Days after a self-imposed July 1 deadline passed, negotiators for the Maryland Jockey Club (MJC) and the state’s racing interests — including the Maryland Thoroughbred Horsemen’s Association (MTHA) and Maryland Horse Breeders Association (MHBA) — remain at odds over numerous issues regarding the future of Maryland racing. But the profile of the slow-moving negotiations may be about change, as state racing commissioners are set to embark on a round of one-on-one “shuttle diplomacy” meetings with the various parties, according to numerous sources.
In each of the last two years, these negotiations have gone down to the wire, with high-level intervention from state officials finally helping to craft an agreement. The Maryland Racing Commission has convened this year’s discussions among the parties for the last several months to avoid such an outcome. Without an agreement in place, there may be no or very limited racing in Maryland in 2013 and beyond.
But a proposal advanced months ago by the Jockey Club has not significantly moved the ball. That, said several people I spoke with who have knowledge of the negotiations, is the result of two issues: first is the fate of the Bowie training center, which has roiled the state for years; and second is the MJC’s desire for racing interests to present a written counter-proposal, which they have not yet done.
There is little doubt that the MJC’s initial offer is closer to a wishlist than to something the racing community would ultimately accept. At the same time, however, it is not an unrealistic starting place for a negotiation and suggests that the two sides could be able to reach accord without the blood-letting seen in previous years.
The proposal, as it has been outlined to me, includes the following components:
- Two 40-day racing meets, one in the fall and one in the spring;
- The ability for the state’s horsemen to “buy” additional racing days at an unspecified price, to be negotiated, but expected by many to settle in the neighborhood of $100,000 per day;
- The closure of the Bowie training center and the construction of all-new barns and dorms at Laurel, with a total of 1408 stalls, which would be open for training year-round. The estimated $14 million in costs would be split three ways: 50 percent of the money coming from slots revenues dedicated to racetrack capital improvements; 25 percent from the MJC; and 25 percent from the horsemen.
- A three-point shift in the split of parimutuel revenue, which would give the MJC 50 percent of takeout (up from 47), purses 44 percent (down from 47), and leave the state’s bred fund unchanged;
- A shift of 0.25 percent of slots revenues to cover the MJC’s unfunded pension liability;
- The ability for the MJC in its sole discretion, to construct new off-track betting facilities, where the revenue split from wagers would be 80 percent to the MJC and 20 percent to purses;
- A $60 million investment by the MJC in unspecified improvements to the racetracks, conditioned on the receipt of a similar amount from state funds dedicated to such activities;
- The agreement by the MTHA to consent to the import and export of simulcast signals for the life of the agreement, revocable if the MJC breached the agreement;
- The 10-year agreement could be renewed, at the option of the MJC, for an additional five years.
Taken as a whole, the proposals would mean that a 146-day racing meet would “cost” the state’s racing interests an estimated $15 million annually. The agreement among the tracks and the state’s racing interests governing racing in 2012 includes about $10 million in subsidies to the MJC: $4.4 million from the MTHA and the MHBA and the remainder from certain slots revenues originally intended for capital expenditures. The $10 million in subsidies are anticipated to enable the MJC to break even this year — but the agreement expires at year-end and there is every likelihood that state subsides will not continue ad infinitum.
No question, there’s much work to be done. Some of the MJC proposals will be non-starters with the horsemen; some will involve legislative changes unlikely to occur; and some require further work to iron out details that will be critical. For example, how the closure of Bowie and the construction at Laurel are handled are tricky, important matters; the horsemen aren’t likely to agree to a one-way option or to a dilution of their control of simulcast signals.
But in a big-picture sense, the task is simpler. The MTHA and MHBA provided $4.4 million to the Jockey Club this year (and other state sources boosted that amount to $10 million). Going forward, the MJC is seeking various actions and changes that will shift about $15 million annually into their coffers. The sides appear to agree that, absent subsidies, the tracks would lose about $10 million this year. So those are the big numbers: a current subsidy of $4.4 million, an estimated annual loss of $10 million, and requested revenue shifts (excluding the one-time capital investment in the new stabling) totaling $15 million.
Two questions for the state’s breeders and horsemen: What’s it worth to us to maintain a 146-day racing schedule? And, philosophically, should the breeders and horsemen agree to make the money-losing MJC profitable, enable it to break even, or merely help it to close the gap on the theory that it ought to be able to get itself to profitability?
The answers to those questions are what’s critical now, because those ultimately represent our bottom line. The details — important as they are — should depend on the ultimate goal and not the other way around.
Wherever we end up on these questions, one thing’s certain: the clock is ticking, and everyone in racing can surely see that another bloody, 11th-hour fight would be another black eye for a sport eager to turn the page on the bad old days.
ON ANOTHER NOTE…
If you’re reading our site, there’s a good chance that you were one of the millions who bet on the US Triple Crown this spring. Either way, you’re probably aware that betting online is the future of horseracing wagering, and if you click on the text links here, you’ll find some info on that topic!
NOTE: I attended an MTHA meeting at which the proposal outlined above was discussed but did not publish this post until I had spoken with several additional sources who were, off the record, able to confirm what I had heard, fill in additional details, and/or provide additional and differing perspectives.
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17 comments
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Tony
July 6, 2012 at 12:45 pm (UTC -4) Link to this comment
No mention of year-round stabling?
admin
July 6, 2012 at 12:47 pm (UTC -4) Link to this comment
Year-round stabling at LRL. Sorry for not mentioning it.
(@JerseyTom) (@JerseyTom)
July 6, 2012 at 5:37 pm (UTC -4) Link to this comment
RT @ThatsAmoreStabl: Clock ticking on slow-moving negotiations over future of Maryland racing http://t.co/fH3mFzUk
Stewart
July 6, 2012 at 10:11 pm (UTC -4) Link to this comment
So much for Stronach showing any level of reason once Hoffberger was out of the picture…
admin
July 7, 2012 at 10:50 am (UTC -4) Link to this comment
Thanks for checking in, Stewart. My understanding is that this proposal predates the present unpleasantness, and honestly, I don’t think this is an unreasonable first offer in a negotiation. Obviously, it’s not an offer we would accept, but it’s not an outrageous place to start from, in my opinion.
Josiah
July 7, 2012 at 11:53 am (UTC -4) Link to this comment
If I were the Maryland horsemen, I’d be scouting for locations in PG County to build my own scaled down racetrack and seek slots as the original legislation was intended. If the horsemen can’t find a track owner they can live with, they can control their own destiny and use the synergies of a casino to increase revenue.
Phil Schoenthal
July 7, 2012 at 9:44 pm (UTC -4) Link to this comment
Maybe I am as dim-witted as some would suggest, but I don’t understand why 146 days is the “line in the sand” so to speak.
Who cares if we race 80 or 146, as long as we can stable year round? I am not afraid of less racing in MD, I’m afraid of having to move or go back to a circuit-running lifestyle with a mortgage and two small kids. I think it would be great to run 80 days in MD for huge purses, and the rest of the year be free to ship and run whereever I please. I guess somebody smarter than me can please explain why more racing days is better.
The elephant in the room is that everyone knows there is too much racing, and with economy weakened in 2008-9 we are starting to see the shortage of horses due to decreased foal crops and/or people unable to afford to break and train the ones they had. In my estimation, because MD was the last state to the “slot machine table” for dinner, we volunteered to be the first to cut days.
I’ll crawl back in my hole now.
-Phil
P.S. Frank, I agree, it’s not an outlandish first proposal. At least they are willing to put something on paper.
admin
July 7, 2012 at 10:18 pm (UTC -4) Link to this comment
Thanks for checking in, Josiah. I’m not sure the PG County option is a winner, especially w/ Natl Harbor likely to get that license (and Rosecroft and the standardbred guys likely to raise hell if the T-bred folks go for that), but clearly it’s hard to partner with people when you don’t trust them.
Thanks for weighing in, Phil (and for agreeing with me!). You raise an interesting point, and I’d like to hear more horsemen respond — many people (and I’m among them) have sorta automatically assumed that more days are better, and that w/ fewer days, keeping good help and some of the other infrastructure of a year-round circuit would be hard to keep in place. Is that right? Or could we make do with big purses and a short meet?
Tony
July 8, 2012 at 10:12 am (UTC -4) Link to this comment
Come on out of the hole Phil and join the fight-. Your negotiating team for the MTHA consists of Dale Capuano, Richard Hoffberger and Wayne Wright- These 3 men control the future of MD racing- they still believe it’s 1985. Like I said a couple of days ago, it’s Dales world and we’re just livin in it. Dale Capuano insists on 146 days- he has said that he doesn’t care how low purses go- that means less competition and he wins more races. So the slots money goes directly to the Stronach Group at 100K a pop instead of into purses- where it should be. – If we have year-round stabling then we’ll survive that’s the key
Dale is against by-laws changes – he said so at the meeting Monday night If the by-laws change, he would have to rotate off the board and thus lose control- no more negotiations, no more purse structure and condition book control. We don’t have MD-bred restricted races- why not? Cause Dale says no!! We can’t even try it
Phil- kudos to you for recognizing the influence of the US economy on horse racing
Brian
July 8, 2012 at 1:31 pm (UTC -4) Link to this comment
80 days of racing is simply not sustainable for the vast majority of those involved in Maryland racing. Even with a “guarantee” of year round stabling, 80 days would increase the purse structure to a level that it would be too enticing for big operations to ship in for the money. The backbone of Maryland racing would be forced to ship out of state to find competitve races, so even with year round stabling, many outfits would not find it cost effective to remain in Maryland. Of course with a limited amount of Maryland breds, an 80 day year works out very well for the breeders, who would stand to profit with larger breeder awards in two boutique meets. More dates brings stabilty and we should be striving to get closer to the 220 dates specified in the state constitution than the 80 days being offered or even the current agreement of 146 days. Colonial Downs is drawing about 1,500 fans on a Saturday night with seemingly no long term plans for growth (slots are not an option) and New Jersey racing is being forced to fend for itself while surrounded by states relying on state subsidies (sounds familiar). This is the time for Maryland racing to expand it’s presence, not minimize it. If it takes the MTHA to “buy dates”, $100,000 may be too much, but an agreeable figure is probably out there.
Moving on to the other points, if the MJC wants to close the Bowie Training Center, the state constitution seems to indicate the land would convey with the state. Instead of closing the training center, how about just transferring to the MTHA (or an appropriate subsidy)? Some of the money used to pay the MJC to operate, can be used to operate the training facility for its members. I’m skeptical of any offer by the MJC to build new barns & dorms at Laurel. Previously the MJC struck an agreement with a private entity to build four new dorms, two by the private entity and two by the MJC. The private entity upheld their part of the agreement (the newer dorms behind barn 6A), but after those dorms were built, the MJC simply stated they could not afford to build the other two.
Instead of redistibuting the paramutual takeout, how about lowering the takeout to make racing in Maryland more enticing for wagering? The slot revenue should more than cover any drop in income. If there is any shift in the split in the takeout revenue, there should be an accompanying guarantee of full live coverage of Maryland racing on Stronach owned HRTV.
Gotta admit, I’m thrown by the unfunded pension issue. Stop treating the purse disbursment as some open money pile. Audit the pension plan and require those accountable to make good.
Off-Track betting facilities? Could this possibly be tied to Stronach being a minor partner is Ceasar’s bid for the Baltimore City Slot facility? The horsemen have a position of strength relative to simulcasting agreements and it would not be in their best interests to reduce that control.
The $60 million for unspecified impovements with matching state money should be already covered by the 2.5% matching funds provision from slots revenue in the state constitution. It would be nice if some of this available money would have already been in play.
As mentioned above, consent to import & export of simulcast signals should not be part of any operating agreement.
10 year agreement with a five year renewal? Understanding the fluidity of the racing industry, five & five might be a better option for both parties.
I realize I’m biased because as a rinky dink Marlyand based owner, I’d likely be knocked out of the business by an 80 day meet, but the goal should be to grow the game, not for any one group to maximize profit off the backs of other groups trying to make things work.
Thanks for the platform,
Brian Conley
Santa Rey Stable
Charles Mcginnes
July 8, 2012 at 4:55 pm (UTC -4) Link to this comment
The breeders could not survive with only 80 days of racing…who would buy MD breds with so few opportunities to run them? Stronach makes NO EFFORT to market Laurel and has turned down every idea to increase income and purses. He will be hard pressed to show a $10 million loss this year because the Preakness was so successful. He wants to destroy MD racing.
Stewart
July 9, 2012 at 12:06 am (UTC -4) Link to this comment
Why wouldn’t the MTHA be the 1st to put something on paper? Stronach is the one who continues to agree on something at the end of the year only to change his mind several months into the following year. Why exactly would anyone put something on paper when they have no idea what the hell Stronach is thinking?
I could be wrong but I do not believe the “proposal” pre-dates the recent MTHA infighting. Either way, I don’t see how anyone can look at this as a reasonable or serious start to a negotation. It is basically the same as Horsemen asking for 730 days of racing a year, a 100% increase in purses and a total reconstruction of all racing facilities.
Tony,
Richard and Wayne are leaving their positions in the fall and you lost me around halfway through your attack against Dale. But there was settlement agreed upon by both “sides” to the recent infighting so get over it.
admin
July 9, 2012 at 11:43 am (UTC -4) Link to this comment
Thanks for weighing in on all of this, everyone. I appreciate it.
Brian – you touch on one interesting issue that really isn’t on the radar screen to my knowledge: lowering takeout. I’d like to see some real consideration given to that, especially on the pools where there’s a lot of churn (WPS, exacta). I think that might be a nice way to differentiate our product in a crowded market.
I don’t think we can reasonably imagine that we’re getting anywhere near 200 days anytime soon, though — the US foal crop is 2/3 what it was a few years ago, the Maryland foal crop is 1/5 what it was a few years ago, and the mid-Atlantic market is crowded – there just aren’t the horses or the parimutuel activity to support that level of racing here.
Stewart – as usual, you and I will mostly have to agree to disagree. One thing – the Stronach offer is on paper, so to some extent we know what Stronach is thinking. Responding in kind is pretty standard stuff.
MD Racer
July 9, 2012 at 1:29 pm (UTC -4) Link to this comment
Kudos to Phil Schoenthal for saying publicly what many of us have been discussing privately. Let me be clear. Do I want 146 days of racing in MD? No – I want 346 days of racing in MD. However, I am a realist and I have a strong business background. Accordingly, I understand that there is no feasible or rational argument that can be made to increase days in Maryland. Unfortunately, the converse may actually be true. We, as Phil rightly suggests, may need to consider a proposal for less than 146 racing days in MD.
If last Fall/Winter is any indication, we simply do not have the horse population to draw upon to maintain a 146 day schedule. There were days when only 8 races could be carded and far too many races drawn with 6 or fewer entrants. Inevitably, a number of the more robust fields were depleted by scratches and lighter races scratched down to 4 or less runners. Add in the unavoidable off-turf days in the Fall and certain race days were totally decimated. Why does this matter? Field size has a direct correlation to pari –mutuel interest. Handicappers and betters consistently show very little taste for short fields that feature prohibitive favorites. There is no value to be had and many handicapping angles are nullified by the lack of runners. The net result is a lackluster handle, failing attendance, and no action on our exported simulcast signal. You can have the best facilities in the world and market them with great vigor but true horseplayers are not going to wager on short fields that offer no value. The competition for the gambling dollar is fierce and growing by the day. It is an undeniable truth that we need betters and handle. The core of our business relies on a product that must be enticing to gamblers. Always has been that way. Always will be that way. Additionally, the far too frequent dismal wagering days may actually lead to greater operating losses that will require even higher subsidies from horsemen in the years to come. I don’t know that for a fact because I am not privy to the numbers but that is my humble guess. Keep in mind that the difficulty in filling cards came during a winter which was mild and in which we had more horses on the grounds than in previous years. Add in the sputtering economy and the mix was right for the perfect storm of disappointing racing.
So, what is the right number of days for racing MD? That is a good question. It is not the 80 days suggested by the Stronach Group but it may also not be the “line in the sand” 146 days wanted by the MTHA. The price of buying additional racing days is quite steep and perpetuates a vicious circle. Extra racing days that result in poor field size and lousy handle is no tonic for what ails us. More importantly, to buy those extra days it is necessary to divert money from the purse account. More days at lower purse levels will not entice horsemen based elsewhere to race their horses in Maryland. Drastically reduced foal crops and the inability to attract new outfits to MD will only exacerbate the horse shortage. Owners and trainers race for purse money. The decision to move a string or a single horse is often predicated on the purse money available per condition. Have attractive purses, then the horses, the field size, and the wagering will follow. Just look at what is happening in neighboring states that have enhanced their purse structure.
I am a firm believer that without a thriving breeding industry in MD, racing will be doomed in this state. How do we protect the breeders with less dates? Once again we must look to our neighbors. I want WVA and PA and NY breds not because of the number of days they run but because they have wickedly good restricted race programs. In WVA, for example, you can run through your lifetime conditions in WVA restricted races and then run through them again in open company. That gives anyone with a WVA bred a chance to make a buck. Even with a cheap horse. Interest in NY breeding went through the roof for one reason – purses. NY bred races are plentiful and lucrative. No one is going to breed in MD to race in MD unless we get a healthy dose of MD bred races with rich purses and adopt the dual lifetime condition program of other state bred funds. The ONLY way to interest breeders in breeding to race in MD is follow the proven track that has worked in other states- a rich restricted program. I am not going to breed in MD to race in MD to run for purses that are diluted by buying days – and have to face only open company. Nope – my breeding dollars will go where it makes the most economic sense. How do we fund such a program? Simple , we don’t waste our purse money buying superfluous days.
Obviously, we will have to buy a certain number of days and that should be the focus of our negotiations with the Stronach Group. Let’s see if we can move Stronach to 100 days and then buy an additional 20-25 days. Let’s use the additional funds on greatly enhanced purses and an improved product that is anchored by a strong MD bred restricted race agenda funded by the purse account. I believe, in the end, a strong 120-125 race day calendar with lucrative purses and a strong MD bred program is the hope for the future. No one will race here or breed here or bet here when we offer low purses ,small fields, and lack an attractive bred fund. I understand that this is a simplistic overview of my opinion and it may require legislative action/MRC approval/ etc etc etc. But we have to start somewhere and indeed the clock is ticking.
Lead Pony
July 9, 2012 at 2:47 pm (UTC -4) Link to this comment
Great post as always racer-
Stewart- were you at the last meeting July 2? You would have witnessed a contentious show so it is apparent there is no “settlement.” Richard will remain on the board just not as president. It’s 2to 5 that Wayne will stay on as a “consultant” after September 15th.
The entire horse industry is contracting not just racing: the American Horse Council at their June meeting in D.C. had a discussion group about getting new people involved in horse ownership. The boomers are facing retirement with less money in their pension funds to support luxury items ie racehorses. The purses must go up to allow owners to at least break even- there are not enough owners such as Kevin Plank willing to drop millions into the racing biz.
Stewart
July 10, 2012 at 1:11 am (UTC -4) Link to this comment
If there is no “settlement” then you need to look to Johnson for answers since he accepted the “settelement” rather than pushing for another round of voting.
I realize that racing is contracting and anyone who doesn’t realize this is either blind or has no business sense whatsoever. Not sure how this has any bearing on the fact that Stronach continues to act in bad faith and that his latest and greatest “proposal” is basically worthless but I do agree with your statement.
So Stronach gets credit for putting a one-sided, bad faith and basically worthless “proposal” on paper? I have been involved in many business negotiations in my professional career and don’t get this perspective at all, especially considering that he refuses to open his books.
If you get credit for putting something on paper than I would respond with the ridiculous “730 days a year, double the purse size and rebuild all infrastructure” proposal I jokingly referred to above. That is about as realistic as Stronach’s proposal and certainly has the same level of bad faith.
The bottom line is until Stronach opens his books and is honest (if this is possible for Stronach) about his operating expenses and true P & L, there is no way to negotiate with this guy. Buy racing days from him without understanding the real cost structure of day-to-day track management? Seriously?
admin
July 10, 2012 at 3:57 pm (UTC -4) Link to this comment
Thanks for continuting to participate, everyone. Two points worth mentioning:
1) The MTHA’s outside accountant and the MJC accountant are currently reviewing numbers to try to reach common ground on what the marginal cost of a day of racing is (and of course, we’re already “buying” racing days right now, in the form of a $4.4 million payment, plus additional moneys from the state).
2) As for the “settlement,” the MTHA board essentially disavowed the May agreement when it voted July 2 not to consider any bylaws changes for at least two more years, six weeks after it had created a committee to propose bylaws changes and without hearing a report or recommendations from that committee.