On a balmy afternoon last spring, Gov. Harry Hughes and leaders of the General Assembly sailed into the Chesapeake Bay aboard the governor's yacht, determined to devise a horseracing reorganization plan that would mark them as the politicians who finally resolved Maryland's most troublesome political issue.
"We decided we needed something bold -- a comprehensive plan that would be more than just the tracks coming in and saying, 'Give me more money,'" recalled House Speaker Benjamin L. Cardin, one of the voyagers that day.
The politicians who sailed so hopefully into the racing issue last spring have united behind a bill, but it is not at all what Cardin envisioned. Instead, the cornerstone of the horseracing consolidation bill is a deal that was devised in private by officers of Maryland's two neediest thoroughbred tracks and presented to the state as a virtually nonnegotiable demand for $6 million in state funds.
This multimillion dollar deal to close Bowie Race Course and give its business to the two remaining thoroughbred tracks, Laurel and Pimlico, would rescue Laurel from financial ruin and drop a cash windfall on the conglomerate that owns Bowie. And the state's political leaders concede that they simply accepted the tracks' price without knowing why or how it was calculated. Their public arguments, some of them say, are little more than rationalizations for picking up the track owners' prearrangd $6 million tab.
"This is not a reform bill, I admit it," said Senate Finance Committee Chairman Melvin Steinberg (D-Baltimore County), another traveler on the governor's yacht and cosponsor of the racing bill. "It is a private industry assistance bill. It is a gift shop. It is a bonanza."
The fact that a privately arranged deal between track owners became the basis of a plan initially conceived as a comprehensive reform package illustrates the seemingly unbreakable hold that parochial interests have exercised over Maryland horseracing ever since the state began regulating it.
The terms of the bailout of Laurel and buyout of Bowie -- an act unprecedented in state history -- were set last fall in negotiations between Bowie's chief officer, Marshall Jacobs, and Eugene Feinblatt, Laurel's veteran attorney, with no state officials present. In raw figures, the terms they set seem to bring nothing but profit to the two tracks.
Bowie's owners, who earlier set a price of $12 million for all their property and their racing business, would close their track, but keep the buildings and surrounding 476 acres for future sale or lucrative redevelopment. bFor the value of their racing business, the state will meet their cash demand for $6 million -- almost enough to equal the track's annual earnings in the investment market, according to two of its officers.
And yet, the land and improvements that the Bowie conglomerate is keeping now have an assessed value of $11.7 million -- just below the $12-million price Bowie originally asked for both the property and the racetrack business.
Laurel's officers estimate that they would earn about $700,000 a year in new profits from running half of Bowie's racing season at their track. That additional income, minus the cost of fixing up the track facilities as the bill requires, would be just about enough to pull Laurel out of the red for the first time in three years.
The sponsors of this year's bill made peace with the $6-million buyout because of separate, personal interests that each wanted to advance.
Hughes, who rode into office on a reformer's platform in the wake of the racing-related scandal that brought downformer governor Marvin Mandel, desperately wanted to put his name on a once-and-for-all solution to the longstanding political and financial problems plaguing the racing industry. A longtime supporter of plans to reorganize racing by consolidating the thoroughbred tracks, he is presenting this package as exactly that cure.
Senate President James Clark, a land-rich Howard County dairy farmer, has also believed for years that the solution lies in track consolidation. That belief led him in 1972 to become an unwitting cosponsor of a consolidation bill that was a central part of the scandal that ended in the conviction of former governor Marvin Mandel. Well aware of Clark's leanings, Laurel and Pimlico last year hired Clark's neighbor and friend, Howard County horse breeder C. Oliver Goldsmith, as their lobbyist to push for consolidation.
House Speaker Cardin, a Baltimore lawyer whose district includes the Pimlico track, wanted a legislative answer for his well-organized consituents who have complained for the last three years about noise and traffic jams caused by Maryland's summertime racing season, which Pimlico has hosted three of the last four years. He tacked it onto the $6-million deal.
The other two sponsors -- Sen. Melvin A. Steinberg and Del. Tyras Athey, chairman of the General Assembly's fiscal committees -- were eager for the three major tracks to decide among themselves which one would blow out of the racing business. The agreement settled on by Feinblatt and Jacobs, however expensive, did just that.
And for all the politicians, the plan had added beauty they could parade before the taxpayers in a tight fiscal year. The $6 million would be picked up by racetrack bettors, whose prize money would be cut back enough to finance the deal.
Because the politicans had such divergent interests, they never reached a consensus beyond their common wish to resolve the controversial issue. Steinberg eventually proposed offtrack betting as a financial solution. Hughes had his attention distracted by the state's fiscal crisis. Cardin, admitting that the politics of racing bore and exhaust him, left the initiative to the others.
As such, the real momentum for a racing package grew not from that springtime discussion on the bay, but from the owners of the Laurel thoroughbred track, which has lost hundreds of thousands of dollars for two racing seasons in a row. Concluding that the track could not survive much longer without new business or relief from the state, they hired Goldsmith as their lobbyist and convinced Pimlico to take him on as well.
The tracks began preparing for the 1981 season more than a year in advance. Goldsmith organized a meeting of the owners of Laurel, Bowie and Pimlico in January 1980 at the International Hotel at Baltimore-Washington International Airport. At that and a later meeting, the owners decided that the thoroughbred tracks should consolidate and that Bowie would be the track to go.
Jacobs stated his price as $12 million, and the two other tracks' owners -- John Schapiro, the multimillionaire industrialist whose family owns Laurel, and Ben Cohen, the Baltimore magnate whose family owns Pimlico -- began trying to figure out how to foot the bill.
Cohen, whose family is legendary in Baltimore for its wealth, offered during the summer to buy both Bowie and Laurel, according to several involved in the negotiations, but that offer was resisted by Schapiro and the other track owners.
And so, the two wealthy owners decided to tell the state that they could not afford to buy out Bowie, citing as evidence the tight financial balance sheets of their tracks. They agreed to ask the state to make the purchase for them, even though Maryland racetracks have always paid for their own consolidations.
That idea evolved into a plan, drawn up by Goldsmith, Feinblatt, and another lawyer in Feinblatt's firm, for a $12-million purchase of Bowie by the state. This plan called for the state to turn the aging track into an equestrian center and, in addition, give Laurel and Pimlico millions more from daily betting money to build new stables and install airconditioning at Laurel.
Armed with the plan, which he termed a "white paper," Goldsmith went on a determined lobbying campaign, meeting with Clark, Steinberg, other legislators and even the governor. The plan "was pretty much greeted with derision," one track official conceded, and when presented to the Steinberg-Athey group, was summarily dismissed as outlandish.
Nothing more was heard of the consolidation idea in public forums for the rest of the year, but Laurel's attorneys and Goldsmith doggedly kept up negotiations with Bowie and with certain state officials -- chief among them, Clark -- in hopes of striking a compromise.
Feinblatt, one of the most knowledgeable students of Maryland horseracing laws, finally found the compromise in the primary instrument of Maryland's racetrack regulation: racing days. Throughout the history of Maryland racing, it has been up to the legislature to apportion among tracks the number of days in which races can be held. The more days of racing a track is authorized to conduct, the more money the operation brings in.
Feinblatt suggested to Jacobs that he sell the state not his track, but the 96 days of racing it was authorized to conduct. The idea is a bizarre one on the surface -- the state paying for the days it awards and uses to regulate track business -- but it is partly supported by a 1974 attorney general's opinion, which suggested, but did not conclude, that since tracks had bought the days from each other as assets over the years, the state could not withdraw them without compensation.
The Feinblatt proposal meant that the state would not have to take over ownership of a racetrack, and, what's more, would have to pay far less than $12 million. Jacobs liked the idea, and told Feinblatt in a phone conversation that he would sell the days for no less than $6 million. The sale would leave him with property assessed by government officials at $11.7 million -- just below his original $12-million asking price for both the track and the days -- and some legislators are now arguing that the state is paying $6 million for nothing.
But Jacobs insists the price is fair, arguing that he could not sell his property for $12 million if there were no prospect of further racing at the track.
Ten days into this legislative session, the three track owners convened in Annapolis with the same politicians who had dreamed months earlier of resolving the horseracing issue. Hughes sent his chief of staff, Ejner Johnson, and the legislators brought along their chief fiscal and bill-drafting advisers.
When Jacobs brought up his $6-million price, the legislators hurriedly concluded that it was fair since it averaged out to roughly the same price that tracks had been paying each other for racing days in recent years. And they proudly announced that the state would now have clear title to the all-important racing days.
However, nobody bothered to ask Attorney General Stephen Sachs for a definitive opinion on whether the state or the tracks owns the days. And as it turned out, Jacobs did not consider the average price of racing days when he calculated the $6 million. He said in an interview that $6 million is the amount of money Bowie's owners would need to put in investments so that their earnings would remain in line with what the track brought in. "This way, we would not take too much of a loss on our financial statement," Jacobs said.
"There's no magic to it. It was simply the figure I came up with," Jacobs said. "Except if we get less than that, we'll fight it."
After the legislators had caucused that night early in the session, they spent the next two weeks furiously negotiating the bill's features. In fact, they were still revising the bill less than an hour before they introduced it on Friday, Feb. 13. And some of the sponsors were surprised to learn that certain details in the final bill do not conform to what they wanted.
Meanwhile, the bill may face rough going in the legislature. Since it attempts to address so many different interests, it has pitted the various segments of the industry against each other.