Maryland state legislators are considering legislation that would enable them to use eminent domain to condemn the Preakness Stakes horse-racing track, as well as the trademark and other intellectual property rights associated with the famous race which is part of the Triple Crown [HT: VC reader John Thacker]:

Under the bill, the state could seize the tracks as well as the Woodlawn Vase and Preakness-related trademarks, copyrights and contracts, if doing so prevents "the loss of the historically, culturally, and economically important" horse racing legacy . . .

The last-minute legislation was prompted in part by reports that Pikesville developer Carl Verstandig was interested in razing Pimlico and turning the Northwest Baltimore property into a shopping center. He has since said he would prefer to keep the Preakness at Pimlico, as have other potential bidders.

Magna Entertainment Corp., the firm that currently owns the Preakness and the Pimlico race track, is facing bankruptcy. And Maryland officials, including the governor, claim that the threat of eminent domain is needed to keep the Preakness from being moved out of state, as the Baltimore Colts were in 1984.

This argument doesn't make much sense. As I pointed out in a recent post, the Colts' famous midnight departure to Indianapolis was itself precipitated by the state's threat to use eminent domain against them. More generally, state efforts to use eminent domain against mobile assets tend to be self-defeating. They cause owners of those assets to flee the jurisdiction and also deter new firms from moving to the state. I suspect, therefore, that Maryland's efforts to use eminent domain to keep the Preakness in-state will be unsuccessful. They may even bring about the very result that state legislators say they want to avoid.

However, there is a complication. It's not clear to me whether the most valuable elements of the Preakness really are mobile assets or not. Since I don't know much about horse-racing, I'm not sure whether the truly valuable commodity here is the Pimlico race track (which is static) or the trademarks and other intellectual property rights associated with the annual Triple Crown race (which can potentially be held at a different race track in another state). In other words, would horse-racing fans be just as willing to watch a Preakness race held in a different state? Or is there something unique about the Maryland site that would make the race significantly less popular if it were moved elsewhere? If the latter is true, then Maryland's threat to use eminent domain might accomplish its objective of keeping the Preakness race going in-state. Ironically, it would do so precisely because the race can't really be moved out of state without losing much of its profitability. The owner's only realistic options would be to either keep the race in Maryland or shut it down entirely in favor of some other use for the land; eminent domain can prevent Magna from picking the latter option. Perhaps readers with greater knowledge of horse-racing can enlighten me as to the true nature of the Preakness' value.

Even if Maryland's eminent domain threat is rational in the sense of having a real chance of achieving its goal, I'm not convinced it is good policy. If the owners of the Preakness track prefer to shut it down and use the land for other purposes, the state probably should not intervene. After all, the owners have the strongest incentives to allocate the land to its most valued use; unlike state legislators, they have their own money at stake. If the highest valued use of the land turns out to be something other than horse-racing, I don't see any good reason for government intervention to prevent it. Indeed, if the new use produces more economic value than the race track does, preventing the change might actually hurt the state's economy during an already difficult time.