Report: 1/ST Racing execs paint dire picture of Maryland racing

Executives with 1/ST Racing, the racetrack operational wing of The Stronach Group, met with Maryland officials on Friday to discuss the array of problems facing horse racing in the state, including substandard facilities and a business model that has produced a trail of red ink dating to 2013, according to a news report.

According to the report by Frank Vespe on The Racing Biz website, the meeting between 1/ST Racing executives vice chairman Craig Fravel and executive vice president and chief operating officer Kevin Gilmore and members of the Maryland Thoroughbred Racetrack Operating Authority did not paint a pretty picture of the challenges facing the state's racing industry.

“How long would any business want to continue to operate with a $10 million-a-year loss with no prospect of turning around? I don’t think it’s a long horizon,” the publication quoted Fravel as saying in response to a question from George Mahoney, the Maryland Racing Commission’s non-voting representative on the authority.

The public meeting was the fourth held by the racetrack authority following previous sessions involving executive sessions and a discussion of the lack of progress in lining up funding to make much-needed improvements to the aging Pimlico and Laurel Park racetracks, both of which are run by 1/ST Racing under the Maryland Jockey Club nameplate.

But Friday's session focused on the underlying financial issues that are blocking investment in the state's racing industry.

Fravel showed authority members a slide showing the Maryland Jockey Club's earnings before interesting, taxes, depreciation and amortization  showing the company has lost money every year since 2013, including a record $14 million in 2022.

The company’s numbers excluded Preakness day, which was long profitable enough to offset the losses. But Fravel said the second jewel of the Triple Crown also is struggling, producing losses of $2.9 million in 2022 and $1.9 million this year.

"Day to day racing in Maryland has to be reimagined, and it needs to be reimagined on an economically sustainable basis for all the participants,” The Racing Biz quoted Fravel as saying. “Not just for us, but for the horsemen and for the communities where we operate.”

Among the steps needed to bolster the state's racing program, the 1/ST executives said, are "the redevelopment of Pimlico as the future home of racing" in Maryland, which would keep the Preakness in Baltimore; development of a training facility, since the limited Pimlico stables cannot house enough horses to run a meet; as well as "re-aligning the racing calendar around the Mid-Atlantic" and "updating the economic model to fully support racing and training operations.

As part of the schedule re-alignment, 1/ST would like to see a schedule of between 80 and 90 racing days per year, down sharply from the 175 presented last year. That would allow the track to bolster purses to the $500,000 to $600,000 a day range, which would allow it to remain regionally competitive and ensure the state program is sustainable, the publication quoted Fravel and Gilmore as saying.

Finally, Fravel told the authority that the company would like to see a re-examination of the way that revenues from video lottery terminals, a type of slot machine known as VLTs, are distributed, noting that most of the money is currently directed to the purse fund.

“The horsemen get over $70 million dollars in total net revenue (from VLT subsidies and parimutuel wagering) while the racetracks receive $31 million,” Fravel said. “(Running a racetrack) is a massively expensive day-to-day operation, and those numbers simply don’t cover our out-of-pocket expense.”

Mahoney, the Maryland Racing Commission representative, agreed that racing in the state needs fixing but said the company cannot count on the state and other industry players to bear the brunt of a reimagined funding formula. 

“It’s something that has to be addressed,” The Racing Biz quoted Mahoney as saying. “For the horsemen, the horse breeders, and taxpayers, the state of Maryland, to invest heavily in your business, I think, would be wonderful, but the reality is, your presentation this morning was red ink, red ink, red ink. It’s not cheerful to hear.”