Pimlico Race Course as Good as Closed

Burton DeWitt@bsd987Senior Analyst IAugust 6, 2008

This might as well be the end. This might as well be a funeral.

For the past two decades, every horse racing news out of Maryland was one of contraction. Whether it was the end of the Pimlico Special, the fabled stakes race that once pitted Seabiscuit versus War Admiral in a march race, or purse cuts or requests not to have race dates at Pimlico, it has been a near-constant struggle.

A state that once had the most important juvenile race in the country, the most important spring race for older horses, a breeding industry that sired countless champions, a fan base that came from every corner of the country and not just on the third Saturday in May, this is a sad turn of feet. And now it just got sadder.

On Wednesday, Pimlico shut down for training. While it has always been open for horsemen, even when the track did not have live racing, it won't anymore. Not until April, when the track's meeting opens again.

At the same time, the state announced the cuts of every single non-state-bred stakes race for the rest of the year. Every single one.

From the De Francis Memorial, a Grade I sprint race that is one of the most important post-Breeders' Cup races in the country, to the Laurel Futurity, which was once won by such champions as Count Fleet, Citation, Secretariat and Affirmed, all of whom became Triple Crown winners the year after their triumph in Maryland.

Odds are, they're also going to cut the Barbara Fritchie Handicap and General George Handicap, both held in February, considering the purse money continues to be lacking.

Much of this is probably related to the announcement that Magna Entertainment Corporation, which owns and operates Pimlico and Laurel, Maryland's two thoroughbred tracks, has had losses totaling more than an half billion dollars since 2005, including $67 million over the first six months of 2008.

Magna had a terrible first quarter, usually its best quarter, after losing eight live racing days due to drainage problems at Santa Anita in California, one of the company's two profitable facilities.

In 2007, Magna posted a first quarter profit of more than $2 million. In 2008, it lost $46 million in the first three months of the year

Finally, Magna was recently nearly taken off of the NASDAQ exchange after its stock price dropped below $1. To stay on the exchange, the company did a reverse 1 to 20 split, raising the value to $7.20 as of Wednesday morning.

And while all these facts might answer why these moves were made at this time, none of them cut to the chase of what is really happening.

Sure, this move is just a posture. Despite all the loses, Maryland racing could still at least maintain itself for the rest of the year at the current figures. But barely.

Magna has been asking for legislation allowing for slot parlors at the states two thoroughbred and two standardbred horse facilities for a decade with no success. The revenue generated from these parlors would be used to bolster the horse purses.

But even if these moves were just to help the cause to get slots, it doesn't change the fact that without this money, the tracks will continue to lose money and eventually, might close.

No one thought Hialeah Park in South Florida would close. Or Ak-Sar-Ben in Omaha, Neb. Or Detroit Race Course. Or Longacres Park in Renton, Wash. Or Arlington Park in Chicago. But they all did, some more than once.

Arlington Park closed for two years from 1998 to 1999 before reopening under the management of Churchill Downs Incorporated, hosting the Breeders' Cup World Thoroughbred Championships in 2002.

Hialeah Park closed for the first time in 1990 and again in 2001, without reopening since. It is currently on the verge of being sold and saved.

The other three? All closed and long-since demolished, the only standing memory is the grave of Omaha, the Triple Crown winner in 1935 who was buried at Ak-Sar-Ben in the city whose name he honors.

Now Pimlico is bound to join the others, a lost treasure with nothing there to replace it.

If Pimlico does not get slots, how much longer can it keep its head above water?

How much longer can Magna afford to lose money on Pimlico when it is already losing millions each year on Great Lakes Downs in Muskegon, Mich., Remington Park in Oklahoma City, Okla., Portland Meadows in Portland, Ore., and Thistledown in North Randall, Ohio? Those properties have been on the market for four years without anyone willing to take the financial hit.

The simple answer? It won't.

The only thing that has kept Pimlico and Laurel Park afloat for the past decade has been the Preakness Stakes. The money brought in from gamblers on that third Saturday in May has done much to offset the losses of the other 364 days.

But each year, the losses of those 364 days continue to grow while the income from Preakness day continues to vanish.

Despite a record-setting attendance of more than 112,000 to see Big Brown win the Preakness this year, only the fifth-most money all-time was wagered on the event, a mere $73 million. Overall, there was a fall to $190.9 million from $228.7 million for the spring race meeting at Pimlico.

Last year, Maryland thoroughbred racing as a whole suffered a 4.1 percent decrease in overall handle, a fall of nearly $80 million from 2006.

Basically, in 2007, Maryland lost one Preakness in income.

Sure, gas prices make it more costly for people to travel, leaving them less money to spend at the tracks. But the dilapidated state of the facilities at Pimlico, located right in the slums of Baltimore, do not seem to invite anyone to come to the racetrack in the first place.

2006 was the only profitable year for Maryland thoroughbred racing this decade, as well as one of only two with an increase in handle from the previous year. Despite that, the Maryland Jockey's Club cancelled the Pimlico Special in 2007 before further slashing purses that June.

It's been a long spiral in Maryland and it only seems getting worse.

But there is hope.

After former governor Robert Ehrlich spent his entire term from 2003 to 2007 trying to get the state congress to pass legislation that would allow for slot machines at Pimlico and Laurel as well as Rosecroft, a standardbred facility in the state, it seems like the measure might finally succeed.

This Election Day, voters will head to the polls and vote on a referendum that will allow for 15,000 slot machines to be placed at the tracks in the state, generating $100 million for the horse breeding and racing industry.

But opponents say that too much money is going to the tracks and not the state. Additionally, of that money going to the tracks to bolster purses, only 42 percent will go to state-bred horses.

The rest will go to horses bred in other states and countries that are racing at Maryland's tracks.

Nevertheless, a poll conducted by proponents of the measure from May 19 to 21 of 803 Maryland residents showed 63 percent in favor and 34 percent against with a margin of error of 3.1 percent. But don't get too giddy.

Those numbers are nearly identical to those shown in Colorado in 2004 for a similar measure before it failed by a near 2:1 count in November. Early support does not mean November success.

If the measure fails, if Pimlico cannot make needed internal improvements to its dilapidated facilities and Maryland cannot bolster purses to compete with neighboring states, then Pimlico might as well not open again in April.

Once, Maryland hovered over neighboring tracks in Delaware, Pennsylvania, and West Virginia.

Now those states all have tracks with attached slot parlors.

While Maryland continues to offer about $200,000 a day in purses, Philadelphia Park has upped the ante to more than $300,000. Delaware Park has done almost the same.

Magna, after losing $575 million since 2005, cannot afford to lose money on Pimlico and Laurel again in 2009.

Maryland racing cannot afford to sit behind Delaware and Pennsylvania in the feeding order.

If worst comes to worst, the Preakness might just have to move.

What other choice is there if the slots measure does not pass?


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