The Maryland Racing Commission awarded $120,000 to the Jockey Club to help pay for the "infield board" at Pimlico, one of the few capital repairs the company has made at the Baltimore track. The commission is supposed to approve and monitor such spending, but has not.
The Maryland Racing Commission awarded $120,000 to the Jockey Club to help pay for the "infield board" at Pimlico, one of the few capital repairs the company has made at the Baltimore track. The commission is supposed to approve and monitor such spending, but has not. (Kim Hairston / Baltimore Sun)

Maryland’s horse racing regulators have ignored state law while awarding nearly $22 million in public subsidies for racetrack upgrades to the private company that owns Pimlico Race Course and Laurel Park, an investigation by The Baltimore Sun has found.

The Maryland Racing Commission had planned to release last Thursday an additional $4.4 million in subsidies to the Maryland Jockey Club for Laurel Park renovations even though the panel has not approved a capital construction plan to guide such work at the two tracks. After questions from The Sun and advice from an assistant attorney general, the volunteer nine-member panel removed the latest reimbursement request from the agenda until a current spending blueprint is submitted for approval.

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A state law in effect since 2013 requires the racing commission to approve such a plan before distributing any money from the slots-funded Racetrack Facility Renewal Account. The commission has not done that, records show.

The jockey club submitted a preliminary capital improvement plan for 2013 to 2017 that promised “significant investments in the rebuilding of Pimlico Race Course to serve as the proud home of the Preakness Stakes.” But the racing commission never voted on the plan, and the jockey club did not carry out that vision — instead spending most of its state grants at Laurel.

The commission acknowledges that it has never approved a plan for 2018 and beyond.

Nonetheless, the commission awarded the jockey club $15.6 million over the course of its plan ending in 2017, with 91 percent going to the Laurel track. And last year the commission gave the track owner $6.7 million, with more than three-quarters invested at Laurel, according to the company’s annual reports.

While state law does not dictate where the jockey club must spend the subsidies, the statute makes clear that the track owner must submit a plan detailing how and when it will spend the state’s money. And it clearly states that tthe commission must consider and approve the plan before releasing any money.

“It appears on its face that the racing commission has totally failed in its obligation to serve as a regulator of the industry,” said Sen. Bill Ferguson, a Baltimore Democrat. “You have to have oversight.”

Ferguson said he plans to ask Gov. Larry Hogan to order an audit of the commission’s use of the Racetrack Facility Renewal Account. “All funds in the RFRA account should be frozen until there has been a clear accounting for every dollar spent out of the account,” Ferguson said.

Maryland Jockey Club seeks $4.4 million in state reimbursement for improvements — all for Laurel Park track

The Maryland Jockey Club is asking the state racing commission for $4.4 million in subsidies for racetrack improvements — all of it for Laurel Park.

A spokesman for the racing commission said the panel stands by its work. “The commission believes it has complied with all regulations with one possible exception in 2018,” said Michael L. Harrison, spokesman for the Department of Labor, Licensing and Regulation, which houses the commission. “The department stands by the commission which has consistently and openly followed the regulations.”

Tim Ritvo, chief operating officer for The Stronach Group, which owns the jockey club, said the company moved away from the plan that envisioned greater spending at Pimlico when the extent of the track’s deterioration became more evident. “We knew shortly after the submission of the 2013 plan that minor renovations were impractical,” Ritvo said. He said the company kept the commission informed about its change of direction.

Ritvo said the company now plans to submit a new capital blueprint to the commission in July.

The account for racetrack renovations was established as state lawmakers were approving and expanding slot machine gambling in Maryland beginning in 2007. A portion of slots revenue has been funding the account since 2011, but the current reimbursement process did not kick in until 2015, state officials said. The commission has not rejected any request for funding by the jockey club since then, state officials said.

The jockey club submitted a capital plan for 2013 through 2017 that called for a “major overhaul” at Pimlico including six new barns with 216 stalls and “substantial patron focused improvements to the Clubhouse and Grandstand buildings.” At Laurel, the plan committed to construction of hundreds of new stalls, a new gatehouse and a new clubhouse.

Commission officials contend that the plan qualified the jockey club to receive subsidies through 2017. But there is no record that the commission approved the plan, as required by state law. And the commission did not monitor renovations to make sure the company was spending the money in accordance with its plan.

Instead, the board relied on an accountant’s verification that the money was spent on qualified capital projects, not necessarily those outlined in the plan.

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The former secretary for Maryland’s labor department who oversaw the regulations implementing the 2013 law says great care was taken to assure clear oversight and accountability. If approved capital plans are not followed, he said, the regulations allow the commission to recoup the funds — a step the board has never taken.

“A great deal of time and effort went into making sure that money was properly allocated and monitored,” said Alexander M. Sanchez, former secretary of Labor, Licensing and Regulation. “There was a clear process and timeline for oversight of the RFRA funds,” Sanchez said. “The process has to be followed for the funds to be legally utilized.”

Questions about how the racing commission has supervised the spending of racetrack improvement money comes amid a controversy about Stronach’s push in Annapolis to shutter Pimlico. The Sun previously detailed how the company’s renovation spending has gone mostly to Laurel and that poor conditions at Pimlico led Stronach to close nearly 7,000 seats last month in the Old Grandstand for the state’s biggest racing event, the Preakness Stakes.

The Sun’s recent investigation found that oversight of racetrack renovations with state funds has turned into a reimbursement process: The jockey club submits its expenses after work is completed, and the commission pays half of those costs after its accountant signs off. That’s not how it was envisioned, Sanchez said.

“The plan had to be submitted in advance and it had to be approved by the racing commission and it had to be monitored by the Department of General Services and the commission,” he said. “If that process was not followed it would be extremely concerning how that money was spent.”

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As Pimlico faded, its owners were pouring money into their Laurel track. Was anyone watching?

State and local lawmakers have said for years they do not want to see the Preakness leave Baltimore. Yet no one raised any alarms as Pimlico's owner was focusing most of its finances of turning Laurel Park into a "super track" that would host the third leg of the Triple Crown.

Harrison confirmed that the commission has not approved a capital plan for 2018, a year in which the panel provided $6.7 million in subsidies to the jockey club. He said racing officials didn’t believe a capital plan or monitoring was required because the money has been distributed as reimbursement for work that has been completed, not in advance.

The regulations say the opposite.

“To qualify for grants” the jockey club must receive racing commission approval of a “capital construction plan” that includes “specific time frames for implementation,” the regulations state. After a grant is provided, the commission shall “monitor the implementation of the approved plans for capital construction” and direct the company “to refund” the money if work “is not completed within the time frame approved.”

Even though reimbursements are permitted under the law, the commission can only approve such spending if the panel has approved a “plan for capital construction and improvements at a racetrack facility,” the regulations state.

Harrison pointed to minutes of the commission meeting in February 2013 at which executive director Michael Hopkins told members capital plans from the racetrack owner had been received. “The minutes do not reflect a vote,” Harrison said. “But if commission members had concerns they would have voiced them, therefore absent any negative comment it was accepted.”

Pimlico owners spent almost 90 percent of Maryland renovation funds at Laurel

Baltimore Mayor Catherine Pugh accused the Maryland Jockey Club of wanting to abandon the city for a preferred Laurel location, saying the firm “allowed Pimlico to deteriorate" by spending most of its state-funded improvements in Laurel, not Pimlico.

He added: “The commission will ensure a formal vote is taken on future plans.”

The jockey club’s 2013 plan noted that it was “subject to change.” Indeed, the plan foresaw a far more optimistic future for Pimlico Race Course than what has evolved since. Stronach tried this year to get the General Assembly to allow it to consolidate operations at Laurel and the Bowie training center. The “super track” plan would eventually move the Preakness to Laurel from Pimilco, which eventually would be rebuilt — without a racetrack.

The 2013 plan offered a very different vision.

“The 10-year plan is premised on the permanent consolidation of thoroughbred racing down to two facilities — Pimlico and Laurel,” the plan stated. “The Bowie Training Center will be closed and the activity taking place there will be transferred to Pimlico and Laurel.”

At the time, the plan called for an even split in capital spending: $15.5 million for Pimlico and $14.8 million for Laurel Park. The state subsidies would have provided half, or nearly $7.5 million, at each track.

That’s not how the spending transpired, according to an analysis by The Sun.

Through last year, Laurel received a total of $19.5 million and Pimlico received $2.9 million, a disparity The Sun reported in February that lawmakers decried.

Both tracks still have incomplete projects that had been in the company’s former plans: new barns and housing for track workers at Laurel Park, as well as a $4 million project to build 150 new stalls at Pimlico.

Ritvo said outstanding renovations will be addressed in the new plan the company will submit. But he told the commission that it likely won’t include specifics for Pimlico beyond basic safety upgrades, since city and company officials are negotiating the future of the 149-year-old track. “We hope that you will be patient with us on that,” he said.

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