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Buffalo Raceway is going to get a new owner.

The Erie County Agricultural Society, which owns the Hamburg Fairgrounds where the raceway is located and operates the Erie County Fair, has signed a letter of agreement with Delaware North Cos. Inc. to buy its Buffalo Trotting Association Inc., which includes the raceway, pari-mutuel license, equipment and a 10-acre strip off South Park near the raceway entrance.

The sale is expected to be completed Sept. 1. The price was not disclosed.

Stanley F. Phillips, vice chairman of Delaware North Cos., said Friday his company is selling Buffalo Raceway because it has lost money for the last three years and a different owner might have a better chance of making the business succeed.

"A logical purchaser like the Agricultural Society can consolidate a lot of the costs," he said. "For instance, the society already has a staff to operate the track, whereas we had to have a separate staff."

Paul C. Laing, the society secretary and fair manager, said one of his key goals with the raceway acquisition is to make the Hamburg Fairgrounds the most beautiful in the nation. A state racetrack capital improvement fund now becomes available to the prospective raceway owners.

He listed the benefits to area agriculture, through the care and feeding of 700 horses during the racing seasons, as another reason for buying the raceway.

Laing said he hopes the new management will increase raceway attendance. Last year, 227,828 people attended the raceway's 127-day program and bet approximately $23,772,000. In 1988, 248,097 patrons bet about $23,905,000, according to the Racing and Wagering Board.

The purchase agreement was reached Thursday after negotiations that began unexpectedly two weeks earlier. The agreement now requires approval by the New York State Racing and Wagering Board.

James J. Gallagher, the Racing and Wagering Board's racing director, said an investigation of the proposed Fair Board ownership would precede approval of the sale.

Buffalo Raceway would become a wholly owned subsidiary of the Agricultural Society, Laing said. It would have its own directors, three from the Agricultural Society and two from the public at large.

He said he expects to appoint a racetrack general manager in two weeks.

The Agricultural Society plans to continue employing the raceway's 90 or so workers while retaining the right to review employee records.

"We in the Ag Society have enjoyed fine relations with Delaware North Cos. and its Sports Service subsidiary. Sports Service will continue to operate the raceway restaurant," he said.

The Agricultural Society is the only fair owner in New York State to become a raceway operator, although Laing, the incoming president of the International Association of Fairs and Expositions, said such arrangements exist elsewhere.

The acquisition is the Agricultural Society's second major new undertaking this year. In March, construction began on a $3-million Agri-Center expected to open in August.

Laing said the combined attractions of the Agri-Center, raceway and fair will within a year attract 1 1/2 million visitors to the Hamburg Fairgrounds.

"I think that the Agri-Center and raceway will help each other," he said. "The Agricultural Society now is a $3 1/2 million business. The raceway will add another $8 million, and we think that the Agri-Center will have sales of between $500,000 and $1 million. We see some things that can be done to improve raceway earnings."

The sale was the second in a year. A tentative sale of Buffalo Raceway and the Finger Lakes Race Track in Canandaigua to Wilmorite Inc. of Rochester fell through last year after uncertainties developed over a bill in Albany that would have allowed a quarter horse track to open near Binghamton.

News staff reporter Henry Davis contributed to this story.

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