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Firms jockey for position in racing industry

| Sunday, Jan. 12, 2003

For nearly two decades, the state's horse racing and harness racing commissions each had a pair of licenses available for tracks in Pennsylvania.

They were about as popular as an overweight jockey.

The state already has four tracks — two thoroughbred and two harness — and their owners have long said it's getting harder to make a buck, especially with competition from tracks in West Virginia, which have slot machines, and with gambling beckoning from Delaware and Atlantic City.

Now that there's a good chance casino-style slots could come to the Keystone State's tracks, one of the languishing thoroughbred licenses has been grabbed. Three companies, including one made up of five local siblings, are competing for the other thoroughbred license. Five applicants, including a Washington County couple, are vying for the two harness licenses.

The race for the licenses is being run on a muddy, or perhaps muddled, track. The racing commissions have found that they lack rules — unneeded until now — to explain how to proceed when they have competing applicants. Does the race go to the swiftest, or should commissioners consider the applicants together?

"We asked them point-blank, 'Are you going to judge our application against the other applications?' " said Frank Bialon, the attorney for Vorum Racing, which wants to open a harness track in Canton, Washington County. "We were told, 'Each application will be examined on its own and not compared with the other applications.' I don't know what that means."

The confusion is likely to spawn court battles and could become an issue for state lawmakers as they reconsider expanding gambling.

"I'm sure that there will be appeals on every decision that this commission makes," said Anton J. Leppler, executive secretary of the Harness Racing Commission. "I wish the laws were more clear and specific, but the real world is that they're not."

Legislature lining up

Speculation began a little more than a year ago that the time might be right for the Legislature to allow slots at tracks, as the administration of Republican Gov. Tom Ridge sent signals it had changed its position and might allow them as a way to keep the tracks as viable employers.

Over the past 20 years, attendance has dropped from 5 million annually to 1.1 million at the state's tracks: The Meadows, a harness-racing track in Washington County; Philadelphia Park Racetracks, a thoroughbred track in Bucks County; Penn National Race Course, a thoroughbred track in Dauphin County; and The Downs at Pocono, a harness track in Luzerne County.

In harness racing, the jockey rides in a cart pulled by the horse. In thoroughbred racing, the jockey rides the horse.

Competition also has reduced the tracks' handle — the amount of money wagered — according to the Pennsylvania Horse Racing Association, a nonprofit group in Harrisburg. For example, in 2001 Penn National's racing assets were down 24 percent compared to the previous year.

Despite declines in attendance and the handle, three of the four tracks are profitable. Only The Downs at Pocono has been a consistent loser, reporting an average annual loss of $1.3 million the past four years. The Meadows leads the pack in profits, with an average of $3.3 million the past four years. Philadelphia Park has averaged about $1.5 million in annual profit, and Penn National has averaged just under a million dollars.

Last spring, gubernatorial nominees Ed Rendell and Mike Fisher said they would support slots at Pennsylvania's tracks to preserve track jobs. Rendell, a Democratic former mayor of Philadelphia, largely was viewed as more willing to support slots and other gambling legislation. Even before he won the general election in November, the jockeying for the state's remaining licenses was on.

And they're off

Presque Isle Downs Inc. was way ahead on the thoroughbred track. The company is a subsidiary of MTR Gaming Group, which owns Mountaineer Race Track and Resort in Chester, W.Va.

Presque Isle won one of the two available thoroughbred licenses on Sept. 26. The application and review process to open a track near Lake Erie took about 18 months.

The approval has been challenged, however. In December, MEC Pennsylvania Racing Inc., which owns The Meadows, filed an appeal in Commonwealth Court opposing state officials' decision to allow the $56 million project.

Seaport Park Racing Association Inc., of Bensalem, Bucks County, applied for the other thoroughbred license on Aug. 20, the same day it filed its articles of incorporation. The company, which is run by Robert W. Green, wants to build a track near Philadelphia Park Racetrack, owned and operated by Greenwood Racing Inc., of which Green is chief executive.

Seaport is competing with a local family: brothers John Biros, of Greensburg, and Andrew Biros, of White Oak; and sisters Christine Biros, the company's chief executive, of White Oak; Susan McGraw, also of White Oak; and Lisa Smith, of North Versailles. The siblings, who own the Oak Park Mall in White Oak and other commercial properties, formed 1935 Inc. this summer for their track venture.

The company, named for the birthday of a relative, applied for the license on Nov. 12, seven days after Rendell won the gubernatorial election. The family wants to build a thoroughbred track in the Coulter Road area of South Versailles. Their attorney, Robert Goldman, said the $15 million project would include grandstand and clubroom seating for about 1,000 and employ about 1,200.

Bringing up the rear is an international group of investors known as Horsemen's Group. The company filed an application a few days after the Biros family and wants to build a track in the Philadelphia area.

"There has been no seated commission in the seven years I've been here that has seen three applications," said Ben H. Nolt Jr., executive secretary of the Horse Racing Commission.

The problem, Nolt says, is that a 1981 state law set the number of licenses available but didn't explain the application process clearly.

At the Harness Racing Commission, Leppler said the last two licenses "laid around for years" without any takers — until August, when Penn National Gaming applied to build a track between Allentown and Philadelphia.

Chester Downs was next with a bid to build in Chester, Delaware County, near Philadelphia. Pacers and Trotters filed an application in September with a plan to build a track in the shipyards area of Philadelphia.

Vorum Racing entered the race in October with a plan to turn a training facility into a track in Washington County.

The Meadows' MEC Pennsylvania Racing has told the Harness Racing Commission it strongly objects to Vorum's application, saying the potential neighbor would weaken an already-struggling industry. That's the same argument it used to oppose the thoroughbred license for Presque Isle Downs.

"I do not take slot legislation for granted," said Mike Jeannot, the MEC official who oversees The Meadows. Under current conditions, he said, a second track in Washington County "would spread the resources too thinly."

Vorum Racing is trying to resolve a zoning dispute for the track. Bialon, the company attorney, said the owners — Daniel Vorum and his wife, Elizabeth Eelkema — aren't counting on slots, but want to cater to horsemen who favor a smaller track. Bialon said the project would provide a grandstand for 300 and a restaurant for 50. It would employ about 100 people.

Finally, in December, Centaur Racing applied to build a harness track in Beaver County.

"It's kind of interesting that (the racing commissions) have been so inactive so long they haven't had to consider more than one application at a time," said Mike Young, a Harrisburg public policy consultant. "It's a good sign for an industry where there have been a lot of cobwebs growing."

But the lack of clear rules is causing problems.

Who wins, who places, who shows

"I think they should honor some long-standing traditions and consider each (application) on its merits as it is received," said John Stoviak, the Philadelphia lawyer for Seaport Park, the first to file for the remaining thoroughbred license. "They should not delay considering our application just because other applications have been filed."

Stoviak said doing so would be a "horrible precedent."

"Do you delay it for the next applicant, the next, the next?" he asked. "When does it stop?"

Others see the situation differently.

On Dec. 12, Goldman, the attorney for the Biros family, filed a petition with the Horse Racing Commission asking that the three applicants be considered together. Goldman's fear is that the license could go to the first company to complete the commission review — possibly leaving his clients "out in the cold."

"It appears the commission is moving rather quickly on the Seaport application," Goldman said.

He said he was surprised when the commission scheduled a Dec. 16 public hearing in Chester for Seaport. He interpreted that action to mean Seaport was far along in the review process.

Goldman said commission officers "delayed" the Presque Isle Downs application process as a model for his clients. Presque Isle won its now-disputed license two weeks after its public hearing. The hearing had come at the end of an extensive review process, in which the commission had required Presque Isle to submit detailed plans for its facilities.

Nolt, the Horse Racing Commission official, said the public hearing, which gauges public opinion, can come at any stage of the review process.

"There's no set timetable for that," he said. "It has no more importance than any other part."

There is no deadline for the granting of the final thoroughbred license, Nolt added.

Goldman wondered whether a lack of specific rules for the process would require the commission to ask the Legislature to write new guidelines. Nolt declined to speculate how the commission would resolve the problem.

The law might have to be fine-tuned, experts say. Perhaps the state should lift the cap on track licenses.

In West Virginia, for example, the racing commission isn't limited to a set number of licenses, said Joseph Cuomo, the commission's director of racing and auditing. Instead, each application is considered on its merits.

The commission requires marketing studies and extensive plans for construction and financing. If the project looks viable and the public supports it, the proposal is approved.

Since 1985, West Virginia has had two thoroughbred tracks and two greyhound tracks. Slots were legalized at the tracks in 1995, boosting revenue to $161 million in 2000 from $28 million in 1995.

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