The Maryland Racing Commission may withhold operating licenses from the group seeking to purchase the state's thoroughbred racetracks until it receives assurances that the group will make financial commitments to upgrade the tracks' stable and housing areas.

The racing commission is scheduled to meet at 10 a.m. today at Laurel Park to approve the $50.6 million transfer of controlling interest in the tracks by owner Joe De Francis to Magna Entertainment, a racing conglomerate based in Canada.

The licensing issue, however, could derail approval of the sale, postponing what was expected to be a largely routine hearing, unless Magna agrees to financial commitments to upgrade conditions, which were described as "Third World" in a memorandum by former commission chairman John Franzone.

"I'm in receipt of a memorandum that is very disturbing," commission member Terry Saxon said, "and it has to be addressed before we grant a license for next year. This has nothing to do with transfer; it's about licensure, and I don't think we can address transfer without addressing this first."

Racing commission members interviewed agree that Magna, which owns and operates 10 racetracks and recently completed purchase of Lone Star Park in Texas, meets the criteria for owning Laurel Park, Pimlico and the Bowie Training Center.

The company submitted to a financial audit by the commission and underwent a criminal background check.

However, several commission members are demanding guarantees of comprehensive upgrades to the track backside facilities, as well as guarantees the Preakness Stakes, Maryland's most prestigious sporting event, which generated a record $71.5 million in wagers in May, will remain in the state.

"It is in the licensing where we can put conditions," commission member Ellen Moyer said. "We can condition the state of the buildings so they are up to code, and with respect to the Preakness. The law is broad."

Commission chairman Louis Ulman said yesterday that an agreement has "been ironed out in concept." Negotiations between commissioners and the company were ongoing last night.

Magna officials declined to comment.

In September, Franzone, executive secretary Mike Hopkins and representatives of the tracks toured the backside of Laurel, Pimlico and the Bowie Training Center. Franzone followed up by recently sending out a memorandum on his findings to the eight other commission members describing barns, living quarters for track workers and drainage as "Third World conditions." "Renovation is out of the question," Franzone wrote. It needs "systematic demolition."

The memorandum described rat infestation at Pimlico, a stable area overrun by birds, standing water problems, substandard housing and a lack of significant grazing area for horses at Laurel. It represents a "serious disregard for the health and welfare of backstretch workers," Franzone wrote.

Richard Hoffburger, president of the Maryland Thoroughbred Horsemen's Association, which represents workers who live at the track, said his organization did not prompt Franzone's memorandum, but would welcome upgrades.

"The horsemen never have said, 'The barns are in deplorable shape; please rebuild them,' " Hoffburger said. "But has everybody said the barns should be rebuilt? Yeah, [anyone] can see that."

On Oct. 9, De Francis, Magna President Jim McAlpine and members of the commission met to discuss the concerns.

"We told them we would not approve this transfer without a bond to guarantee [upgrades] in place," said Saxon, who said the commissioners are asking Magna to commit in a form such as a bond or irrevocable letter of credit for at least $15 million.

Franzone and Ulman expressed confidence the issue would be ironed out and not block approval of the sale this morning.

"I think they're going to cooperate and do what ought to be done to improve the backstretch," Ulman said. "It would be best for Magna to make a commitment to do it and do it rather than us dictating what they have to do."