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In 2008, Maryland voters legalized slot machine gambling and channeled some of the proceeds to revive Maryland’s storied but sagging horse racing industry. As a result, tens of millions of dollars a year now flow into racing purses and other incentives to breed and race horses in the state. But some still question whether state money should be spent on horse racing. As Triple Crown contender California Chrome– who has Maryland roots–prepares for Saturday’s Belmont Stakes, Kojo examines the economics of Maryland horse racing.
- Vinnie Perrone Freelance journalist
- Thomas Bowman Veterinarian, Past President of the Maryland Horse Breeders Association
MR. KOJO NNAMDIAfter a long and contentious effort to bring gambling to Maryland, voters agreed in 2008 to allow slot machines at five sites in the state. And to win the support of a struggling but rival gambling enterprise, the ballot measure directed that a portion of slots revenues be used to revive the state's long struggling horse breeding and horse racing industries. As a result, slot machine gambling now pumps tens of millions of dollars a year into the horse industry. And observers say the cash infusion is working. Purses are up at the track and the number of Maryland-bred mares and stallions is climbing.
MR. KOJO NNAMDIBut not everyone at the racetrack is sanguine. They know horse folks have to demonstrate that the state money is being well spent to keep it from being pulled, as is happening in its racing rival, West Virginia. In the meantime, all eyes are on this weekend's highly anticipated Belmont stakes where a horse with a Maryland-bred mother, California Chrome is racing for the triple crown.
MR. KOJO NNAMDIJoining me to examine slow machine revenue and horse racing in Maryland is Vinnie Perrone. He is a freelance journalist and a former Washington Post horse-racing writer. Vinnie, good to see you again.
MR. VINNIE PERRONEThanks, Kojo.
NNAMDIAlso joining us by phone is Tom Bowman. He is a veterinarian and past president of the Maryland Horse Breeders Association. Tom Bowman, thank you for joining us.
MR. THOMAS BOWMANYou're quite welcome.
NNAMDIYou too can join the conversation. Give us a call, 800-433-8850. How important do you think horse breeding and horse racing are to the state of Maryland. Vinnie, can you explain how much money is going to horse racing and breeding as a result of the Maryland ballot measure, and how that money is distributed?
PERRONESure, Kojo. Late in 2011 Governor O'Malley signed a bill that allowed slot machine revenue subsidies to go to the horse racing industry. And it needs to be noted that it is simply slot machine revenues that benefit horse racing, not table game revenues. And so in 2012, those purse totals increased in Maryland by about 26 million. And last year the slot benefits realized about $40 million. And this -- the numbers need to be put into some kind of context.
PERRONEIn the years before voters passed the slots referendum, I mean, Maryland had become a sick and withering figure. I mean, it once had been the preeminent racing state in the mid Atlantic. And then as West Virginia and Delaware and Pennsylvania all incorporated slot machine revenues into their racing programs, Maryland suddenly became the weak link in the region. And it went beyond economics. The mood was exceptionally glum any time you went to the tracks.
PERRONEAnd so there's really been a renaissance in addition to the economic boom to the state. There's a feeling of optimism when you go out there now that really had not existed in the last recent years.
NNAMDITom Bowman, you have been deeply involved in the horse world in Maryland for a long time. You authored the part of the measure allocating the slots revenue to different areas of the racing and breeding industry. Why did you feel that horse racing should be included as one of the beneficiaries of the slots money when the legislation was drafted?
BOWMANWell, first let me be clear that I authored the part that had to do with allocations directly to the breeding industry, which came subsequent to the original measure simply diverting money from slots revenue to horse racing in general. But I was a part of the effort from the beginning to try to convince everyone involved that the state of Maryland, as far as the horse industry had been concerned, was in such a competitive disadvantage that without some sort of a boost, some sort of help from the state, you know, this fabled industry was destined to wither away.
BOWMANAnd, yes, I've been involved in it for a long time. The question -- I think the question you're asking is, why do I think it's a good thing or why do I think it was a good idea. Well, first of all, I think that we as an industry, meaning everyone involved in raising and breeding and racing horses in the state needs to be able to stand up and explain to the average citizen, the average Joe on the street why this investment -- and I prefer to call it an investment -- by the state rather than a subsidy. Because a subsidy simply implies that you're giving somebody something. And investment implies that you're putting money into something with the expectation of receiving more back.
NNAMDI...getting a return. What's the return?
BOWMANThe return is a ripple effect Not only does the industry itself flourish, therefore providing more jobs directly, providing more use of agricultural land, providing jobs on the racetrack, but the ripple effect is that every ancillary business that supplies the horse farms, the race track, they all increase. For instance in my area, there's a feed mill that's increased its business many times over because horse raising in this area has flourished.
BOWMANI put new fences around my own farm when I started getting breeders awards. There's been an influx of new stallions which means more activity. So the effect is not just to a small group of people that let's say somebody from inner city Baltimore or from outside of D.C. who has no interest whatsoever in agriculture, they may view this as a subsidy to a small group of quasi wealthy people that own race horses for a hobby. But the fact is, this is an investment in a huge industrial industry in the state.
BOWMANAnd I was on the University of Maryland's Agricultural Dean's Council for a while. And I know that horse racing -- raising as opposed to racing, but the whole industry involving horses has either the second or third largest economic impact of any agricultural industry in the state.
NNAMDITom Bowman is...
BOWMANThe only one that's higher is poultry.
NNAMDITom Bowman. He's a veterinarian and past president of the Maryland Horse Breeders Association. He joins us by phone. Joining us in studio is Vinnie Perrone. He's a freelance journalist and former Washington Post horse racing writer. You can join the conversation. Give us a call at 800-433-8850. How do you feel about giving 7 percent of the revenue from Maryland's new slot machines to support the local horse industry, 800-433-8850? In what other ways, Vinnie, has the infusion of slots money changed the outlook for horse racing and breeding in Maryland?
PERRONEWell, it's clearly reinvigorated people emotionally, spiritually and also economically. I mean, Kojo, you have to understand that in the 20 years from the early '90s when Maryland racing and breeding was at its most vigorous peak, I mean, there was a substantial downturn. In 1992, Marylander's bred some 2450 mares. And by 2011 that was down to 548. I mean, that's nearly an 80 percent decline. It was just a devastating impact. There was -- the number of foals declined. The number of races declined. You had this tremendous consolidation within the Maryland racing industry. And what did that mean?
PERRONEWell, you had -- as Tom alluded to, you had stallion owners who suddenly couldn't make it work because mares were not being sent to them. And so you have entities like the Maryland stallion station which was once a promising stud farm which went asunder in 2008 after a mere five or six years. And it's important because -- it's important when you keep in mind Maryland's agricultural heritage.
PERRONEI mean, the Maryland Jockey Club was founded before the Republic itself. George Washington would ride his horse to the Annapolis races in the 1760s and has diary entries where he lost a few shillings because there wasn't even a U.S. currency then. The Maryland Jockey Club dates back to 1743.
PERRONEAnd it's perfectly understandable for somebody to think, boy, there's a curious symbiosis between slot machines and horse racing. But in the end it preserves this agricultural legacy that exists in Maryland. There are 650,000 acres of farmland now that are -- that can be preserved because slots are helping boost the entirety of the industry.
NNAMDIMany of us only follow horse racing at the highest level when we watch the triple crown events once a year. But the bread and butter of the industry are the smaller races that take place year round. Can you describe, Vinnie, the economics of horse breeding and how the recession in 2008 hurt breeders?
PERRONEWell, I'm going to let Tom speak to the actual horse breeding consequences, but I will say that you're right, Kojo. I mean, all eyes focus on the Preakness, the third Saturday in May. And this year the Preakness gave out $1.5 million for its purse. It was the largest purse ever allocated to a Maryland race. It drew a record 123,000 people. So it is a tremendous enterprise, of course. And the Preakness alone -- Preakness day alone makes up for a year's worth of losing virtually every time Pimlico and Laurel run a live operation.
PERRONEI mean, the overhead is great and the amount of money needed to sustain the purse levels is coming back some but it's still not great. So the point is that you have an entity -- when you talk about the Preakness, it overshadows everything else that goes on.
NNAMDIAll of those other races that take place all year round.
PERRONERight. So 20 years ago Maryland was racing 260 days a year. That was the number of days that Pimlico and Laurel combined ran. Now it's down to a 160 races a year. There's been, again, a sizeable consolidation in the number of races. But the plan that Tom has helped institute, which is to reward Maryland breeders and Maryland owners and the stallion owners is meant to reinvigorate a Maryland racing program that really has been (word?) for a long a long, long time.
NNAMDITom Bowman, can you explain the economics of horse breeding? How much does it cost to breed a thoroughbred race horse and raise it until you can take it to auction?
BOWMANWell, that question is a little bit tough to answer. It's sort of like asking how long is a ball of string? You know, there's some very basics. It costs several thousand dollars a year just to maintain a thoroughbred horse. So if you multiply that times several years for a brood mare who is bred one year and doesn't have her offspring race until it's at least two and usually three, you'll see that the multiple thousands add up in a hurry. And this doesn't include veterinary costs. It doesn't include breeding the mare to a stallion and paying a stud fee.
BOWMANThe stud fee could be $500 or it could be $100,000. So it's very hard to quantitate completely. But let's just say that it costs thousands of dollars. I think if I said an investment in a brood mare would ultimately cost somebody 40 or $50,000 before they found out whether her first foal was a successful race horse, would not be an exaggeration.
BOWMANAnd many people would say that's way too low. It depends on whether you can maintain the horse at your own place or whether you're paying board to somebody else. So the economics say that the end result -- are you still there? I'm sorry. I had a…
NNAMDIOh, yeah, we're very much here.
BOWMANOkay. I'm sorry. The end -- to say that it's a wise and predictable economic investment would not be true. What it is, is it's an investment into a sport that yields the ultimate excitement in the two minutes that it takes to run the sport. And what most people that breed horses hope to do is to occasionally hit the big one. That will allow them to continue to do this, either for a hobby or for a living. So, you know, big investment, high risk, occasionally high reward.
BOWMANWhat Vinnie pointed out about the Preakness is so true. Most people don't recognize horse racing in Maryland on day-to-day basis. But certainly, if you go, literally, around the country or around the world, there are two or three things that stand out in Maryland, as far as sports. The University of Maryland's basketball team for several years was the talk of the nation. The Chesapeake Bay and fishing and crabbing are always the talk of anybody who has ever been to Maryland. The football team in recent years, obviously. And everybody mentions the Preakness.
BOWMANHaving the Preakness to the city of Baltimore would equivalent to having a Super Bowl every single year. So from that standpoint alone, it doesn't take very much thought to figure out that having the Super Bowl in your town yields millions and millions and millions dollars of revenue for all the ancillary services that are provided. The same thing can be said of the Preakness. And it's every year. You don't have to wait for your Super Bowl. You've got it every year.
NNAMDIHere is Janet, in Warrenton, Va. Janet, you're on the air. Go ahead, please.
JANETHello, Kojo. Thank you for taking my call. I was just wondering if any of the money from the slots had been allocated to thoroughbred rescue.
NNAMDIDo you know, Tom Bowman?
BOWMANDirectly, no. Indirectly, yes. By that I mean that the Maryland Horse Breeders has very definitely invested in the horse rescue. I'm part of a group who has to go over some fund requests, grant requests, actually this week. And thoroughbred rescue is high on that list. A few years ago we would not have been able to do that. So there's not a specific allocation, but there is a -- there are very definite recognitions that that's part of the obligation of the thoroughbred community is to try to protect their legacy of caring for the animals, far after the race track.
NNAMDIThank you very much for your call, Janet. We're going to take a short break. When we come back we'll continue this conversation on Maryland horse racing and the relationship to slots, and continue taking your calls. 800-433-8850. How important are horse farms to Maryland's open space and agricultural heritage in your view? 800-433-8850. I'm Kojo Nnamdi.
NNAMDIWelcome back to our conversation on Maryland horse racing and the boost that it has gotten and is getting from slots. We're talking with Tom Bowman, he's a veterinarian and past president of the Maryland Horse Breeders Association. He joins us by phone. In studio with me is Vinnie Perrone. He's a freelance journalist and former Washington Post racing writer. Vinnie, despite the upswing in horse racing thanks to the slots revenue, some people are still nervous that it won't last. What's happening in West Virginia with the slots revenue allocated for horse racing?
PERRONEWell, last week, Kojo, the West Virginia legislature voted to reduce a budget shortfall. And they did so in part by reallocating an estimated $22 million in slot machine revenues that had been earmarked for the racing industry. And this is -- has sent up some alarm bells for the remainder of the racing industry nationwide, in that as legislatures all over the country cite the additional needs for revenue, that the slot revenues, according to the racing industries there, could be in the spotlight.
NNAMDITom Bowman, how important do you feel it is that the slots money continue to flow to racing in Maryland? You've described it as an investment. Is the current infusion building up horse breeding and racing enough that they could eventually stand on their own without state funds?
BOWMANWell, I think it's a legitimate question. And my presumption is, in the short term, horse racing and breeding could not stand up on its own because of the competition from outside. As long as other states are provided with supplementary income, it would be very difficult for this industry to stand on its own. However, I think, as I told the lady that called from your station yesterday, I believe that we're in a relatively different position than some of the other states.
BOWMANSo I'll take a minute to explain why. Number one, when we were working with, first, the Ehrlich administration, and then the O'Malley administration to try to get the slots legislation through, we made it very clear that we didn't want to be viewed as an industry that was greedy to the point of excess. So we voluntarily put a cap on whatever monies would towards horse racing and horse breeding. Now, that cap is, you know, it's pretty strong, but it guarantees to the public that if slots revenue continues to go upward, that the horse industry will not continue to receive the same proportion that it has on the ground floor.
BOWMANThat's important because people need to understand that this investment that Maryland's making does not have a never-ending ceiling. The next thing is, because we are the direct surrounding land of the Chesapeake Bay, it's important for everybody to understand that maintaining horse farms is probably the most cost effective way of maintaining a filter system for the Chesapeake Bay. Something that almost everybody recognizes as extremely important for the future of this state.
BOWMANAnd here's the reason why. With many agricultural entities, such as raising livestock in high density, there's a tremendous amount of runoff by way of manure into the Chesapeake Bay. And this has set up alarms for the last 25 years. One way to control that is to buffer the runoff by having large amounts of vegetative land, whether it's forests, whether it's intentional planting or whether it's pasture. With horses you do not raise them high density. They need a lot of acreage per animal. Also, you do not intentionally fertilize the fields, like you would with crops, because they don't need high levels of nitrogen and phosphorus.
BOWMANAnd so you have the most effective natural biological filter that you could have and somebody else is maintaining it, the owners of the horses. If horse farms go out of business, then the state is faced with two dilemmas. Number one, allow those areas to become housing developments, which obviously no one wants to see on a mass basis because of the tremendous runoff you get from any sort of high density land. Or the other is to buy it up and to pay the price for preservation of these lands.
BOWMANIf the state has to pay to preserve this land, they then have to pay to maintain the land. So it seems like to me that even from just this aspect, the investment into maintaining open space by allowing horse owners and horse farms to stay in business, is a terrifically wise economic move by the state. And that's one of the arguments that we would make in the years to come.
NNAMDIVinnie, nevertheless and in spite of, there is a $100 million cap on the amount of state money that can go to the horse industry. If state lawmakers decided to lower that cap and pull back the slots money, do you believe that will put -- not only put Maryland at a competitive disadvantage with other states, but could threaten the survival of the horse industry itself?
PERRONEWell, it's a difficult question to answer, Kojo, because I'm not sure of the feasibility of that. As I said, last year the slot benefits to Maryland purses was a little over $40 million. As Tom said, the cap is $100 million. Baltimore is going to open its casino within a few months in all likelihood. As we know, the MGM colossus over in P.G. is scheduled to open in 2016.
PERRONEExactly. National Harbor, probably, exactly. So there's going to be room for considerable growth, but whether that gets you up close to the $100 million, I’m not sure. And if that were the case, it's possible that legislators might wish to ratchet that back. But by then the continued growth of the Maryland racing and breeding industry could be so significant that it might be able to weather some type of pullback.
NNAMDIHere is Jay, in Manassas, Va. Jay, you're on the air. Go ahead, please.
JAYHey, Kojo. Long-time listener, a big fan.
JAYI wanted to kind of note that it's a (unintelligible) with the gambling income. I'm a musician by trade. So I get to actually see the various ramifications of gambling in an indigenous market. And before somebody cites Las Vegas, recognize that the people who come to Las Vegas are not the people who live there to gamble. I'd like people to recognize that both West Virginia and Maryland -- and they're lobbying to say, put the other out and be first to engage gambling, was actually caused by the gambling industry.
JAYBecause they had nothing to lose and everything to win. That being said, I think that the horse trade is a wonderful industry and I think it's a beautiful sport. It's a very viable sport. So I'm curious how the mayor of, say, Lexington, who has renovated or plans to renovate his town with the hundreds of millions of dollars that he's actually created through horse revenue, but yet without making a big statement about gambling, has done it. Is there anything to learn from that? And I'd really like to see less emphasis on the addictive nature of getting the gambling because the social…
JAY…ramifications are just tremendous.
PERRONEWell, there's no question. I mean the caller raises a number of interesting points. And we could have a week's worth of discussions relative to many of them.
NNAMDIBut he mentions the mayor of Lexington, Ky. And what he's trying to do for his city.
PERRONEWell, I, you know, I have not been following what's going on in Lexington. So it would be -- I really can't speak to it. Maybe Tom has some better insights about that.
NNAMDIWell, we got an email from E. J., who said, "I've always heard of Maryland's horse breeding and racing and the Preakness, of course. Support of the Maryland racing industry is the only reason I voted for the gambling measures on the ballot. I've lived in Lexington, Ky. And the horse breeding there is legendary. Where are the farms here? Many are being lost to development, no doubt, which is a shame since we need to preserve our open space." Tom?
BOWMANWell, boy, we couldn't have scripted that any better because that's pretty much verbatim what I had just discussed. And I agree with him. I don't know the particulars of the Lexington, Ky., situation. I can tell you that they have an unbelievable infrastructure down there, which we do not have. Which is supported by a small group of very, very wealthy international investors that send the best stallions in the world down there. So we're talking about almost apples and oranges when we describe Maryland breeding.
BOWMANMaryland breeding is basically mom-and-pop operations. A couple of farms that have some significant funds behind them, but for the most part this is a family business in the state of Maryland. And so to compare one to the other is very difficult. The other thing is I would tell you that the breeding industry, despite the fact that this is -- Kentucky is definitely the epicenter. They are constantly, constantly struggling with their breeding industry because there's no reward system down there that even rivals states like Maryland.
BOWMANMany of our horses go to Kentucky to be bred, but they come back here to be born because there's a significant advantage, both competitively and financially to coming here now, that wasn't the case a couple of years ago, but it is now.
NNAMDITom, you've been breeding horses for a long time, and among your horses were the mother and grandmother of one California Chrome, this weekend's Triple Crown contender. Tell us the story of how your mare ended up in California giving birth to a celebrity race horse.
BOWMANAll right. All right. Well, first, a couple of points. As far as I'm concerned this is the genetic lottery. This is what people try to achieve, but as is the case with the lottery, there's not a lot of intelligence that goes into pulling the plug for the lottery, nor is there in this particular instance. So to claim any direct intellectual capabilities in this process would be silly. To me it's like retrospective genius. You know, you look at it after the fact and you say, "Oh, my gosh. This is what worked." Well, what worked? Nothing worked as far as we were concerned.
BOWMANWe originally bought a very, very handsome, very nice brood mare at a sale in Keeneland, my partner Milton Higgins and I, because we were trying to "upgrade" the stock that we had. And this mare had reproductive problems. And as a veterinarian that's what I deal with on a daily basis. And so we sort of decided to roll the dice and buy this mare. Her name was Chase it Down -- Chase the Dream, I'm sorry. Two generations later the dam of California Chrome appears at our farm, is born at our farm.
BOWMANShe is a very, very ordinary horse, as far as ability goes, and not a very big imposing brood mare prospect. And so we eventually sold her. We sold her as a yearling. A young lady who deals with us a lot bought her and then sold her as a two-year-old in training. And then she eventually was bought by a group that took her to California. I am proud to be sort of on the outside looking in at this historic event.
BOWMANAnd I hope it becomes a Triple Crown, the first Triple Crown winner since Affirmed. But I think it needs to be pointed out that when people say to me or my family, "Aren't you sorry you sold that?" Well, of course not. Because if we had kept her, she certainly wouldn't have been bred to a stallion called Lucky Pulpit in California. She certainly wouldn't have been owned by the people that own her. She certainly wouldn't have produced a horse that was trained by an older man who was a jockey…
NNAMDIOkay, okay. We get it. We get it. We get it. It's the lottery. We're running out of time. But, Vinnie, what's your prediction for which horse will win the Belmont Stakes on Saturday? Can California Chrome pull off the first Triple Crown victory since 1978?
PERRONELoved him in the Derby, loved him in the Preakness. Do not like his chances so much in the Belmont, Kojo. Not so much for him, because he's a wonderful race horse. I just think that the breed has been weakened over 40 years of permissive medication. That they're just -- they're just -- these horses are not as able to withstand the grueling rigors of three tough races in a five-week span. I'm going to go with Metal Count to rundown.
NNAMDITom Bowman, in 10 seconds or less.
BOWMANI thought that there was a lot of left when he crossed the line in the Preakness. I was there. And so I would say I'm more optimistic than Vinnie. But there's a whole lot of horses that have been training for this race for a long time, while the other horses had to struggle. So I would say -- I'd give him 50/50 shot and hope for the best.
NNAMDII'm with you, Tom. Tom Bowman is a veterinarian and past president of the Maryland Horse Breeders Association. Vinnie Perrone is a freelance journalist and former Washington Post horse racing writer. I'm Kojo Nnamdi.
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