Maryland racing stands at crossroads
Maryland Racing Commission task force led by John B. Franzone addresses both urgent and long-term needs of the industry.
Interview by Lucy Acton

This past October, the Mary­land Racing Com­mis­sion (MRC) took an unprece­dented step, going beyond its regulatory role and forming a committee to push for positive change within the state’s horse industry.

The committee, known as KIM (an acronym for Keep It In Maryland), is chaired by John B. Franzone, a Timonium, Md., businessman who has lobbied extensively for Maryland’s racing industry over the last 10 years. Franzone has served as a member of the MRC since 1997, and was its chairman from 1998 to 2001. For the last several years, he has chaired the MRC’s Maryland Fund Advisory Committee, the group that provides governance for the Maryland-bred Fund.

Franzone, 50, became a racing fan at an early age. He was the co-owner of an active claiming stable for 11 years, until his appointment to the commission. Although he does not currently participate as an owner, he is frequently confused with his father, John Franzone Jr., who owns a 100-acre breeding and boarding facility, Flying High Farm, in Harford County, Md., along with several horses who compete at Maryland tracks.
When he isn’t occupied with his volunteer activities on behalf of the horse industry, Franzone works as CEO of Fawn Industries, which manufactures decorative automotive plastic components. Fawn was founded by Franzone’s father in 1953. Since purchasing the firm in 1990, Franzone has greatly expanded its operation, by adding plants in Mexico and China.

Franzone discussed the KIM initiative in an interview with Mid-Atlantic Thoroughbred editor Lucy Acton, on January 29 in his office in Timonium.

Why did the Maryland Racing Commission choose this particular time to launch the KIM task force? Obviously, a lot of the issues it’s dealing with have been out there for many years.

We finally have some “peace in the valley,” as (commission) chairman (John P.) McDaniel said, now that we have that 15-year agreement (reached in 2006 between the Thoroughbred and Standardbred interests). We don’t have the acrimony that we once did, and each group’s not out there lobbying for its own point of view, so we’re finally able to get some cooperation. There’s quite a bit of unity among the groups; everyone seems to have a common goal. John McDaniel thought it would be a great idea and so far it has.

KIM includes representatives from all of Maryland’s horse industry—the show people, trail-riding enthusiasts, as well as the Thoroughbred and Standardbred interests. After all those years of disputes, we find our needs are really one and the same.

What are those needs?
As far as the racing industry goes, a slots bill or a purse and bred fund enhancement is the big one. And obviously with the bordering states having expanded gaming, we need to have some type of slot bill or alternate gaming bill put forth, but in the meantime we do need help.

The second need is marketing funds. We can’t compete with the state lottery. The lottery outspends the race tracks, combined, 14 to 1. That’s a daunting obstacle to overcome, and the tracks don’t have the money and neither do the horsemen. The state does have funds for marketing the lottery, and frankly we can’t compete against lottery devices. They’re everywhere—they’re almost in every bar and tavern in the state. We’re in very few locations, so it’s a big challenge for racing.

Lastly are the venues, and this is huge. We need funds to upgrade our facilities. At the Meadowlands Sports Complex, they’re talking about building a new stadium for the Jets and the Giants because the existing facility has become antiquated. It’s almost like our old Memorial Stadium. I think the cost of that project is a billion and a half dollars. Nobody really seems to be balking at it. But I guarantee if you look at the revenue that Aqueduct, Belmont and Saratoga bring in, it’s greater than what those two football franchises bring into the state of New York.

It’s just unbelievable to me that we have two beautiful facilities (Camden Yards and M&T Bank Stadium) in Maryland and we can’t get at least one race track done. D.C. is building a new baseball stadium for the Nationals, and we continue to race in substandard facilities.

What is your ultimate vision for a new race track in Maryland?
The possibility of a new track in downtown Baltimore has been discussed off and on for close to a decade. (Former) Governor (Parris N.) Glen­­den­ing liked the idea. The problem was, from a political standpoint, he had just taken a lot of flak over getting the football stadium (now known as M&T Bank Stadium) built as he took over the reins from Governor (William Donald) Schaefer.

You know there are always people who say: “Why should the taxpayers fund this activity?” But then there’s a greater group of people who howl when a sports franchise leaves town—for instance, the Colts, when they left.

Would (current Governor Martin) O’Malley like to see what the impact study would be for a downtown race track?
I think that he wants to take his time and get things right. He has indicated his support for the racing industry many times. I would imagine he would consider a study on the downtown track. In addition, I believe that he would like to see the numbers on totally renovating Pimlico. I totally agree with Governor O’Malley’s idea to take his time to study all these issues before he plunges in. Very few people get in trouble for going slow. When you dive in, that’s when you have problems. Be careful what you wish for—poorly crafted legislation can be a nightmare. I was with Bob Flynn (executive director of the New York Thoroughbred Horsemen’s Association) when slots were approved in New York State. He got a phone call informing him of the good news. He was jumping for joy. More than five years later, Aqueduct still does not have slots. I do think the governor understands the need for an immediate infusion of assistance for purses and breeders’ funds. We’ll see how that goes over the next couple of months in the legislative session. I have complete faith in his leadership and administration.

Do you think a race track in downtown Baltimore is a realistic possibility?
I think it would have to tie in to Magna’s plans. Magna (Entertainment Corp., majority owner of Laurel Park and Pimlico) is on record as being totally opposed to it. They want to make Laurel the linchpin of their revitalization. If you look at (Magna chairman) Frank Stronach’s plans, he’s going to take the grandstand at Laurel and move it to the other side. It is a total redo, a very cool project. Additionally, Laurel is a very good location. I can’t argue with that.

I personally think it’s a good idea, if we’re going to have two facilities, to give up on the Pimlico location and look at this downtown track and also redoing Laurel. But again this is just my opinion. The cost could be too high. There is the condemnation issue: That’s going to create a high cost. So a complete study would be the first step. To me, the concept of a downtown track plays in better to the idea of the Preakness, as all of the Preakness events are downtown. If you could attract the Breeders’ Cup to downtown Baltimore and if alternative gaming ever came and it was at that location, it would be a beautiful tie-in to conventions and the Inner Harbor. Downtown merchants would be yelping for joy almost every weekend with that type of activity. But then again, the tracks are Magna’s facilities, and they’re not in favor of it. Who knows—down the road, maybe they could see where it would be beneficial. I can understand there is some trepidation about having the state involved in your business.

Right now it’s a huge longshot. It’s probably off-the-board as far as the odds go, but again I think it’s worthwhile to continue to study it, and for Magna to have an open mind to it. Right now I know their number one interest—and it would be a major coup for us—is to totally redo Laurel and renovate Pimlico. That’s maybe not a grand slam, but it’s certainly a home run.

Obviously, the immediate question, for a lot of people, is when (if ever) slots will be approved to boost the racing industry—and how racing will survive in the meantime.
Well, I think it’s finally hit home; we are on the brink of disaster.
While West Virginia had slots, and Delaware had slots, it was still said: “Well [Maryland racing is] out there and it’s doing okay.” West Virginia runs a slightly different program from Maryland—they’re focused more on the lower end. And Delaware has worked with us; (Delaware Park owner) Bill Rick­man doesn’t want to put the Maryland tracks out of business.

We cut back the number of (live racing) days at Laurel and Pimlico from 220 to 180; we severely cut the stakes program. So we managed to build a little bit of a surplus in the purse account; I think it was $8 million. That surplus is now almost gone.

In 2008—I don’t disagree with Magna’s position—the purse money will probably only stretch far enough for us to run somewhere between 140 and 150 days. When you get that low, you’re not talking about a year-round racing program. It is a very dire situation.
Then you look at the initial success of the slots at Philadelphia Park, and their purse increases. They’ll soon be in the $350,000 to $400,000 range for daily purses, with us sitting down here running 140 days at $200,000 a day—we would be the minor leagues. That blows my mind, how far things have gone downhill for us. We were never at the top of the top—we weren’t on par with Belmont, and boutique meetings like Saratoga and Del Mar. But we were in the top group. We’ve fallen out of the top group, and we’re headed down.

I do think from a political standpoint that’s been realized and is unacceptable to everyone. The legislature knows something has to be done now.
For the general public, the big issue is, are we going to lose the Preakness? For the horsemen, it’s how are we going to survive? And I think both issues have hit home in Annapolis.

I’m very confident that something will happen as far as a purse enhancement. I don’t know about marketing money and getting these venues fixed up. I don’t think anybody’s going to work on getting the facilities redone until they know what a slots bill would mean, and where these slot locations would be and what kind of revenue would be available.
But I know we do need a two-year purse enhancement program; we’ve asked (the state) for $30 million in 2007 and again in 2008. Even if slots were passed today, we’d still need that $30 million for two years, because we wouldn’t see any revenue for a couple of years.

Is $30 million going to be enough?
I think it gets us partially there. It’s enough to keep our head above water. It’s also enough so that people would have the feeling that if the Maryland legislature was willing to do that, maybe a slots bill is imminent next year.

I think that would stave off people who are looking to move farms and training stables. Because it’s only going to get worse. As Pennsylvania moves toward its maximum number of slot machines (61,000), Delaware and West Vir­ginia will probably go to table games. The pressure gets greater and greater. Maryland will fall farther and farther behind.
I do see Maryland breeders slowing down their exodus with the purse enhancement; maybe people looking at Maryland from the outside and saying: “Hey, they’re starting to do the right thing.”

KIM is focused on more than slots—is that correct?
We’re not really trying to advocate slots. But from a reality standpoint, when every major racing state surrounding us has slots or, in the case of New Jersey, some enhancement, it’s a major issue.

Our whole thing was to present, now that we had peace in the valley, a united position from the horse industry in the state of Maryland.
Beyond the jobs and direct economic impact, the horse industry plays a crucial role in preserving open space. Horse farms are estimated to take up 10 percent of our open space. Well, you can’t lose 10 percent of the open space.
A few weeks ago, I participated in a talk show on (Balti­more radio station) WBAL. One of the callers said: “We shouldn’t fund this. Why should we fund racing? Why shouldn’t we just let it go the way of the dinosaur?”

I said, “Well, that’s a point of view. But if you let racing go, you’ve got to look at the other social costs. If you think the investment you’re going to make in racing is major, you should look at what the investment is going to be to build a double-decker highway to replace the Baltimore Beltway, because if you develop that open space, you’re going to be in total gridlock.”

It’s going to be like LA (Los Angeles) here; traffic on the roads is already tremendously bad and getting worse, even with all the restrictions on land development. It’s not a good prospect for the state; it’s not a good prospect for the environment and certainly the Chesapeake Bay.

The horse industry is a contributor—a purse enhancement would be an investment, not a subsidy. If you put more money into it, that just grows the business. People who breed and race in this state reinvest this money; it creates jobs and spurs positive economic development.

Is racing self-sustaining?
It’s not self-sustaining, because the model around us, from our border states, uses funds from other sources of gaming to infuse the sport. It’s a way to take some of that slot money and reinvest it into the state and protect some of the things that are very important to the state.

If the $30 million purse enhancement comes from lottery funds, then lottery money will actually be redistributed.
The lottery is able to do what­ever it wants. It has this Race­trax game (based on images of horse races) that can get into every bar and tavern. In racing, we can’t come out and do that. We’re tightly regulated as to what we can do, and where we can do it. That’s a totally unfair advantage.

How about Maryland’s off-track betting (OTB) facilities? Certainly they don’t seem to have lived up to expectations.
It’s a dismal failing for us. I don’t know that there’s anyone to blame. As I just mentioned, it’s a very expensive process and laborious. The initial concept that the Maryland Jockey Club had was to team up with established restaurateurs. Not a bad idea. Unfortunately, they were not at the quality level that was ultimately needed.

When the Maryland Jockey Club redid Poor Jimmy’s into the North East Sports Club— and in my mind they did a great job, probably spent more money than they had to—the business went up. Bill Rickman then came along and built a facility that’s like a modern sports bar, in Cambridge. Very well done. We know if you do it right, the business grows. And a lot of people who go to nice OTBs will eventually migrate to the track. So you’re really creating a farm system for your patrons. We could easily use four or five additional OTBs in this state.

But that question immediately leads to other issues. Why can’t you go down to my good friend Costas (Triantafilos)’s bar (the Costas Inn in Balti­more) and bet those races through your HRTV telephone account?
The only problem with that is that a lot of people like an immediate payoff. That’s where the lottery, and its scratch-offs, have an immediate appeal. Because if you go to Costas’s and you play the lottery, you win and unless you hit the big bonanza, he’s going to pay you right on the spot. With this, you don’t have the teller, so you say, “Okay, I won $100 and it goes into my account. Now I can go online when I get home and ask them to mail me a check.”

Part of gaming is to get the money. It’s an appeal. Those are things that we may need to change by statute. I’ve been talking to the legislature about giving us more leeway—opening it up so that people can do just what I said.
Similar issues need to be addressed on a national level, regarding HRTV (Magna) and TVG. I have a TVG account, but I can’t watch a lot of the Magna races. I have an HRTV account and I can’t watch the races from Belmont. It’s crazy. You should have one account and be able to see the whole product.

Otherwise, it gets hard to manage. It leads you to go to one of these off-shore wagering sites that take the wagers on anything. It used to be you couldn’t watch races after you bet on them using those off-shore systems, but now you can see them almost every way imaginable. Unfortunately, the industry derives little revenue from these off-shore wagering companies. So we’re shooting ourselves in the foot, by making our “legal” systems so burdensome to the fan.

If you explained to most people in the state of Maryland that this (off-shore) money is not coming back to us to support the industry, I’d have to say that 80 percent of the people would say, “I’m going to support the system and bet legally. Just make it easy for me to wager here and let me tie all this together.” We’re not embracing the technology and making it seamless for the fans.

Do you think KIM can help resolve that problem?
We’ve definitely talked about it. A lot of people in KIM are users of the system. They play the game, and they understand all these problems.
Lou Raffetto (Maryland Jockey Club president and CEO) has discussed it with his management, and they’re working on it. But this is an issue that is on a national level and needs to be addressed.

What would better facilities mean to the industry?
Right now, one of my reservations from a marketing standpoint is what are you going to market, as our facilities are just so outdated. We’re able to market the big events because they have appeal—we don’t really need to market the Preak­ness, because it sells itself. With the limited funds available, the Maryland Million is fairly well marketed.

On these signature race days, you have huge crowds and it is great. You go to Laurel for the Maryland Million, and you have 20,000 people in attendance. You think, “Wow—where did all these people come from?” People who have been in Mary­land racing for a long time say, “This is how it used to be every Saturday.”
But when you go to Laurel on, let’s say, a Thursday when it’s 20 degrees with a chance of snow, literally you could practice your golf game inside the grandstand—it would be hard to hit anyone with a golf ball. Even on our biggest day, these facilities are not going to meet the needs of the current player. Laurel, for example, was built around 1912. If Laurel racing was the only racing a patron could see, the place would be a lot more crowded on a Thursday. If people couldn’t bet anywhere else in the state, it would be a lot more crowded. What that tells you is you don’t need these mammoth facilities any more. You want to create a more intimate facility that has all the technology and entertainment options that today’s fan wants.

There are still a small number of people who like to go out to that rail and watch and bet the horses. To each his own. We should offer that broad spectrum.
Back to the point of marketing—if you take your spouse or girlfriend/boyfriend to Laurel on a Thursday, and you go up to the dining room, and there are only a few tables occupied, you’re going to wonder what’s wrong with the place. Crowds bring in crowds. I’m convinced of that. If you form a line anywhere, people will get in it. It’s like the Christmas toy. If you pay (NBC news anchor) Brian Williams to say this toy is the hottest toy this season, people will be waiting in line at 5 the next morning to get in the store and buy that toy. It’s just that way; people like the excitement a crowd brings, and being the first to have something.

Even on a good day, if you have a few thousand people at the race track, and they’re dispersed in this facility that can hold 20,000, it looks like something’s wrong. If the facility held 4,000 and you had 3,000 on a Thursday, it would look exciting. We don’t have that to offer with these facilities. All we have is a good racing product. And we know, in today’s world, that’s not really enough.

The example that I like to use is the Borgata (Hotel, Casino & Spa) in Atlantic City. I went up there within the first week of its opening. The bars were packed; everything was packed. Everybody likes new. They were so far beyond what the norm had been in Atlantic City that they created a revolution. Now every major casino is redoing itself. It’s been a great thing.

Even the Borgata has expanded on its original concept. They added Bobby Flay, Michael Mina and Wolfgang Puck restaurants. They are building a new hotel tower as well as super luxury condominiums. It offers big-name shows and entertainment on a weekly basis. They are tying all of these entertainment options together. Well, the race track can do the same thing. The race track can have all those things. It can have nightclubs, restaurants and spas. Why shouldn’t it? Because people today want to go where they have exciting options. You don’t need to be a rocket scientist to figure out where the gambling/entertainment dollar is going. But funding is a big obstacle, and we’re going to need some help to get this process started at the tracks.

People will get involved with horse racing. It’s an enjoyable sport. You can go both ways. You can bet races all over the country in rapid fire, or you can take your time and enjoy lunch or dinner and bet races at your pleasure. If you have some analytical skills, it’s a much better game. You’ve got the Racing Form, you’ve got all these information sheets and you have all these different ways to access information on a computer. A lot of people like that; some people don’t. Some people like playing a slot machine and just pushing the button or pulling the handle. That’s fine, too. It all comes back to the venue. If you don’t have that exciting place that people feel comfortable about, they’re going somewhere else. And that’s what’s happened to us. We don’t have the facilities and the entertainment options.

Are you optimistic about keeping the racing industry in Maryland?
I think that if we do not get this purse enhancement, we’re in serious, serious trouble.
I have a high degree of confidence that we’re going to get some form of purse enhancement this year. And I also have a high degree of confidence that we’ll get the gaming bill done next year. People in racing think racing is the biggest issue in the universe. To us it’s huge. But in the scope of things, it’s way down the list. When people are talking about health care, crime, education and global warming, racing is not at the top of everybody’s agenda. But we still are heard, because people do understand the importance of the industry. But seniors not getting their medications is a bigger priority than horse racing. So the governor has to address a lot of big issues.

I think next year will be the year. If we don’t get a slot bill in 2008, I think the damage is irreparable. We’re going to have such a decimated industry. The guys who really hold the program together, like Dale Capuano—I think he sells his house and takes his horses somewhere else. When somebody like Dale does that, another major stable leaves, then your breeding stock loses its value and the guys who are breeding here say: “I can’t breed here any more; I can’t survive; I can’t make it.” It is the beginning of the end.
The industry really starts with the horse. It starts with the foal. If you don’t have the player, you don’t have the product—and the horses are our players. You can build a great stadium. If you don’t have any players, the fans aren’t going to come. What’s to watch? And we’re losing our players. The value of a foal coming out of Maryland is not what it should be and we have lost a lot of our bloodstock. Commercial breeders here in Maryland are going to Kentucky, Pennsylvania or New York. Not so long ago, Pennsylvania and New York were almost unheard of. We were far ahead of them.
We should also be focused on building up the Maryland-bred Fund program—boosting purses and bonuses—because that’s going to grow the business. It’s amazing that we’ve let that program fall to such a relatively low level. But Maryland’s racing and breeding industry is still hanging in there.

Two more years, without gaming or a major infusion, and it’s over. We’ll be here. Some­how. But the people who have been involved in it won’t want to be a party to it any more. So we will have lost our program. We’ll see exactly what we have predicted all along—these farms will shut down. They’ll be sold off and developed.
I am hopeful that will not come to pass, that our new governor, along with the legislature, will give us the tools we need to prosper. I know we will do our part to ensure success for racing in our great state.