April 9 (Bloomberg) -- The 134-year-old Preakness Stakes, the second leg of U.S. horseracing’s Triple Crown, may need a state bailout to keep running.

Maryland lawmakers debated a measure today authorizing the state to acquire the Laurel Park and Pimlico racetracks and other assets from their bankrupt Canadian owner, Magna Entertainment Corp. The state may buy the properties with money from a bond sale or seize them through eminent domain.

The possibility that Pimlico, home to the Preakness each May since 1909, might be sold to real estate developers has horrified Marylanders, who are still smarting from the state’s inability to stop Baltimore’s National Football League team, the Colts, from moving to Indianapolis in 1984.

“Those who recognize the psychological importance of the Preakness are very troubled,” Alan Foreman, general counsel for the Maryland Thoroughbred Horsemen’s Association, said in an interview. “The Preakness is one of the great sporting events, and it defines the city and state’s culture and traditions.”

Emergency legislation to seize the properties or buy them passed a Senate committee today, over Republican objections that the state was moving too quickly and might entangle itself in the horse business.

The bill will face the full body tomorrow, said Patrick Murray, deputy chief of staff for Senate President Thomas Miller Jr. If passed, it would have to be taken up in the House before the legislative session ends Monday night.

Repaid From Revenue

The measure authorizes the Maryland Economic Development Corp., a state-created entity that’s sold $3 billion of bonds for economic development, to raise money for a purchase. Foreman values the tracks and a training center at $60 million.

Any debt sold would have to be repaid from revenue generated by the racetracks and wouldn’t be backed by the state, said Bob Brennan, executive director of the development agency. Maryland is one of only seven states with top general-obligation credit ratings from both Standard & Poor’s and Moody’s Investors Service.

“Investors must be willing to underwrite based on the credit of the project,” Brennan said.

Attracting bond purchasers with the tracks’ earnings might be a tough sell in an environment that favors highly rated credits. Magna reported that revenue from its Maryland operations fell 12.5 percent in the nine months ended Sept. 30 from a year earlier because of lower wagering and decreased attendance at Laurel and Pimlico and the 2008 Preakness.

Centuries-Old Heritage

Magna, which also owns Santa Anita Park northeast of Los Angeles and Gulfstream Park north of Miami, filed for Chapter 11 bankruptcy protection March 5. The Aurora, Ontario-based company wants to sell some of its assets, drawing interest from developers who envision the Pimlico property as a retail shopping mall.

That doesn’t sit well with Governor Martin O’Malley, a Democrat, who points out the state’s horse industry provides 20,000 jobs and contributes $1.5 billion to the economy a year.

“Our centuries-old heritage of horse racing and horse breeding is woven deeply into the cultural fabric of Maryland,” O’Malley said, announcing the state bailout plans yesterday.

The Maryland Jockey Club, the Magna unit that operates the racetracks, challenged O’Malley’s attempt to seize its assets.

“We question the government’s right to confiscate private property, which will only lead to more confusion and litigation while these matters are in bankruptcy,” Tom Chuckas, president of the club, said in a statement.

Grueling Challenge

The Preakness stakes follows the Kentucky Derby, held at Churchill Downs in Louisville, Kentucky, and precedes the Belmont Stakes, from Belmont Park near New York City, to form the Triple Crown, the premier string of U.S. horseracing events.

The three runs occur over five weeks beginning the first Saturday in May. The distance of the third race is longer than the first, presenting horses with a more condensed and grueling challenge than usual. Only 11 have won all three in a single year. The last was Affirmed in 1978.

Pimlico opened in 1870, making it the second-oldest track in the U.S. after Saratoga, in upstate New York, which started in 1864, Magna’s Web site says. The stakes are named after the colt Preakness, who won the first such race at the track.

The winner of the annual event receives the Woodlawn Vase and is draped with a blanket of black-eyed susans, Maryland’s state flower. The colors of the winning stable are painted on the weather vane atop the course clubhouse immediately after the race, to remain for a year.

With such traditions, local purists reject suggestions that the Preakness be moved to another track so the present site can be developed.

‘Hallowed Ground’

“The race should be run on the hallowed ground of Pimlico,” said Foreman of the Horsemen’s Association. “It defines whether there is a possibility of a Triple Crown winner, one of the most difficult feats in all of sport.”

The state’s seizure of the track through eminent domain may be impossible, because bankruptcy laws limit such actions once a company is under court protection. That leaves buying the tracks outright, putting the state in competition with other offers.

Brennan, the economic development agency head, says the price would be worth it to protect the state’s heritage.

“The last thing we want is another sport franchise to be taken out of the state,” he said. “My grandfather still turns in his grave about the Colts. It was a bad day some of us haven’t forgotten.”

To contact the reporter on this story: Jerry Hart in Miami at jhart@bloomberg.net.

Last Updated: April 9, 2009 19:02 EDT