Maryland Mulls Takeover of Money-Losing Racetracks

Published June 1, 2009

Marylanders own many money-losing enterprises, including a golf resort in the western mountains and real estate in Baltimore City that the state can’t rent, sell, or subsidize. The state may add another failing business to its portfolio: racetracks.

Magna Entertainment Corp.’s bankruptcy filing in March opened up the possibility for the state to own Laurel Park and Pimlico Race Course, home of the Preakness Stakes, and the government is considering it. Gov. Martin O’Malley (D) in April introduced a bill to seize the Preakness Stakes, under the power of eminent domain.

The state already sponsors gambling in the form of a lottery and chooses who runs slots parlors and how many machines are allowed in them. And since one of the main reasons to allow slots—passed by referendum as a constitutional amendment last November—was to subsidize horse racing, it would not be a great leap for the state to take over the industry.

Private Interest

Many other options are open. In March O’Malley met with Peter Angelos, owner of the Baltimore Orioles major league baseball team, about saving the Preakness. Real estate developer David Cordish, whose bid to open a slots entertainment complex at Arundel Mills is under consideration by Anne Arundel County, said he is interested in buying the tracks and the rights to the Preakness.

Pikesville, Maryland-based developer Carl Verstandig, president of America’s Realty LLC, said he is interested in buying Pimlico and Laurel Park and developing them into shopping centers. He does not want the Preakness, he said.

Senate President Determined

While those offers may prevail, state Senate President Thomas V. Mike Miller (D-Calvert) wants racing to stay in Maryland, by any means.

“The state has an interest in it, the governor has taken an interest, we have attorneys general in it, we’ve got private law firms hired by the state in Delaware,” Miller told the Baltimore Sun in April. “We’re going to find a way to keep the Preakness in Maryland. Period.”

“I’d suggest that the owners of Pimlico dismantle the track piece-by-piece, load it onto some trucks, and take it to a state where the government actually respects private property,” said Competitive Enterprise Institute Senior Fellow Eli Lehrer. “The Preakness has brought a lot of publicity and money to Maryland over the years. It’s ironic that Maryland’s government is now planning to steal it.”

No Stimulus Money

O’Malley spokesman Shaun Adamec said there is “no talk” of dipping into the $3.8 billion the state will receive from the federal economic stimulus program to purchase the tracks, noting 90 percent of the money already has been earmarked for specific programs.

Maryland Racing Commissioner J. Michael Hopkins would not comment on whether he wants the state to buy the tracks with federal tax dollars.

The racetracks have been attracting fewer people each year. Even racing’s subsidies from slots facilities cannot be counted on, as investors seeking slots licenses have requested fewer than half the machines allowed under the constitutional amendment. That means the more than $600 million the state anticipated each year from slots tax revenue will likely never materialize.

Marta H. Mossburg ([email protected]) is a senior fellow at the Maryland Public Policy Institute.