May 8, 2002
 
 First of two parts
 
 The debate over slot machines - long seen as a billion-dollar lifeline for Maryland's foundering horse racing industry - is beginning anew. But a lack of leadership and an abundance of infighting have so marginalized racing's influence that the industry may be denied the riches it seeks.
 
 Whether to allow casino-style slot machines is a contentious issue that candidates will start to address in earnest as the campaign for governor takes shape. Also taking sides will be members of the General Assembly, all up for election in November.
 
 Trouble is, public feuding and broken promises by racing leaders have irked key politicians who are staking out their positions for the campaign and the next legislative session. Lawmakers may view the machines primarily as a way to pay for education and other government programs - "slots for tots" as boosters say.
 
 There is little doubt the machines can be lucrative. Last year in Delaware, gamblers spent $3.5 billion on slot machines at the thoroughbred track near Wilmington. The machines at Delaware Park and two harness facilities generate tens of millions of dollars for racing and contribute to the competition that Maryland faces from tracks there and in West Virginia, which also has slots at racetracks.
 
 Maryland, of course, does have a major advantage: It is the site of one of the sport's biggest events, the Preakness Stakes, to be run May 18 at Pimlico Race Course in Baltimore.
 
 But even that big event can do only so much to sustain racing year-round. Hence the desire for slots at the tracks, which is not a given.
 
 "Unless there is some coming together and genuine feeling that people can work together, this so-called 'enhanced gaming' might be located at places other than the tracks," said Maryland Senate President Thomas V. Mike Miller, a Democrat from Prince George's County.
 
 If Maryland approves slots, it would probably control the machines and keep the lion's share of the proceeds, predicts state Sen. Barbara A. Hoffman, a Baltimore Democrat who chairs the Budget and Taxation Committee.
 
 "We won't do what they did in Delaware. I'll tell you that," she said.
 
 Sen. Michael J. Collins, a Baltimore County Democrat and co-chair of the Special Committee on Gaming, appointed to explore the slots issue, was blunt about how the failings of racing's leadership have changed the political dynamic.
 
 "They don't just shoot themselves in the foot, they shoot themselves in the head," he said. "In my opinion, if slots come to Maryland, the racetracks aren't going to run the show. You are not going to let the gang that can't shoot straight run that show."
 
 Such words once would have been heresy in the red-carpeted chambers of the State House, where a swaggering Frank J. De Francis, the late owner of Pimlico Race Course and Laurel Park, swooped into hearings to collect tax breaks and favors. His son, Joseph, and daughter, Karin, inherited their father's racetracks but not his clout. No one has unified the industry as he did.
 
 The eye of the storm
 
 Joseph A. De Francis, president of the Maryland Jockey Club, which owns the tracks, stands behind the job he's done. He points out that he has kept year-round racing - and its thousands of jobs - alive in the face of stiff competition from other sports and neighboring tracks with slots. He's done it, he said, with prudent management and selected improvements at Laurel and Pimlico. Lately, he said, he has had to devote much of his attention to trying to make peace among the state's thoroughbred and harness trainers, horse owners, breeders and track operators.
 
 "Unity has always been important, but it's more important now than it's ever been," he said.
 
 The sport's fall from prominence has produced a harsh political climate. Maryland lawmakers who once could be counted on to pass industry-backed initiatives are instead handing out scoldings. A once-compliant racing commission has turned activist, even hostile. Leaders from the governor on down are griping about missed opportunities.
 
 "The Maryland Jockey Club has an awful lot of work to do to make its
 entertainment product more attractive to a bigger audience," said House Speaker Casper R. Taylor Jr., an Allegany County Democrat. "We're still fumbling around trying to keep up with the cutting edge of horse racing."
 
 Several industry initiatives have failed to produce the results that
 lawmakers expected:
 
 
 - The number of places where people can bet on horses away from Maryland's tracks has shrunk from five to three in recent years, even though off-track betting elsewhere is a popular moneymaker.
 
 
 - Telephone betting, authorized 18 years ago, stalled in the test stages in Maryland. Out-of-state firms dominate the growing market, in which players set up accounts and place bets by phone or computer.
 
 
 - Sweeping upgrades of Pimlico and Laurel Park, planned by the Maryland Jockey Club and approved by the General Assembly more than two years ago, were never carried out. The state collected a portion of wagers and held the money in escrow to back bonds that would pay for track improvements. But a series of miscalculations - by the Maryland Jockey Club and the state - resulted in the financing falling through.
 
 Lawmakers voted last month to spend some of the escrow money. An estimated $4.5 million will go to increase purses, the prizes paid to owners of top-finishing horses. The idea was to help Pimlico and Laurel compete with tracks in Delaware and West Virginia, where slots have fattened purses.
 
 But the money can't be used for renovations or problems that have become sore points among Maryland lawmakers and racing commissioners, who complain of unkempt and dilapidated facilities, insufficient marketing and poor customer service.
 
 "I'm tired of the industry self-destructing," said Sen. Thomas L. Bromwell, the Baltimore County Democrat who sponsored the purse bill. "I'm tired of baby-sitting."
 
 However, Bromwell said Joe De Francis does not deserve all the blame for the troubles of Maryland racing, or the tracks.
 
 "A lot of people are critical of him, but it is his business and he should run it as he sees fit," Bromwell said. "He's pretty committed to racing. He's certainly not a Frank De Francis, but he's committed to racing."
 
 Next year, racing - and Joe De Francis - will have to do without a longtime champion of the sport. Bromwell has announced that he is leaving the Senate to become president of the state's Injured Workers Insurance Fund.
 
 Proposed legislation that the racing commission had sought to help the industry was yanked on the verge of introduction last month, a victim of discord between harness and thoroughbred racing interests. The setback was just the latest example of short-term disputes preventing long-term progress.
 
 Nonetheless, the two most successful racing companies in North America offered this year to buy Maryland's thoroughbred tracks. Kentucky-based Churchill Downs Inc. ended its overture, but Magna Entertainment Corp., a Canadian firm, is still in talks with De Francis.
 
 The Maryland Jockey Club reported a profit of $1.5 million last year,
 double that of the year before, thanks in large part to strong returns from Pimlico's premier event. The Preakness follows the Kentucky Derby and precedes the Belmont in the Triple Crown series.
 
 Various estimates value the tracks jointly at $80 million to $150 million, and much more if slot machines are permitted. Year-round racing at Pimlico and Laurel appeals to conglomerates such as Magna that are seeking to bolster their telephone- and off-track betting businesses. But both tracks are in need of costly renovations.
 
 In neighboring states, tracks have been remodeled and racing rejuvenated by profits from slot machines, phone betting and off-track betting parlors. Some of those states' financial incentives to race and breed horses have caught or passed Maryland's.
 
 As they've watched horsemen in neighboring states make more money, those who earn their living raising and racing horses in Maryland have become outspoken about their problems and what caused them. Many point their finger at Joe De Francis. Detractors call him an ineffectual leader whose missteps have made him an obstacle not only to progress within the industry but to further help from state government.
 
 "Our leaders are leading us nowhere," said Tony Dutrow, one of the state's foremost trainers and the owner of stakes-winning thoroughbreds. "The employees of the racetracks aren't happy. The [horse] owners aren't happy. The breeders and trainers aren't happy. Annapolis isn't happy. Tell me who's happy. Who's responsible for all this?
 
 "Joe De Francis is the most responsible," Dutrow said.
 
 De Francis appears to be at odds with most segments of the industry,
 including the New York investment firm that holds a minority stake in the Maryland tracks. The owners of Rosecroft Raceway, the harness track in Prince George's County, want to quit their more than 2-year-old agreement with the Maryland Jockey Club to share betting revenue.
 
 Tom Chuckas, president of Rosecroft, says harness interests believe they can manage operations more efficiently without being tied to the Maryland Jockey Club, which they see as lacking a vision for the future of racing.
 
 "I believe Joe De Francis is willing to accept the status quo," Chuckas said.
 
 Dissension is particularly strong among the thoroughbred horsemen's group, whose leaders say they do not believe De Francis has played straight with them on matters that involve negotiations. Issues range from the development of off-track betting centers to Pimlico management's proposal to cut costs by closing barns in winter.
 
 "The reality is, what you see isn't what you get," said Alan Foreman, a lawyer who represents thoroughbred trainers and horse owners and has dealt with De Francis for a dozen years. "And that's every time. After a while that gets a little old."
 
 At the eye of the storm is Joe De Francis, 47, a lawyer who also holds a business degree from UCLA and a political science degree from Stanford. He practiced law in the District of Columbia, specializing in mergers and acquisitions. As president of the Maryland tracks, he was paid a $350,000 salary last year.
 
 As a racetrack executive, he describes his management philosophy as hiring the best people possible and then getting out of the way so they can achieve. He passionately declares his company's devotion to racing and to Maryland.
 
 "We have not paid out one dime in dividends or profit distribution or other return on equity," said De Francis. "We have plowed every penny this industry generates back into the business, trying to make it grow. That's something I'm damn proud of."
 
 His intensity in private contrasts sharply with his restraint in public. At meetings and hearings, De Francis seldom responds when legislators or horsemen criticize the Maryland Jockey Club. Usually he listens impassively or tries to lighten the moment with a smile or a remark.
 
 In his own defense
 
 In an interview, De Francis vigorously defended his performance. Despite increasing competition, whether from football and baseball stadiums downtown or from slot machines at nearby tracks, the Maryland Jockey Club has maintained year-round racing in Maryland, kept open its two tracks and its training center at Bowie, and avoided widespread layoffs, he says.
 
 De Francis gives himself a mere "C" grade for building an adequate
 off-track betting system in Maryland. But he says his company has
 continually tried to upgrade its aging tracks. He challenges anyone to tour Churchill Downs, hallowed home in Louisville of the Kentucky Derby, and then tour his much-maligned Pimlico. He says Pimlico will emerge favorably in the comparison.
 
 One upgrade completed in recent years at both Pimlico and Laurel was the construction of well-appointed simulcast betting areas with monitors that show races at other tracks.
 
 De Francis calls Maryland Jockey Club marketing "the favorite whipping boy" of critics but says his company's marketing has been "outstanding." He points to television ads that won national awards, a Preakness promotional film that won an Eclipse Award and the Pony Pals, a club for youngsters who will eventually, the idea goes, become racing fans. He says the company is spending about $150,000 for a consultant to help improve customer service.
 
 For those initiatives he credits his sister Karin, a 43-year-old lawyer and the company's senior vice president of public relations and marketing.
 
 She was a deputy district attorney in Orange County, Calif., at the time of her father's death in 1989. She and her husband moved to Maryland the next year. She took over managing her father's 35 thoroughbreds, had three children and, in 1995, joined her elder brother in running their tracks.
 
 Joe De Francis sees his role as extending beyond the company as he tries to promote unity among the disparate factions in Maryland racing. He says the industry needs help, and that whether it is in the form of revenue from slot machines or some other source, aid will have to come from Annapolis.
 
 "It is going to take a collaborative effort on the part of the key
 constituents that comprise Maryland racing," he said. "As the CEO of the Maryland Jockey Club, I obviously have a significant responsibility to make sure that the Maryland Jockey Club carries its weight in this coalition.
 
 "But I believe more in leading by consensus than by leading by unilateral dictate. We need the support and cooperation of the other players in the industry."
 
 He acknowledges having made mistakes. He says that his aggressive support for Republican Ellen R. Sauerbrey during the 1998 gubernatorial election hurt his standing in Annapolis and within the racing industry. She had left open the possibility of supporting slots while Glendening adamantly opposed them.
 
 De Francis has not preached about his desire for slot machines since making peace with Glendening. He agreed to keep quiet in return for the governor's support for other measures benefiting racing.
 
 "My silence on the subject hasn't changed the economic realities of what's happening in Delaware and West Virginia," De Francis said. "That continues to have a devastating impact on our business."
 
 De Francis says that the Maryland Jockey Club will not lead a crusade for slots but would participate in any effort that emerges within the racing industry. Its usually fractious segments say slots have become an economic necessity.
 
 But some in the industry say that De Francis' strategy is too dependent on the possibility of slots.
 
 "I think the vision, unfortunately, is electronic gaming," said Lou Ulman, chairman of the Maryland Racing Commission. "The vision is, 'We're going to get slots one day, so why spend a lot of money now? All our ills will go away.'"
 
 In Delaware, William Rickman Jr. led a movement in the mid-1990s for slots at racetracks, which transformed a dying racing business into a regional force.
 
 Rickman, a Montgomery County developer, owns the Delaware Park thoroughbred track. He bought the Ocean Downs harness track near Ocean City two years ago and is developing a track in Western Maryland and an off-track betting facility on the Eastern Shore.
 
 He has said he will not fight for slots in Maryland but through his acquisitions has positioned himself to benefit if they are legalized. Rickman declined to be interviewed for this article.
 
 At Delaware Park, about 90 percent of the money played in slot machines is returned as winnings. Of the rest - amounting to $350 million last year - 49 percent went to the track, 35 percent to the state, 11 percent to purses and 5 percent to slots overhead.
 
 A murky future
 
 Slots have become so popular with gamblers that some within the racing industry fear they could one day supplant racing. The machines also are low-maintenance, high-profit; horse racing is high-maintenance, low-profit.
 
 "Slot machines in this state could be very good for racing or they could be a disaster," said John Franzone, a member of the Maryland Racing Commission who owns racehorses.
 
 The political future of slots here is murky even with the departure next January of a resolutely anti-slots governor. Lt. Gov. Kathleen Kennedy Townsend, the leader in early polls to succeed Glendening, also opposes them.
 
 "I don't think that slots at the racetrack are a good answer for any
 challenge we have," Townsend said. "There's evidence that it promotes more street crime and domestic crime. I don't think they send a good message to our kids about how to get ahead, which is through hard work and persistence."
 
 Republican gubernatorial candidate Rep. Robert L. Ehrlich Jr., whose
 sprawling district is dotted with scenic horse farms, supports putting slot machines at tracks. He would give racing a share of the proceeds and devote the state's share to education.
 
 "On balance, I think the merits fall on the side of slots to help racing," Ehrlich said.
 
 Baltimore Mayor Martin O'Malley, who is exploring a run for the Democratic nomination for governor, supports slot machines at the tracks but not at the Inner Harbor. He says Maryland's horse tracks are doing as well as they can, given the competition they face from those in nearby states with slots.
 
 "I don't see how you can expect them to do more," O'Malley said. "We do have them handicapped."
 
 Girding for a fight
 
 Forces on both sides of the issue are preparing for a spirited fight. Money is expected to pour in from casino interests. In the four-year election cycle that ended in 1998, the most recent for which figures are available, racing and casino interests contributed $134,436 to state politicians, according to the National Institute on Money in State Politics.
 
 Adding urgency to the debate is an expected state budget shortfall of about $775 million for fiscal 2004. That shortfall could grow larger after passage last month of legislation that calls for spending additional money to improve public education.
 
 "The next General Assembly and the next governor are going to be tested on this. There will be a tidal wave of money to get slots on every street corner," said state Sen. Brian E. Frosh, a Montgomery County Democrat who co-chairs the Special Committee on Gaming.
 
 "I think there are fairer ways of generating tax revenue and that don't incur the heavy social costs that gambling does," said Frosh, who opposes slots.
 
 Kim Roman, co-chair of the anti-slots group NocasiNO Maryland, notes that slots have been rejected in Annapolis for years and refutes the notion that approval is inevitable.
 
 Proponents "are spending millions and we are spending hundreds, and we are whipping their butts," she said.
 
 Even supporters of slots say that a vote would be close and that racing's faltering image would work against approval.
 
 "I think we're going to get slot machines," Hoffman said. "But whether they are going to be at the racetracks I don't know."
 
 Legislation that failed in the Assembly this year would have allowed slot machines only in cities or counties in which voters approve them by referendum. Hoffman, whose Baltimore district includes Pimlico, says neighbors object to the possibility of traffic snarls and other fallout from slots.
 
 "As far as I'm concerned, the Maryland Jockey Club is a big part of the problem," she said, "because they have not lived up to their obligations."
 
 Speaking of the potential flow of revenue from slots in Maryland, she said: "I have the feeling that Joe De Francis thinks he's going to control it. He's not.
 
 "I think he's holding out for it like any good business person would, but there's not much of a reservoir of goodwill for him," Hoffman said.
 
 Del. Howard P. Rawlings, the Baltimore Democrat who chairs the Appropriations Committee, has been the most outspoken advocate in Annapolis for slot machines.
 
 "We're going to succeed," he said. "We're losing millions of dollars,
 probably hundreds of millions, to slots in Delaware and West Virginia."
 
 Rawlings has endorsed Townsend despite her opposition to slots.
 
 "I don't think she would veto a bill that had strong support," he said.
 
 He said he doubts that dissatisfaction with Joe De Francis hurts the case for slots or that a change of track ownership would matter.
 
 "I think he is irrelevant to what takes place," Rawlings said.
 
 
 
 
 Sun staff writer Sarah Koenig contributed to this article.
 
 
 
 Copyright (c) 2002, The Baltimore Sun
 
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