PAULICK REPORT FORUM brought to you by Breeders’ Cup: WHAT NEXT FOR MARYLAND?
By Ray Paulick
If anyone can explain the confusing situation in Maryland regarding slot machine revenue to horsemen and the future ownership of the Maryland Jockey Club racetracks—Pimlico and Laurel Park, owned by Frank Stronach’s bankrupt Magna Entertainment Corporation—I figure it’s Richard J. Hoffberger. A longtime owner/breeder and operator of the equine specialist Hoffberger Insurance Group, Hoffberger has been president of the Maryland Thoroughbred Horsemen’s Association since the group’s formation in 1987.
The Paulick Report caught up with Hoffberger on the road this week somewhere between Baltimore and Philadelphia Park to get an update on the challenging circumstances the Maryland racing and breeding industry is facing, with increasing competition from slots-rich states all around: Delaware, Pennsylvania and West Virginia.
What is the general feeling of Maryland horsemen right now?
Certainly there is a feeling of why didn’t we do this a long time ago? Fifteen years ago I stood at a podium talking to the press and introducing the concept of slots at Maryland racetracks. We said we would send $100 million to $150 million in tax revenue to the state each year and help save the Maryland horse industry. Using the conservative figure of $100 million a year, that was $1.6 billion ago. The state needs the money and the horse industry is in dire straits.
It’s typical political wrangling and it’s happening in too many states on too many issues. I don’t think anybody in today’s world would argue health care doesn’t need reform, but how do you do it? Nobody has really argued that slots at the racetracks is a bad idea, but how to you do it? It’s not just us: Kentucky, New York and some other states are going through the same thing. There is definitely a feeling of frustration.
Does the Maryland THA have a preference among the six groups eligible to bid on the Maryland Jockey Club tracks in the bankruptcy auction that’s been delayed several times and is now scheduled for March 25?
We hope a scenario exists where there can be slots at Laurel. We’ve always wanted slots at the racetrack. Our philosophy and desires are unchanged. We want somebody who wants to run races. We are in the racing business and we want somebody who wants to run races. We never contemplated slots would not be at the racetrack (the Arundel County Council approved a plan putting slots at the Arundel Mills Mall and not at nearby Laurel Park). If slots are at the track, they would be required to run 220 days of live racing a year, or less with agreement of the horsemen. But if there are no slots at the track, that provision doesn’t apply.
What is happening with slot machines throughout the state, and in particular Anne Arundel County, where there’s a petition drive to overturn the council decision?
The way it works in Maryland, slots revenue to the horse industry is not location specific. Two locations, in Cecil County and Ocean Downs, will probably be the first of the five specific locations approved for slots to open. The split going to purses is the same irrespective of location. The problem is if the racetrack operator can’t make any money, we could have the scenario of cash available for purses but not have any place to run. That’s the big fear.
Theoretically, higher purses attract better horses and create better wagering opportunities, driving up handle. Could that apply in Maryland if the tracks don’t get slots?
Throughout the U.S. in the last 20 years we haven’t found a scenario where tracks can compete favorably with slot machines. The biggest example is what happened in Illinois when (Richard) Duchossois spent all that money to rebuild Arlington Park and is struggling because of the riverboat competition and actually closed down for a while.
So what’s up with the petition drive to overturn the county commission’s zoning approval for slots at the Arundel Mills Mall?
The law in Anne Arundel County not specific to slots says if the zoning board, the county commission, passes a zoning law, then the citizens have the right to overturn the zoning approval with a petition signed by 19,500 people within 40 days of the zoning regulation being signed into law. It then it goes to a public referendum. Approval of slot machines is predicated on zoning approval. When Arundel Mills got zoning approval, there was a move afoot to overturn the ruling. Enough signatures appear to have been gathered; approximately 40,000 have been submitted though not yet approved. Any referendum would be in November.
If the zoning decision is reversed in Anne Arundel County, the whole bid process starts again, and somebody else has to apply for zoning. It’s back to square one.
What impact does the Anne Arundel situation have on the value of the Maryland Jockey Club tracks and the potential auction?
Obviously if the potential for slots existed, assuming that Arundel Mills gets knocked out, then the possibility exists for them to go back to Laurel. You don’t have to be an economist to see the value of the property goes up. It’s a gamble. But every business is a gamble.
When horsemen do get benefits from slots revenue, how much of a difference could it make to purses?
Assuming the Baltimore City and Anne Arundel County locations are up, we could be looking, by the time the machines are mature, at $70 million to purses each year. That’s the maximum. We could be looking at $100 million a year in total purses in Maryland.
What do you think is going to happen to Pimlico and the Preakness?
I think they’ll stay. Pimlico and the Preakness is a money maker. If you won Pimlico in a poker game this afternoon, you’d be the happiest guy in the horse business.
Have the delays and uncertainty damaged Maryland’s breeding industry beyond repair, or can it bounce back?
Look at what happened in Pennsylvania. That came on pretty quick. Can we bounce back? Yeah. Have horse will travel. We tell politicians it’s very easy to put horses on a van. We talk about the Baltimore Colts packing up everything in a moving van and leaving in the middle of the night. The difference is, in the horse industry, you can ship five mares a day, and in 100 days you’ve lost 500 mares. Your breeding industry is dead.
The key in Maryland, everybody in the horse industry wants to see what happens with the auction of the tracks. Is it going to get delayed again? Magna, in bankruptcy, has been running races, which is good. We’ll see who buys the tracks. There’s six groups putting in proposals, which is kind of like nominating for a stakes. Even if you won the lottery this afternoon you couldn’t become a bidder. Penn Gaming is a potential bidder. Who knows what they want to do. Cordish (which won the Arundel Mills Mall zoning approval for slots) is a bidder, and MID (Stronach’s MI Developments, which struck a deal in bankruptcy court to keep Santa Anita Park, Gulfstream Park, and Golden Gate Fields) is in there. It’s anybody’s guess, and I don’t even think the people bidding know how it’s going to end up. All those players say they are in it to get the job done.
Copyright © 2010, The Paulick Report
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Tags: Anne Arundel, Arlington Park, Cecil County, Frank Stronach, Hoffberger Insurance Group, laurel park, Maryland Jockey Club, Ocean Downs, pimlico, Ray Paulick, richard duchossois, Richard J. Hoffberger
March 10th, 2010 at 10:28 am
Ray, an excellent illustration of why Maryland racing is in the state it is in. Since its inception the MTHA has been run by Hoffberger and Wayne Wright with no fresh ideas or changes in thinking for over 20 years. Their demands are simple and narrow-minded, run as many days as possible without any concern to the quality of racing. The MTHA was the driving force that gutted the stakes schedule in Maryland, destroying whatever national signifigance Maryland racing had outside of Preakness day. While spineless track management starting under DeFrancis and company were willing to yield to their pressure, it was the MTHA’s demands that led to the deplorable live racing product that is produced daily. In doing so the MTHA also condemed the MJC to financial mediocrity and the reality of having one day (Preakness) carry the weight of the whole year. Case in point is the meet that fills the gap at Laurel between the closing of Colonial and the opening of Timonium. The MTHA demands it and their is nothing the MJC can do break even by running those days. The fact is that offering twilight racing, cutting takeout, and offering large fields in turf races is not going to make a mediocre product competitive for simulcast dollars during the middle of the Saratoga and Del Mar meets. Its a non-winner for all involved but the short sightedness of MTHA leadership demands it. The cycle continues with the language in the slots legislation (which was added at the behest of the MTHA) requiring 220 days of live racing per year. In the end Maryland becomes another circuit offering a live racing product supported by slots. Rather than wisely using the money to develop a self sustaining racing product, the money is all put into overnights and when the state decides that it needs a bigger piece of the pie the horsemen are left outside looking in.
March 10th, 2010 at 11:09 am
I can’t completely disagree with Tomaz; 220 racing days a year is way too much. We really, really need to shrink the industry in the mid-Atlantic, and that requires some cooperation among NJ, PA, DEL and MD horsemen as well as track managements (assuming there ever is a track management in MD). The $70 million a year (if it’s in fact realized — the eventual total may be considerably less, due to “slot fatigue” among patrons) would add roughly $300,000 per day to overnight purses if racing continues at 220 days a year. If you cut the racing days in half, then the bonus to purses would be $600,000 a day — enough to support a decent stakes schedule and overnight races that owners and trainers would be happy to compete in.
A pity that Richard didn’t mention Jeff Seder’s Blow Horn Equity in his review of the MD bidders. That’s the one group that’s absolutely committed to running races at a meaningful level — maybe not 220 days a year, but enough to maintain a healthy horse industry in Maryland.
March 10th, 2010 at 11:34 am
Anyone who’s held a power position in Maryland racing for 20+ years is the wrong person to lead Maryland racing where it needs to go. Hoffberger clearly believes that racing itself is not viable, that racing can survive ONLY on life-support provided by slots. What kind of leadership is that?
Tomaz Pacas put it perfectly - “no fresh ideas or changes in thinking for over 20 years.”
March 10th, 2010 at 11:58 am
This is my first post on this site and this is the first article I’ve read. I wholeheartedly agree with the other comments. However, I would go much further. As I see it, North America racing is in a long period of decline and the main culprit is its balkanized structure: each state (or Province, I live in Toronto) views racing as strictly a money maker for the government’s coffers. The use of slots money for racing is just a temporary respite, since once all states have slots, the problem will remain. Besides, the government could just take all the slots revenue whenever it wants.
My solution? We should look at other jurisdictions where horse racing is healthy: Japan, Hong Kong, France, England (maybe) and see what they are doing. I know French racing reasonably well and one thing they have going for them is the existence of a national racing board and a national Quinte (high 5) bet once a day. Payouts can be huge since betting represents a large pool of bettors.
Right now, here in North America, it’s like rearranging the chairs on the deck of the Titanic.
March 10th, 2010 at 1:29 pm
#4 I wrote to our chief executive recently making exactly the same point about deckchairs. Don’t forget all the bureacracy are still getting paid whatever happens. Depressingly the preferred solution is often to enlist reinforcements on super salaries! Someone has called this widespread syndrome “the fallacy of Managerial Expertise”.
March 10th, 2010 at 3:33 pm
I understand through a very good source that Jeff Seder would be the best man for the job. Good Luck Mr. Seder!
March 10th, 2010 at 4:53 pm
IT STARTS WITH THE PURSES…THAT WILL ATTRACT THE BETTER HORSES, IF THERE IS ANY LEFT…AS I HAVE YELLED BEFORE…THE BREED HAS BEEN WATERED DOWN..CLOSE THE DAMN BOOK AT 40 LIKE IT WAS IN THE YESTERYEAR!!!
March 11th, 2010 at 4:39 am
Have no fear PennNation Gaming will save the day as they did in PA, WV, NJ and Ohio. Penn National operates in over 12 states. They just purchased a track in Ohio and plan to build a hotel casino in the state.
I see in the future that Penn National will purchase the Baltimore track in MD. They also have purchased land in Cecil County in MD. to build a hotel casino Penn National is good for racing they sure turned around Charles Town Racing in WV, attracting top trainers in the country with added Stake races.
March 11th, 2010 at 10:40 am
#8 Does the recent furore over Michael Gill etc. come under “saving the day”, or is this ironic comment?
March 11th, 2010 at 2:01 pm
I don’t understand why the bankruptcy judge gives Stronach the time of day, much more any deckchair. This is the same arrogant jerk that didn’t file the slots bid application properly or with the funds. Kick his ass out…NOW! He shouldn’t be allowed to keep one track.
And I have to agree with the posters here, Mr. Hoffberger needs to either just fade away (quickly) or go to Wharton for a speed refresher course….he doesn’t seem to understand the mechanics of the slots process, the trolls in Annapolis OR that untimely, lengthy delays will screw MD breeders and racers. He also seemed to be clueless as to how the MD program, their racedates affect VA racing.
March 11th, 2010 at 3:37 pm
Is that guy HOFFBERGER related to the Hoffberger Deli at the DISTRICT LINE WASHINGTON DC & SILVER SPRING back in the 1950’s …THAT WAS THE BEST DELI IN ALL OF DC & SILVER SPRING MD..That was the only place to get a MORNING TELEGRAPH or a DAILY RACINCING FORM…
March 11th, 2010 at 6:14 pm
“RACING FORM”
March 11th, 2010 at 6:57 pm
On the District Line and Silver Spring, you’ve got wonderful Miller’s Newstand on Georgia Ave., carrying the form, and they never run out of them. I walk in the door and the owner reaches under the counter the moment he sees me, not for a gun, but for a simo edition of the DRF. ……….