Imagine that Joe De Francis inherited his father's restaurant, and that the business declines steadily after he starts to run it. The customers complain about poor food, poor service and unattractive decor. De Francis's response: He raises his prices. He tells his clientele that he can't make the necessary improvements unless the customers help pay for them.
Of course, this is an absurd scenario, flying in the face of economic logic. A faltering business can't raise prices because it will almost certainly drive away customers. But this, in essence, is the grand plan that De Francis proudly announced at Pimlico Race Course yesterday.
The president of the Maryland Jockey Club revealed the details of a five-year plan to improve Pimlico and Laurel Park. Pimlico will get a beautiful new outdoor paddock, overlooked by terraced viewing areas, as its centerpiece. Laurel will undergo extensive renovations. New barns will be built at both tracks. New off-track betting facilities will be constructed in Maryland. More money will be channeled into marketing and advertising. The total price tag is $60 million, $35 million of it earmarked for renovation at the two tracks.
Gov. Parris N. Glendening (D) had demanded that De Francis submit such a plan before the state would continue paying its $10 million annual subsidy for purse money. Developing the proposal wasn't as difficult for the Maryland Jockey Club as figuring out how to pay for it. In a memorandum sent to the governor and the General Assembly yesterday, De Francis indicated that the Maryland Jockey Club would spend $32.5 million, and the tracks' customers would be assessed for the remaining $27.5 million. They would contribute to the betterment of the sport through a "temporary" 1.5 percent increase in the takeout deducted from wagers on Maryland races.
Takeout in Maryland -- as at most tracks -- is already oppressively high, averaging about 20 percent per wager. When a horseplayer bets a trifecta on a Maryland race, 25 percent from each dollar goes to the tracks and to horsemen. If the takeout was raised to 26.5 percent, a bettor might not immediately see the difference when he collects $147 on a trifecta that would previously have paid $150. However, economist Maury Wolff noted, "When people get less money back, they bet less. That's why most people in the industry have learned that increasing takeout is a bad idea. If this goes through, betting on Maryland races will be lower next year."
De Francis understands the truth of this statement, but said, "It came down to a question of how we can get this done. We're stretching as far as our corporation can to get financing. Slot machines are off the table. And there's no political appetite to fund these renovations [with public money]."
There are other ways to get the money. The Maryland Jockey Club owns the old Bowie race track, which is now used as a training center, even though the state's thoroughbred population could be housed at Laurel and Pimlico. Selling the land could raise millions of dollars and save expensive maintenance costs. But Bowie is a political hot potato, because residents of Prince George's County and their legislators don't want its open spaces to fall into the hands of developers. It's easier to squeeze millions of dollars out of customers with no political voice than to ruffle the feathers of a few powerful politicians.
The principal beneficiaries of the renovation plan are the state's horsemen, who will receive a $10 million gift when the proposal is approved in Annapolis. So why don't they volunteer to make a sacrifice, and direct a few million dollars from the purse account to the overall betterment of Maryland racing? To anybody who knows horsemen's groups, such an idea is laughable. As De Francis noted, horsemen are "single-mindedly focused on getting the maximum money" for themselves.
The memorandum De Francis sent to Annapolis emphasized that the costs of the renovation plan would not be borne by the taxpayers of Maryland, but by the "racing industry, including track ownership, horsemen and fans."
These few words contain two major misstatements. Horsemen are not contributing; they are only receiving. Fans are not part of the industry, any more than a patron at a restaurant is part of the food-service industry. They are customers -- and, in most cases, disgruntled ones.
De Francis said he thought that the costs to be borne by bettors should be weighed against the benefits they will enjoy. "On balance," he said, "it will be a positive thing." I suspect that if customers were asked if they want to make further financial contributions to Joe De Francis's tracks, their responses would not be positive.
Would horseplayers want their money spent to construct an upscale seating area for the Preakness, so that the track can charge exorbitant prices for the comfort of once-a-year racegoers? Would they want their money spent on new barns and a new access road to the backstretch at Pimlico?
Would they have any confidence that an infusion of money will make a great difference at Laurel and Pimlico? Yes, the tracks' facilities are subpar, but the main problem in Joe De Francis's regime has been the way customers are treated. A consistent complaint by fans has been the lousy quality of the food at concession stands and the high prices charged for that food. Part of the agenda for the tracks' renovation is the construction of a mall-like "food court." But will this expenditure improve the food?
Another part of the plan is the hiring of a "senior executive from the entertainment/hospitality industry with a strong background in marketing and customer service." Does anybody believe, after a decade of dismal customer service in the Joe De Francis regime, that one more vice president is going to change the corporate culture?
Maryland's racing fans are justifiably cynical, though we still may dream that the operation of the tracks will change. We dream of a spiffy new Laurel grandstand with a comfortable simulcast theater. We can dream (in our wildest fantasies) of a track where employees are uniformly polite. We are hopeful that De Francis will succeed -- but not so optimistic that we would voluntarily subsidize his efforts.
On the Fast Track
Details of the five-year plan announced yesterday by the Maryland Jockey Club to improve Laurel Park and Pimlico Race Course:
Cost: $60 million. The club would pay $32.5 million; the remaining $27.5 million would come from a temporary 1.5 percent increase in the amount the tracks take from each wager on Maryland races.
Proposals: Upgrade grandstands and add new food courts at both tracks; provide additional parking at Pimlico by tearing down old barns; increase marketing; hire a senior executive to oversee marketing, promotions and customer service; renovate and expand off-track betting facilities.
Next step: The plan must be approved by the Maryland legislature.