PAGE   80                            LEVEL 1 - 14 OF 30 STORIES                           


                           Houston Business Journal                                             
August  24, 1992

SECTION: Vol 22; No 14; Sec 1; pg 1

LENGTH: 1492 words

HEADLINE: Will County Bet on Racetrack Bonds?

BYLINE: Leah

DATELINE: Houston; TX; US

 BODY:    A group of businesspeople stands at the gate, tempting Harris 
County commissioners to place their bets on the proposed Sam Houston Race 
Park.

   Many of them are familiar names in Houston's business community, like 
Houston Astros owner John McMullen,  Maxxam  Inc. Chief  Executive 
Officer  Charles Hurwitz and plaintiff attorney John O'Quinn. Others are 
smaller players, hoping their days at the races will reap them a huge 
payoff.

   This partnership is asking county commissioners to spur a $ 198 
million bond issue that would buy them out of their racing license, 
making county taxpayers the owners of an ultra-modern horse racing 
palace. County commissioners are expected to vote on the deal Tuesday.

   The racing promoters claim the track would pump at least $ 3.5 million 
a year into county coffers for the next quarter century, draw $ 2 million 
worth of new drivers every year onto the Harris County Toll Road and 
create 1,500 jobs. They've promised it's a win-win proposition, without 
risk to county taxpayers.

   A closer look at the mechanics behind the deal reveals that this 
coalition of racetrack promoters--who have wagered little investment 
money--would hit a daily double worth more than $ 100 million. Other than 
the racetrack license itself, they would lose virtually nothing in 
exchange for a chance at a spectacular payoff.

   The gamble is more risky for Harris County. Taxpayers would indeed 
face no direct fiscal danger. The bonds would be backed only by track 
revenues, so if the facility fails the bondholders would have no legal 
recourse except to foreclose on the park.

   But financial experts who have analyzed the deal point out that a 
failed racetrack could significantly damage Harris County's bond rating. 
That would drive up interest rates the county pays on future bond issues.


   And although the racetrack promoters promise big payoffs for Harris 
County, they're keeping their feasibility studies a secret. Their 
economic impact numbers come from a KPMG Peat Marwick report, which they 
refuse to release to county officials or the public. And they base their 
$ 103 million asking price upon an Arthur Andersen & Co. study that 
supposedly values their license at $

                                                                       
PAGE   81                    Houston Business Journal, August 24, 1992                    


164 million--another study they refuse to release.

   Nonetheless, a laundry list of business groups is backing the deal, 
from The Greater Houston Partnership to the Greater Houston Convention & 
Visitors Bureau. Everyone from contractors to restaurateurs to travel 
agencies agrees the racetrack would be a boon to the economy of northwest 
Harris County.

   "Harris County, by owning that racetrack, creates tons of jobs, 
tourism, new industries and could make a ton of money off it to support 
other county services," says Gerald Holtzman, a major partner in the 
group that owns the license.

   HANDICAPPING THE DEAL

   Here's how the deal would work: Harris County would establish a 
five-member sports authority to build and operate the racetrack. The 
sports board would issue $ 198 million in tax-exempt bonds.

   Out of that $ 198 million, $ 65 million in first lien mortgage bonds 
would finance the track's construction and operation. Another $ 30 
million would pay back the bond buyers for the first two years, covering 
the debt payments until the track is built and starts generating 
revenues. The remaining $ 103 million in subordinate bonds would go to 
the racetrack promoters pitching this deal, basically compensating them 
for their license.

   After that, Harris County would own the license and the racetrack. The 
pony palace would be built and operated by the sports authority. Each 
county commissioner would appoint one member to the authority's board.

   No doubt, those appointments would be coveted political plums. These 
board members would dole out contracts for construction, concessions, 
management and any other lucrative business flowing from the racetrack.

   As the revenues flow in, the bond holders would have first claim. 
After the bond holders are paid, the county would receive its $ 3.5 
million guaranteed minimum profit. The promoters would be last in line to 
collect a cut.

   The track would have to net about $ 40 million a year to move into the 
black. After that, all of the profits would flow into the county 
treasury.

   The arrangement would be unlike anything in county history. The only 
comparable deal involves The Astrodome, which the county flatly leases to 
McMullen's Houston Sports Association. By contrast, HSA would operate the 
racetrack, but the county would collect an ongoing cut of the profits.

   "We've never seen a deal like this suggested or proposed before," says 
Assistant County Attorney Marsha Floyd. "It may murky the waters of a 
clean, non-profit governmental authority."

   However, there are comparable deals cooking in other parts of the 
state. In the Dallas suburb of Grand Prairie, voters narrowly passed a 
half-cent sales tax dedicated to building a racetrack. And in Selma, near 
San Antonio, revenue bonds have been authorized to pay for a $ 60 million 
track. In both cases, unlike Harris County, the local governments will 
not hold the license or operate the track.

                                                                       
PAGE   82                    Houston Business Journal, August 24, 1992                    


   A cautionary example of the dangers behind public financing of 
racetracks comes from Polk County, Iowa. In 1987, county officials there 
issued $ 40 million in bonds to build the Prairie Meadows Horse Racing 
Track. The bonds were supposed to be paid off with lease payments from 
the track operators. But the track failed, the bonds went into default 
and Polk County's bond rating was downgraded from "AA" to "A-" by 
financial institutions.

   That track has never been able to support itself since opening in 
1989. It has stayed afloat only because the county has kept it on a 
resuscitator with $ 9.3 million in government subsidies. Now Polk County 
officials want to issue general obligation bonds to pay off the racetrack 
debt. And a group of Polk County taxpayers is suing county officials to 
block them from issuing general obligation bonds to pay off the racetrack 
debt.

   Polk County voters never had a chance to approve their government's 
racetrack deal. Here in Houston, State Rep. Ron Wilson--an outspoken 
critic of the Sam Houston Race Park deal has called for a referendum.

   "This is worse than writing hot checks," he says. "And it's on 
somebody else's account."

   Skeptical criticism like that raises the hackles of racetrack partner 
Holtzman.

   "This is not a scam," Holtzman says. "This is a legitimate business 
opportunity. This a good deal for all involved."

   THE SURE BET

   That raises a significant question. If this is such a great deal, why 
are the racetrack's license owners willing to hand it over to the county?


   The answer is simple. Dealing with the county will be easier and much 
more profitable. Private financing would be more expensive and 
time-consuming. It would also force the racetrack's promoters to assume 
personal liability for the track's debts.

   Most importantly, without the county's help, there's a strong 
possibility the track will never be built. Bond experts say there's no 
assurance enough institutions would buy the bonds if they aren't 
tax-exempt.

   "There's not really a market for (private racetrack) bonds," says 
Steve Claiborne, a managing director with the Houston office of Lehman 
Brothers. "You can't call up a broker and place those bonds."

   Even some government-backed bonds are having trouble finding buyers in 
the current market. Indeed, Claiborne points out that the county's 
backing wouldn't necessarily make the Sam Houston Race Park bonds 
attractive enough to lure institutional investors.

   "The market is pretty smart," he says. "People who would buy these 
bonds are going to give these studies a one, two or 10 times look over."

   Holtzman admits the bonds would carry a higher risk than usual county 
bond issues. But he says the KPMG Peat Marwick projections should sell 
the project.

                                                                       
PAGE   83                    Houston Business Journal, August 24, 1992                    


   "The real issue, and the only issue, is should Harris County make 
money that way?...We say, 'Why not?'"

   County Commissioner Steve Radack has come up with plenty of reasons 
why the county should be cautious about this deal. He worries that the 
county would essentially lose control over the sports authority that 
would run the racetrack, creating the same type of troubles county 
commissioners like Radack have run into with the Harris County Hospital 
District. Besides, he says, running a racetrack is a complicated 
enterprise.

   "What are we going to have here?" Radack asks. "Are we going to be 
sitting in commissioners court settling gambling debts? If we have to 
decide a photo finish, imagine how many calls I'll get."

   Telephone calls have already been pouring into county offices. 
Commissioner Jerry Eversole says callers opposing the racetrack deal have 
outnumbered supporters by a 3-to-2 margin.

   While the bets for and against the racetrack still continue to trickle 
in, Eversole and his fellow commissioners are weighing the odds and 
preparing to make a decision on the bond issue this week.

SUBJECT: Racing; Local government; Investments; Government securities; 
Southwest

GEOGRAPHIC: Southwest Region; Houston; TX; US

COMPANY: Sam Houston Race Park; SIC: 7948

LOAD-DATE-MDC: September 22, 1992

 Extel Financial Limited