When states take over horseracing tracks
States spend billions on the racing industry. Why not just take the whole thing over?
Happy weekend, readers! A recent article in the Baltimore Sun brought up memories of my business reporting days when I wrote extensively about the bankruptcy of Maryland’s horse racing tracks in 2009. The proposal in the article—a state takeover of Maryland’s tracks—got me thinking about the different ways governments subsidize horse racing and why.
Hanging on to nostalgia
As a kid growing up in California, I knew two things about Maryland: the Naval Academy and horses. And as far as the state’s identity goes, that’s pretty spot-on.
Horse racing is as much a part of the fabric of Maryland as country music is to Tennessee or the auto industry is to Michigan. It supports thousands of jobs, horse farms preserve open space, and once a year the state and city of Baltimore get to show off their horse racing history on national television with the Preakness Stakes. Having been to Preakness, the second leg of racing’s Triple Crown, it’s like stepping back into time when horse racing was the No. 1 sport in the country, people dressed up for sporting events and the stands at Pimlico were spilling with people. It is truly a great time, whether or not you know anything about horse racing.
But I’ve been to Pimlico on other race days, as well as Laurel Park (Maryland’s other thoroughbred racetrack). Picture a cavernous and rundown building thinly populated by the regulars who go to drink, bet, and catch up with the other regulars. That’s a more realistic image of horse racing today and that is the industry that states—not just Maryland—will do almost anything to save.
A state takeover of horse racing
The article in the Sun outlines the newly formed nonprofit Maryland Thoroughbred Racetrack Operating Authority’s sweeping proposal to stabilize the troubled thoroughbred racing industry in the state. In the plan:
The Authority would take over day-to-day racing operations from The Stronach Group (1/ST), which owns Pimlico racetrack and the Preakness Stakes.
The Stronach Group would donate Pimlico to the state.
With more than $375 million in state funds already earmarked for racetrack improvement from a 2020 law, the state would renovate Pimlico and add an off-site training facility by 2027.
“The plan, as outlined in a 16-page report by the racing authority, is far from finalized and will require legal approvals and action by the General Assembly,” the article says. “But representatives of the state, 1/ST and Maryland horsemen projected confidence in the framework.”
Other than the renovation costs, what would this cost taxpayers? There is a reason the company that owned Maryland’s tracks (and dozens of others across North America) went bankrupt and it wasn’t the Great Recession’s fault. According to the Sun:
“Operating racing in the state has not been profitable recently and 1/ST has said it annually loses roughly $10 million. Even the Preakness, which is typically lucrative, lost millions over the past two years. For racing to be sustainable in Maryland, a nonprofit operator would seek to at least break even.”
The nonprofit authority says it could increase profitability by consolidating racing operations at Pimlico and focusing energy and funding there, making the Baltimore track the hub of Maryland racing.
I really want to believe that statement. But it seems like a stretch. What makes the state think it can make $10 million more a year than the private sector?
Why double down on horse racing?
Horse racing subsidies are a big government spend: Pennsylvania has doled out $3.5 billion since 2004. New York has spent $3 billion since 2008. But on the other hand, horse racing subsidies are an economic development two-fer in terms of industry and entertainment. They are like subsidies for the auto industry and sports teams rolled into one.
The question is, are they worth it? In Maryland, here are some of the reasons folks see horse racing as a worthy public investment.
Industry: Running tracks might not make much money but owning thoroughbreds can be extremely lucrative and horse farms support year-round staff, vets, trainers, jockeys and other jobs. Maryland’s horse industry generates an estimated $2 billion-per-year in economic activity, according to the state.
History: Horse racing has a huge nostalgia factor and that’s not just a Maryland thing. Why else would there be dozens of movies about racehorses (I count at least three about Seabiscuit alone), and would people spend thousands of dollars on attending the Kentucky Derby, Preakness or Belmont Stakes? It’s a one-day escape to another time.
The ‘it’ factor: As with most sports, emotion is a factor here too. I got to experience the magic that keeps people coming back to horse racing in 2009, when everyone was buzzing before the Preakness about a filly (female horse) named Rachel Alexandra. She had raced in the Kentucky Oaks (the other “big” race in Louisville held the same day as the Derby) and had decimated the field by an astonishing 20¼ lengths. A filly hadn’t won Preakness in 85 years and everyone wanted to know if we’d witness history that day. Plus, the company that owned Pimlico had filed for bankruptcy just months before and Maryland racing needed a pick-me-up.
With my media pass, I ended up watching the big race in a clubhouse area right at the finish line and when she crossed over first, the place erupted. Strangers were hugging, the rich folks were high-fiving the white-gloved wait staff and for a few minutes, we shared that bond of knowing we’d all seen something special. It’s one of my favorite memories from being a sports business reporter.
Baltimore: When the city makes the national news, it’s unfortunately not typically for something positive. But once a year, the state and city can count on national coverage extolling the wonders of the Maryland racing tradition, Pimlico’s proud history in the city and otherwise bring glamor and lots of spending to a part of the city that—for the remaining 364 days a year—is way underserved.
I’d love to hear from you all about whether states taking over racetracks is a justified use of taxpayer dollars. Just hit reply to this email or share this post on social media with your comment!