executed contract entered into by the Maryland Jockey Club for the construction of another new barn that would contain 84 stalls and a number of dorm rooms and offices for back stretch workers.”

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