Alan Rifkin, RWL Managing Partner and Chair of the Sports Law, Gaming and Facilities Group Quoted in Today’s Baltimore Banner Regarding the Future of Pimlico and the Preakness Stakes

At this weekend’s 148th Preakness Stakes, revelers will don fancy hats and sip black-eyed Susan cocktails. The infield partiers will dance to Bruno Mars. And the thoroughbred horses will circle the racetrack in their imposing muscular splendor.But as the pageantry unfolds in dramatic fashion on national TV, once again there will be a quiet undercurrent of questions about the future of horse racing in Maryland.

Is the racing industry sustainable in Maryland? How long will it continue at Baltimore’s famous Pimlico Race Course, or at Laurel Park to the south? Should the state step in to take over track operations from the for-profit Canadian company that owns the historic Maryland Jockey Club?“We’re at a very tenuous point,” said Alan Foreman, a lawyer who represents the interests of horse owners and trainers.Those involved in charting a new course for the industry are concerned, but not panicked, about the prospects of keeping racing alive and keeping Pimlico in business.The tension isn’t quite as high, for example, as back in 2019, when then-Mayor Catherine Pugh sued the Maryland Jockey Club to try to force ownership of Pimlico over to the city. Nor are things quite as stressful as in 2009, when the industry missed out on slot machines because the track owner refused to pay a multimillion-dollar application fee.But the coronavirus pandemic, construction costs, economic realities and even an unforeseen tax hit have stalled plans to redevelop Pimlico and Laurel, once again thrusting racing into a challenging season of self-examination. Questions about the state’s shrinking industry and antiquated tracks are nearly as prominent ahead of the second race of the Triple Crown as whether the Preakness winner will have a chance at the sport’s most storied title.

“The question of re-examination and restructuring is healthy for the industry,” said Alan Rifkin, a lawyer representing the Maryland Jockey Club, which operates Pimlico and Laurel for corporate owner 1/ST Racing & Gaming, part of the Stronach Group.

Thoroughbred racing has a long and storied history in Maryland, where tracks were once located in every county.

The Maryland Jockey Club was founded in Annapolis in the 1740s, making it the oldest sporting organization in the United States. Over the centuries, racing has changed and contracted down to two struggling tracks, as other sports and gambling options have captured people’s interest and attention.

But even a hobbled industry plays a meaningful role in Maryland’s economy. One study from 2018 estimated the horse industry supports more than 21,000 jobs and has an economic impact of $2 billion per year. And as long as horses are racing and training in Maryland, thousands of acres of horse farms will remain in business and not be sold to developers.

“It has weathered the Revolutionary War, the Civil War, two world wars, any number of downturns in the economy and COVID — and it continues to be a leading light in the racing industry around the world,” said the Maryland Jockey Club’s Rifkin. “The Maryland Jockey Club has its history in Colonial days and it’s going to be here for years to come.”

The most recent industry crisis came in 2019, as the Stronach Group announced plans to turn Laurel Park into a “super track” for year-round racing that would be capable of hosting races like the Breeder’s Cup. Stronach sought assistance from the state to sell bonds to finance the improvements.

Baltimore’s historic Pimlico Race Course — already neglected and dilapidated — would be forgotten, it seemed. And some feared that Stronach would try to move the Preakness Stakes to Laurel.

Baltimore politicians and boosters were galvanized. State lawmakers from the city banded together and blocked the Stronach plan at the last minute.

Meanwhile, the mayor at the time, Pugh, sued Stronach in an attempt to seize the track and put it under city ownership.

A plan thwarted

Weeks later, at the Preakness Stakes, politicians publicly fretted about the future of Pimlico. Privately, the new mayor who replaced Pugh after she resigned amid a children’s book scandal, Bernard C. “Jack” Young, convinced Stronach chairwoman Belinda Stronach to work with him.

The result, several months later, was a new plan that was endorsed by Stronach, breeders, owners, trainers and politicians.

The state would issue hundreds of millions of dollars’ worth of bonds to upgrade both Laurel and Pimlico. Some of the slot machine proceeds that go to the racing industry and the city would be redirected to paying off the bonds, about $17 million per year.

Under the plan, Stronach would retain ownership of Laurel Park and it would be the main site for racing. Pimlico, meanwhile, would be turned over to the city or a quasi-government agency and re-imagined as a multi-use facility for sports tournaments, festivals and, for a few weeks each spring, a racing meet centered around the Preakness Stakes.

Some of Pimlico’s land would have been sold off for development, to bring much-needed retail and commercial services to Park Heights.

After some tweaks, the plan was approved by state lawmakers. Everyone thought they were off to the races.

Then came COVID and macroeconomic challenges that followed.

Rising interest rates meant that the $17 million per year in debt payments wasn’t enough to borrow the amount of money needed. Paying off bonds at a rate of $17 million per year today would allow the state to issue only $210 million worth of bonds for improvements, instead of the $375 million that was expected back in 2020, Rifkin estimated.

Rising inflation and labor costs meant the work would cost more. And it turned out that Laurel Park needed much more work than expected, and that was before this spring’s trouble with the dirt track’s surface that led to safety questions following the deaths of multiple horses.

Meanwhile, Stronach learned that if they took public subsidies for a sporting facility on privately-owned land, they’d be hit with a major tax burden.

Construction never even started, and the troubles were spelled out in a series of government reports.

“Over the last year, the realization that we simply don’t have the financial ability, with the current allocation of money, to do both facilities the way we had envisioned has been very hard,” said Bill Cole, a consultant who represents city government in the track negotiations.

Evaluating options

All of the parties involved have gone back to the drawing board in recent months.

They’ve yet to reach a solution, but they all appear to agree now that Pimlico — not Laurel — should be the primary, and likely only, track to survive the next round of industry retrenchment.

“It’s all but certain that Pimlico would be the sole one-mile racing facility,” said Del. Sandy Rosenberg, a Baltimore Democrat and longtime racing fan who represents the area.

(There’s a 5/8-mile thoroughbred track at the Maryland State Fairgrounds in Timonium that hosts a short racing meet during the fair each year.)

The parties believe that it’s possible to configure Pimlico so that it could host year-round racing as well as other sporting and community events. But it’s not a perfect answer.

“It looks more and more like the industry is gravitating to Pimlico as the year-round home of racing and the home of the Preakness,” Rifkin said. “In saying that, Pimlico does not have enough acreage to accommodate the current number of horses training at Laurel Park.”

The racing industry would need a second place besides Pimlico to house and train horses, ideally not a long drive from Park Heights.

Perhaps that could be a slimmed-down version of Laurel Park; or maybe not, and Laurel could be sold off for development. Perhaps the shuttered Bowie Training Center — currently slated to be turned into a park — could be reopened.

Or maybe another property altogether could become a racing training center. One idea that’s been floated is an old government dairy farm in Gambrills in Anne Arundel County. Another option is the state-owned Fair Hill Natural Resources Management Area in Cecil County, which hosts equestrian events.

“We’ve been looking at options for the better part of six to nine months,” said Foreman, who represents the Maryland Thoroughbred Horsemen’s Association.

And negotiators realize that any plan moving forward would likely need to be completed within the already-approved budget of spending $17 million per year on paying off the debt on the projects.

‘An air of unease’

As decisions are made about where racing and training should take place, there are also serious questions about the operations of the racing industry.

For the past decade, there’s been an agreement under which the owners, trainers and breeders share a portion of their proceeds from simulcast profits with Stronach to subsidize the racing operations.

That agreement, which is separate from slots subsidies for the industry, expires on June 30. Without a new agreement, racing might not move forward.

“There’s an air of unease, to say the least,” Foreman said.

Experts say it’s unlikely that another company would want to buy the tracks if Stronach left. They’re old, they need work, and the revenues are paltry without having slot machines or casino gambling on site.

The state has given itself a backup plan, should the agreement expire or should Stronach pull out of the state.

In the recent General Assembly session, lawmakers approved the creation of an entity called the Maryland Thoroughbred Racetrack Operating Authority. Gov. Wes Moore signed it into law and plans to appoint members of the authority in the coming weeks.

If Stronach and the Maryland Jockey Club don’t maintain a certain number of live racing days, the authority could step in and take actions “necessary to support and sustain Maryland thoroughbred racing.” In short, the state could run the racing operations or hire someone to do it.

The parties involved in negotiations hope it doesn’t come to that.

Cole, representing the city, said the creation of the authority is a “fail-safe.”

“It is a mechanism to ensure we have continuity. We have an option available to the state of Maryland in the event the Stronach Group decides they want a different way forward,” he said.

The authority also is required to issue a report by Dec. 1 making recommendations on where a training facility would be located and updating the progress of track redevelopment. The idea is that if more changes in law are necessary for a reworked plan, state lawmakers could consider that at the General Assembly session that starts in January 2024.

A spokesman for the governor said in a statement that the law is a significant first step in determining the future of the industry, noting that horse racing supports thousands of jobs and protects thousands of acres of horse farms from development.

“There is a long, distinguished tradition of racing here in Maryland,” Moore spokesman Carter Elliott IV said in a statement. “Maryland racing has overcome challenges in the past and the administration is committed to working with all stakeholders to not only move us forward but to ensure a solid, successful, and sustainable future for Maryland racing.”

‘Hard decisions’ lie ahead

Publicly, the racing stakeholders are projecting cautious optimism that they can agree to a new plan — focused on Pimlico — by the end of the year.

“We’re clearly at a crossroads,” said Foreman, of the horsemen’s association. “This is one of the most complicated projects anyone involved has ever seen. There’s no playbook for this. There’s no blueprint.”

Rifkin from the jockey club said the self-examination has to be both productive and realistic. Both the industry and the facilities have to be “right-sized” for the current economic and sports market.

“This is a moment in time where we have to make some hard decisions collectively as an industry,” he said.

Rosenberg, the lawmaker who attends Preakness every year, says his ideal solution is one that has Pimlico becoming a 21st-century racing facility that serves as positive anchor for the neighborhood. He’s hopeful that next year, or maybe the year after that, the day after Preakness will mark the start of reconstruction at the track.

Rosenberg said that his strategy for betting on horses is to bet on the chalk, a term for the heavy favorite.

When it comes to Pimlico redevelopment, he said: “The chalk is that this is going to happen, but not without a lot of effort for a lot of people.”