Maryland Racing - Can It Get Any Worse? Apparently, Yes It Can

The March issue of The Equiery, featuring Tim Capps’ unblinking, sobering assessment of Maryland racing after Magna Entertainment Corporation blew their bid for slots, had barely hit the streets for a few days when the news was announced that Magna had filed for bankruptcy, turning a sobering assessment into a grim prophecy: “The unthinkable has happened: no Thoroughbred track in the state will get slots, suggesting a gloomy future for those tracks, especially given Magna’s likely terminal state.”

Maryland racing is teetering on the edge of the precipice…now what? We turn once again to Tim Capps, the former executive director of the Maryland Horse Breeders Association and a former executive vice president of the Maryland Jockey Club, which owns Laurel Park and Pimlico Race Track. The Maryland Jockey Club is owned by Magna Entertainment Corporation. During his tenure in Maryland, he lobbied actively for the establishment of slots at the tracks. Now, Tim Capps is the “Executive-in-Resident” in the College of Business, Equine Program at the University of Louisville. Click here to read his March editorial.

The Wolf Finally Came, Perhaps
by Timothy Capps
The above headline, minus the word perhaps, was the title of a book written some years ago about the near-death struggles of the American steel industry, especially those of Bethehelm Steel, whose largest production facility during the company’s heyday was, ironically, at Sparrows Point in eastern Baltimore County, a heartbeat from the city line and employer, at its peak, of more than 30,000 people.

That Sparrows Point plant still operates, profitably (although probably not at the moment), but it is now owned by a foreign company and only employs 2,000 or so workers in its downscaled form, with a lot of unused facilities still sitting (rusting away?) on the site.
For much of the past two decades, many Marylanders engaged in the racing industry, including the writer for 16 years or so, told anyone who would listen that horse racing in the state was doomed to a Sparrows Point or worse outcome unless something was done to change its competitive circumstances. The something, in almost every instance, was that the race tracks in Maryland should be allowed to install slot machines which would provide piles of new purse and breeders’ funds monies and give the track operators the chance to build little Taj Mahals to showcase the newly glamorous racing product that would ensue.
And, oh yes, the state would have even larger piles of money with which to fund education, transportation, economic development, public safety and the myriad of other things that state and local governments fund. Might even be enough there to allow for modest tax cuts.

Fundamentally, the basic argument was correct, even when the articulation was fuzzy or distorted, as it was at times. Maryland racing needed new revenue sources, because the old ones, essentially from wagering handle on the state’s racing, were insufficient to keep purses competitive with those in nearby states, never mind the inability to do meaningful overhauls of the tracks’ facilities, which looked increasingly antiquated as the state built two sports stadiums in Baltimore, a new arena to house the University of Maryland basketball program, and aided enormously in the construction of the stadium in Landover that houses the Washington Redskins.

But all the entreaties on behalf of Maryland’s oldest spectator sport just didn’t seem to compel movement by the state’s elected officials, and the slots debate went on for a nauseatingly long time before finally being resolved, in a rather flawed manner, last November via a referendum.

No, it wasn’t an ideal solution, with slots sort of limping across the finish line rather than galloping, but it was much better than an on-going stalemate that had been the status quo since the mid-’90’s. Sighs of relief were heard from the breeding farms to the race track backstretches and beyond: “free at last, free at last, thank God Almighty, we are about to be free at last,” to paraphrase Martin Luther King.

It couldn’t go wrong, could it? Could it?
Four months later, it has gone wrong, terribly wrong. The high tax rate and license fees dampened investor enthusiasm for Maryland slots, leading to miserably skimpy proposals for each of the five sites established in the statute, and, of supreme importance to Maryland racing, the inability or unwillingness of Magna Entertainment Corporation, owners of Laurel and Pimlico, to pay the required license fee up front, which led to their application for slots at Laurel to be rejected. As we write, their first attempt to get that rejection overturned in a local district court has also been rejected, which they will, lacking other options, appeal.

Dumping copious amounts of jet fuel on the fire, of course, was the long-predicted bankruptcy filing of Magna Entertainment, which took place during the first week of March and throws race tracks and other Magna properties across America in the arms of a Delaware bankruptcy court and, eventually, a trustee who will try to raise as much money as possible through asset sales to pay off Magna’s bottomless pit of debt. Without question, in the present depressed economic environment, Magna’s debt far exceeds the value of those assets, which include race tracks in seven states, an account wagering company, a racing television network, a couple of training centers, and the venerable AmTote, the country’s oldest supplier of wagering equipment to race tracks.

A bizarre twist is that the Magna development company, MID, which Magna chairman Frank Stronach has tried to use as a tool to prop up MEC since the debt load began to threaten the company’s solvency a few years back, is apparently bidding on certain assets of MEC, though those don’t include the Maryland tracks nor Santa Anita and Golden Gate in California.

To go through a voluntary Chapter 11 bankruptcy, which presumes business operations continue while the bankruptcy proceedings (including asset sales) go forward, a company has to arrange a loan to facilitate those on-going operations, and Magna’s $62.5 million loan is being challenged by some creditors who clearly see that as a way to avoid liquidation and the resultant paydown of debt.

It is, in a massive understatement, a mess, and the outcome for Maryland racing is extremely cloudy. The most important asset the Maryland tracks own, and perhaps MEC owns, is the Preakness, and its future in the state has already brought about handwringing among state officials and many others who now understand that the wolf really is at the door.

There is no justification for keeping Laurel and Pimlico open for racing purposes without the Preakness. The tracks lose money even with it; contemplating life without it, for a prospective track operator’s vantage point, is a non-starter. And, it is likely that the Preakness, even in challenging economic times, will draw interest from other track operators around the country if it becomes clear that the trustee would entertain separating it from the ownership of the tracks, which might happen for purely economic reasons (it is one asset with substantial economic value that is unencumbered by facility or location constraints).

Alternatively, it is unthinkable that the Preakness leaves its home base, and there will be lots of interested parties, including horse owners and breeders, who will want to take a look at the MJC’s books and try to find the makings of a deal that will work economically. Problem is, if you lose money with the Preakness, how do pay anything for the assets Preakness included and still create a viable business structure?

One scenario would be that Maryland Thoroughbred racing ends up being confined to a short meet at Pimlico in the spring and perhaps another at Laurel in the fall, with year-round simulcasting and the Preakness intact.

That might be better than nothing, but not much. The breeding and racing world in Maryland, under that model, would become a desert outpost, barely on the racing industry’s radar screen. The once proud tradition of horse racing and breeding in the state would be a thing for the history books, and the sport would be reduced to a Sparrows Point type of existence.

The wolf, sadly, has finally come.

Attention Competitors & Show Organizers: MDA Modifies Health Doc Policies

Equiery readers can be very persuasive! After The Equiery reported (March 2009 print edition) on policies posted on the website for the Maryland Department of Agriculture, some of which were new policies, Equiery readers went into overdrive, contacting MDA with either complaints or requests for clarifications. The Equiery was likewise contacted by show organizers, vets, and competitors, as well as by the MDA who insisted that The Equiery had gotten it wrong and wanted us to post and print a retraction.

After The Equiery referenced for MDA officials the language on their own website, MDA promptly removed the language.

Meanwhile, website chat rooms, bulletin boards and blogs lit up, not so much about what The Equiery reported but about a different section of the MDA website, that which required all out-of-state competitors to obtain an Interstate Health Certificate (also known as a CVI, Certificate of Veterinary Inspection) before arriving in Maryland. There were talks of horse shows or events in Maryland being boycotted by out-of-state competitors.
After meeting with equine industry leaders, MDA modified and clarified several policies. A tip of the hat goes to the Maryland Horse Industry Board’s Executive Director Rob Burk, who also serves on the Equine Health Advisory Committee for the Maryland Department of Agriculture’s Animal Health Section. As confusion and concern about the policies as posted on the website grew, and calls to MDA increased, Rob Burk worked tirelessly to obtain clarity, to research the Department’s practices and policies, and then to codify what had previously been unwritten policies into a new, written, policy statement, as well as modifying the new policies. He accomplished all of this in just one week, which is extraordinarily fast in bureaucracy and requires tremendous tenacity and diplomacy, but the Maryland horse industry will most certainly benefit as a result.

The Results!
Equine Health “Self Certification” for Competitors
As a result of the inquiries and the review of their own language, officials at MDA decided to suspend, for this year, the requirement for horse owners/trainers/agents to “self-certify” the health of the horses entered into competitions. The only time a “self-certification” for a horse or pony is now required is when the horse or pony is entered into a show being held at an event in which other livestock species will be present, such as at a county or state fair. Show organizers (at the multi-species fair) are not required to collect them, but are advised that it would be good practice to do so.

Registration of Shows By Organizers
In the meantime, for show organizers, MDA officials were able to dredge up regulations (not originally posted on the MDA website) that exempt virtually every horse show/event/activity in Maryland from having to register their activity with MDA: “Exceptions are provided for events sponsored, sanctioned or otherwise approved by an association or other umbrella organization that holds multiple exhibitions in a calendar year or for events funded by the Maryland Fair and Show Board…” What does this mean? In conversations with MDA officials, it means if Acme Stables holds one event (The Acme Stables Annual Horse Show or the Acme Stables Horse Trial or the Acme Stables Point-to-Point or the Acme Stables Fun Competitive Trail Ride), and this show is not recognized, sanctioned or pointed by any national, regional, state, county or local organization, it needs to register with MDA. However, if the Acme Stables decides to host its own series (The Acme Stables Horse Show Series), then – conceivably – Acme Stables does not need to register. If you are uncertain whether or not your activity needs to register, contact animalhealth@mda.state.md.us.

Out of State Horses & CVIs
Although The Equiery did not report, in print or on line, anything about requirements for Certificates of Veterinary Inspection (CVIs) for horses traveling to Maryland from out of state, because show organizers and competitors were clicking through equiery.com to the MDA website to read more about self certification and registration, site users came across the MDA language requiring that all out-of-state horses have CVIs. When officials at MDA insisted to The Equiery that horses from states adjacent to Maryland were exempt. The Equiery was not able to find confirmation of this in either Maryland MDA regulation or USDA regulation, and informed MDA that it would not publish the exemption without written back up. After an interior search, officials were not able to find an official policy, but declared that it was their practice to not require CVIs from adjacent states. The Equiery still refused to publish these exceptions without written confirmation. After another consultation with their legal department, MDA officials said that the press release (see sidebar) can serve as official policy, and that this policy will be posted on the MDA website.

So, now it is official: horses traveling to Maryland from states adjacent to Maryland and from New Jersey are exempt from having to have a a CVI on file with MDA. And this is now on the MDA website.

Good job, Marylanders!