by | 11.17.2010 | 12:47am

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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