Is the casino “band-aid” falling off? - Casinos at racetracks were always seen as a temporary fix to racing’s massive problem of not doing enough business to survive.
/![Is the Casino Band-Aid Falling Off?By Bill HellerThe danger signs are everywhere.Casinos at racetracks were always seen as a band-aid—a temporary fix to horse racing’s massive problem of not doing enough business to survive, let alone prosper.What happens when the band-aid falls off?In Illinois, where horsemen battled for nearly 10 years to finally get casinos approved at its racetracks, Churchill Downs’ decision not to pursue a casino at Arlington Park has left the future of this international-caliber, iconic Chicago racetrack in dire doubt.In Florida, another Churchill Downs’ racetrack—Calder Raceway—which has operated as Gulfstream Park West on a lease agreement with Gulfstream Park, sought and received legislative approval to keep its casino open with jai alai replacing horse racing. This year’s Gulfstream Park West meeting is its last, with horsemen having to remove their horses by April 15. In the interim, horsemen are hopeful that an appeal and two lawsuits will change that reality.The governor in Pennsylvania in February called for revenue from casinos legislatively targeted to racetracks be used instead to offer free college education. And that was before the coronavirus pandemic made every state in America revenue strapped. Pennsylvania horsemen are hoping they’ll be protected under existing legislation.The sky is falling.“Frankly, not everyone is going to survive,” trainer John Servis, a board member of the Pennsylvania Thoroughbred Horsemen Association, said. “We all knew this was going to come. We need to be able to stand on our own two feet. We have to stop relying on the casinos.”Can they?The plight of Illinois horsemen is downright depressing. “The thing that strikes me is that Illinois never had the band-aid of the racino,” said Dave McCaffrey, a long-time harness racing trainer who was president of the Illinois Harness Horsemen for eight years and is now the executive director of the Illinois Thoroughbred Horsemen’s Association. “At least Delaware, New York and Pennsylvania had this nice run of 10 or 15 or 20 years of dramatically increased purses and increased racing dates because of casino revenue.”A native of Iowa who went to college in Minnesota and fell in love with Quad City Downs—a harness track in Illinois—chronicled the decade-long battle to get slots approved at racetracks. It began while McCaffrey was the head of harness horsemen. It began with a typical, historic cooperation between the state’s Thoroughbred and harness horsemen. “The harness and Thoroughbred horsemen, typically in the country, do not agree on much,” McCaffrey said.McCaffrey and Thoroughbred trainer Mike Campbell, who was president of the Illinois Thoroughbred Horsemen Association, had met at the University of Arizona Racing Symposium in 2009. The following year, they decided to work together. “Both breeds were in such dire straits we figured we were stronger together,” McCaffrey said. “What’s good for us is good for you. We hooked up in a great alliance, and in three months we crafted a bill that I think is the best racino deal in the country. It would have produced 15 percent of adjusted gross revenue to purses. In other states, the casino revenue goes from the racetrack to the state to the purses. In Illinois, it would go straight from the track to purses—a huge difference. When other states are strapped, they don’t want to pay that money for purses. In Illinois, they never get their hands on it.”Neither have Illinois horsemen because there are still no racinos at Illinois racetracks a decade later. What went wrong? McCaffrey provided the two-word answer: “Illinois politics.”In various stages, the racino bill was a victim of the city of Chicago wanting its own casino; the governor vetoing the bill; one house passing the bill but the other house declining to do so; a governor who couldn’t get anything through because both houses were of the other party. “They fought like cats and dogs for four years,” McCaffrey said. “The bill didn’t even get to the floor.”Right before the election of a new governor, Jay “J.B.” Pritzker, who supported the gaming bill, in 2018, Churchill Downs, bought a 60 percent interest in the Rivers casino, 13 miles from Arlington. “I remember it being Halloween when that deal was announced,” McCaffrey said. “There was all this optimism that the damn gaming bill might finally be passed in 2019.”Prtizker took office in January 2019. The gaming bill passed both houses and was indeed signed into law on June 27, 2019, authorizing Illinois’ three remaining racetracks: Arlington Park, Fairmount Park and Hawthorne to build racinos. But Churchill Downs didn’t even apply for a racino license. “Churchill Downs decided this gaming bill doesn’t work for them and were not going to apply for the racino license at Arlington despite the fact that they were screaming for the bill to get passed for 10 years,” McCaffrey said.It got worse. The coronavirus pandemic struck this spring, and Arlington’s already reduced meeting of 70 days were slashed to 30 minus Arlington’s signature races including the Arlington Million.On July 31, according to a story in Chicago’s Daily Herald, Churchill Downs Inc. CEO Bill Carstanjen, on a quarterly earnings call with investors, said, “The long-term solution is not Arlington Park. That land will have a higher and better purpose for something else at some point. But we want to work constructively with all of the constituencies in the market to see if there’s an opportunity to move the license or otherwise change the circumstances so that racing can continue to Illinois. For us, we’ve been patient and thoughtful and constructive with the parties up in that jurisdiction, but long term, that land gets sold.”Mike Campbell is buying none of that. “I’ve repeatedly said I’ve had conversations with several gaming companies to buy Arlington Park—three gaming companies and a very wealthy horse owner all made inquiries to Churchill Downs. Churchill Downs said, `Not interested.’ They’re just not interested. Carstanjen said, `a higher use than a racetrack. Who the hell is he to say it’s suited for a better purpose? There are thousands of jobs involved. I think that what’s going to happen at Arlington is that in the middle of the night they’re going to come in and excavate that track in a manner that it can’t be fixed. Just do it and don’t ask questions.”“It’s exasperating,” Campbell said. “I’ve been president of the horsemen for 10 years. I’m all in for my horsemen. I told my board I’ll do everything I can to step in front of the train to slow it down. But money always wins. I’m the first to recognize it.”Phone calls to Churchill Downs, Inc. requesting a comment were not returned.Campbell, who trains a dozen horses, spent the past year on the road. “We traveled a lot,” he said. “I was in Tampa for seven months, then at Colonial. I plan on going to Keeneland, then back to Florida. I don’t want to do that. We’re being driven from our homes. This is very personal to me. I’ve lived 12 miles north of Arlington Park for 25 years. I raised my family there. My two sons are jockeys. They’re driving us from our own homes. We’re going to move. We’re going to sell our house. There are dozens like me. They’re not taking a gaming license? It’s absurd people are letting them get away with it.”According to McCaffrey, Hawthorne will begin building its racino in September. “It will take 12 to 14 months,” he said.Arlington Park could be shuttered by then.In Florida, Calder Raceway, a.k.a. Gulfstream Park West, will become history. “Our lease was up at the end of the year anyway,” said Billy Badgett, Gulfstream Park’s executive director and former trainer of Filly Champion Go for Wand. “They had everything put in motion to get jai alai approved. I don’t know how it got approved.”He certainly understands Churchill Downs’ motivation: “They can run jai alai at a very minimal cost. They don’t have to have horse racing or dog racing. Eventually, everybody is going to do that or try to do that. This is the edge everyone wants to take.”The impact on South Florida horsemen is real. “We’re going to lose 430 stalls,” Badgett said. “We’re building more barns in Palm Meadows (Gulfstream Park’s training center, 20 miles north) so they’ll have a place to go. They let us extend an agreement to keep the barns open until April 15.”Badgett said Gulfstream Park will also “lose some substantial purse money,” but is working to mitigate that loss. “We’re working on some legislative action, including night racing.”Badgett is convinced that racing must address its own future. “I’m a firm believer that racing should be able to stand on its own two feet,” he said. “If you have to rely on your casinos for purse money, it’s not good.”He is not losing faith in horse racing’s appeal. “We’ve been lucky that people still love horse racing,” he said. “As you can see during the pandemic, the handle numbers have been huge. Even on Travers Day at Saratoga, they were up 38 percent (???) with no people there.”In the meantime, the Florida Horsemen’s Benevolent and Protective Association (FLHBPA) has two lawsuits pending before an appellate court arguing that Churchill Downs built a jai alai fronton with no connection to its casino as the statute of Florida law stipulates. “Churchill Downs was allowed to tear down the grandstand at Calder and [was] told if they apply for a summer jai alai permit, they would no longer have to put horse racing on to maintain their casino license,” Kevin Scheen, the executive director of the FLHBPA said. “This is how they side-stepped their obligations to the horsemen and the horse industry. Their only consideration is to their shareholders—the bottom line. We’re losing 40 days of racing. We’re hopeful we’ll prevail on the appeal. If we don’t, we’ll be examining our options.”He mentioned Palm Meadows and Ocala as possibilities. “We’re lucky we have a great relationship with Gulfstream Park.”In Pennsylvania, Servis—who did a masterful job with 2004 Kentucky Downs and Preakness Stakes winner Smarty Jones—and Sal DeBunda (president of the Pennsylvania Thoroughbred Horsemen’s Association since 2010) continue to battle for horsemen’s future. “We’ve been battling every year,” Servis said. “Every year they want to take money from us. The governor can say take the money for education or highways or senior citizens, for whatever. Does the money ever get there? Politics is politics.”He continued, “There’s a bill where they want to put slot machines in the bars and restaurants. It may not be this year. It may be next year. But it’s coming. If that happens, we’re going to have to fight to get a piece of that. That’s only the tip of the iceberg. We have to be aggressive. We have to take care of ourselves.”DeBunda believes they already have through Article 71, which gives a percentage of slots to the Pennsylvania Horse Development Fund. “They’ve been taking money out of the Fund since year two after slots were passed 11 years ago,” he said. “If they take more than $31 million, they have to return all the money they’ve taken the last 10 years. That was a way to not let them take more. The governor was told this by his staff before his statement about education. If we were going to allow slots in the same facility where we have horse racing, we were going to take a piece. That’s been forgotten. They put in table games and on-line gaming, and we get none of that. When he first got slots, we looked at each other and said this is terrific. We didn’t realize every year we have to educate people. The biggest factor is educating our legislature.”With slots, DeBunda said, average daily purses at Pennsylvania tracks have increased from $130,000 to $250,000. Without them? “I’m an optimist,” Servis said. “I don’t want to paint a negative picture, but we’re battling every single year.”Will New Jersey and Kentucky tracks have to battle, too?In late August, the governor of New Jersey submitted a proposed state budget which did not include the $20 million subsidy that has been split evenly between the Thoroughbred and Standardbred industry.Meanwhile, a court ruling in Kentucky on September 24, has endangered the wildly-popular Historical Horse Racing (HHR) slot-like machine game, a completely different version of the Instant Racing game which literally saved Oaklawn Park in Arkansas, and allowed Kentucky tracks to boost their purses dramatically. On September 24, a Kentucky Supreme Court reversed a 2018 court decision allowing the game at Kentucky tracks. The ruling said that one part of the game using exactas violated the state law on legal parimutuel wagering. That decision could be devastating. In the 2019-2020 fiscal year, which ended in June, $2.2 billion was wagered on HHR at Kentucky tracks, generating $15.6 million for the Thoroughbred Development Fund, $11.8 million for the Standardbred Development Farm, $650,000 for the Equine Industry Program and $320,000 to Equine Drug Research.Churchill Downs Inc., which saw its share price drop by 9.74 percent on the day of the court ruling, released a statement that Churchill Downs tracks does not use the exacta in any of its HHR facilities.Kentucky Governor Andy Beshear said that HHR contributes $21 million to the state budget and that his office is working to find “a path forward.”Sooner than later, many racetracks are going to need a path forward, one dependent on its quality of racing and the marketing of its races rather than slot machines.*************************Oaklawn SidebarBy Bill HellerCenturies after Plato said, “Necessity is the mother of invention,” Eric Jackson, the senior vice president at Oaklawn Park in his 40th year at the Cella family’s beautiful track in Hot Springs, Ark., was desperate. “We had been imperiled in the 1990s,” he said. “We had casinos popping up outside us in Mississippi, Missouri, Oklahoma and Louisiana. We had lost 50 to 60 percent of our business. We nearly went out of business. We knew we had to have an electronic product.“In Arkansas, we were allowed parimutuel betting. I had an idea to develop a slot-like wagering device based on horse racing. It took a while to germinate—three or four years.”That idea (Instant Racing) not only saved Oaklawn, it ultimately led to the state of Arkansas approving four casinos—one of them at the track the Cella family has owned for 117 years. Oaklawn is predicting purses for its next 57-day meet will top $700,000 daily.With the addition of the casino, Oaklawn Park dropped Instant Racing in November 2018, and it has done nothing to slow Oaklawn’s continuing purse growth, one which will accelerate when Southland Casino Racing in West Memphis abandons greyhound racing by December 31, 2022. That decision has already been made and announced. Southland Casino received 40 percent of targeted casino revenue for purses and Oaklawn 60. “When they close, we’ll get 100 percent,” Jackson said.“We believe we have the best racing gaming model in America, and the model is based on a single concept,” he continued. “And the concept is ‘racing comes first.’ We have been a track for 117 years. The Cella family loves racing.The irony is epic. A slot-like machine based on horse racing allowed Oaklawn Park to prosper, then was abandoned when the track added a full casino. But that wouldn’t have happened had Oaklawn not used Instant Racing to literally continue to operate. “It exceeded our expectations,” Jackson said.His boss, Louis Cella said, “We buck the trend. You don’t see feel-good stories today. I think the answer is we focus on Oaklawn. We don’t have a higher agenda. We believe in it, and we’re going to lead by example. We have an unbelievable relationship with our horsemen and with the state racing commission. It’s the opposite of typical. Other companies focus on the bottom line. We don’t. We don’t have shareholders. A lot of our success is because we don’t have shareholders. We want you to have fun. We couldn’t care less if you make a wager. That’s not our focus. We prefer people come with a family, go in the infield with hot dogs, and enjoy the sport. We’re lucky. We don’t have professional sports in Arkansas. We are in the game to sell the sport. If you can’t, shut the doors.”His track nearly did.Oaklawn invited several technology experts to visit Oaklawn Park and meet with racetrack officials and officials from Amtote in 1998. Eventually, they devised Instant Racing, which allows betters to do a bit of handicapping, satisfying Arkansas’ state law description of parimutuel racing.Instant Racing was introduced in January, 2000, and then expanded in 2009. Purses grew exponentially. “In 2018, there was an effort from the Quapaw Native Indian tribe. They came up with a novel idea,” Jackson said. “They would get one of four casinos in Arkansas, and they were willing to put casino revenue into purses. The voters approved it.”Oaklawn Park has flourished ever since. “First off, we’re really lucky,” said Cella, a lawyer and real estate dealer in St. Louis who took over the track’s operation three years ago after his dad died. “We don’t have professional sports in Arkansas. We’re really hard to get to. Once you get there it’s very hard to leave it. It’s the natural beauty surrounding us. We’re part of a park (Hot Springs National Park). It’s beautiful. Because of that, we have a very close relationship with our community. Hot Springs’ population is around 35,000 to 40,000. We’ll have 70,000 people on Arkansas Derby Day. We don’t have professional sports in Arkansas. People sneak in and go and have fun.”Of course, Oaklawn has a decided edge. Just like Saratoga, Oaklawn has a limited single meet every year. People miss racing. “Our nickname was Saratoga South,” Cella said. “That was our mantra. Follow them.”Oaklawn Park has done that with decisive, innovative ideas. “We took over our catering 25 years ago because we had to keep prices reasonable,” Cella said. “When you have an outside company, they have to make a profit. When we had our 100th anniversary celebration on opening day in 2004, we said, `What happens if we roll back prices to what they were 100 years ago?’’ We had 10-cent sodas and 50-cent corned beef sandwiches. We basically give away six tons of corned beef. We do that every year on opening day. That’s how we kick off the season. You see folks with sandwiches piled high. Businesses send people running in to get a stack of sandwiches. Because we don’t have shareholders, we get to choose. What’s best for our industry? We ask ourselves every single day, `How do we improve our sport in Arkansas?’”Jackson and Cella came up with an original idea. “When we started to grow, we had to hire gaming folks from outside Hot Springs or outside Arkansas,” Cella said. “We said most of our managers have no idea what horse racing is. Eric created an agenda for Oaklawn University. Eric does everything for it. The purpose is to give these new members a smidgen of information about horse racing, our family and our community. It ends with a tour of a horse farm. It has nothing to do with casinos. It’s about horse racing and our history. That’s the message.”Cella enrolled himself. “That’s the coolest thing I’ve ever been through.” He said. “I had no idea. I loved it. It’s a great program.”The six-week curriculum, Jackson said, “explains how we got here, why certain things are important to us. When you connect all the dots, it says racing comes first. We want people to never forget that.”Jockey Ron Moquet and Jeanette Milligan—office manager of the Arkansas Horsemen Benevolent and Protective Association, whose husband Alan is a trainer—are Oaklawn University graduates.Oaklawn’s successful business model with Instant Racing led to tracks all over the country to invite him to speak. One discussion, maybe 15 years ago, sticks in his memory. “I was at Derby Lane Dog Track in Tampa, Fla.,” he said. “I was with representatives of the dog industry and horse racing. They wanted to know about Instant Racing. I told them if one party gets greedy, it’s not going to work. You have to agree to have lower margins because the people will show up. People started yelling at each other, dogs vs. horses. I banged my glass and stood up. I said, `Gentlemen, you’re wasting my time.’ And I walked out.”](https://images.squarespace-cdn.com/content/v1/517636f8e4b0cb4f8c8697ba/1603704568534-DM1VCL3TR93JB62ZUL68/HYR46T%2B%25281%2529.jpg)
By Bill Heller
The danger signs are everywhere.
Casinos at racetracks were always seen as a band-aid—a temporary fix to horse racing’s massive problem of not doing enough business to survive, let alone prosper.
What happens when the band-aid falls off?
In Illinois, where horsemen battled for nearly 10 years to finally get casinos approved at its racetracks, Churchill Downs’ decision not to pursue a casino at Arlington Park has left the future of this international-caliber, iconic Chicago racetrack in dire doubt.
In Florida, another Churchill Downs’ racetrack—Calder Raceway—which has operated as Gulfstream Park West on a lease agreement with Gulfstream Park, sought and received legislative approval to keep its casino open with jai alai replacing horse racing. This year’s Gulfstream Park West meeting is its last, with horsemen having to remove their horses by April 15. In the interim, horsemen are hopeful that an appeal and two lawsuits will change that reality.
The governor in Pennsylvania in February called for revenue from casinos legislatively targeted to racetracks be used instead to offer free college education. And that was before the coronavirus pandemic made every state in America revenue strapped. Pennsylvania horsemen are hoping they’ll be protected under existing legislation.
The sky is falling.
“Frankly, not everyone is going to survive,” trainer John Servis, a board member of the Pennsylvania Thoroughbred Horsemen Association, said. “We all knew this was going to come. We need to be able to stand on our own two feet. We have to stop relying on the casinos.”
Can they?
The plight of Illinois horsemen is downright depressing. “The thing that strikes me is that Illinois never had the band-aid of the racino,” said Dave McCaffrey, a long-time harness racing trainer who was president of the Illinois Harness Horsemen for eight years and is now the executive director of the Illinois Thoroughbred Horsemen’s Association. “At least Delaware, New York and Pennsylvania had this nice run of 10 or 15 or 20 years of dramatically increased purses and increased racing dates because of casino revenue.”
A native of Iowa who went to college in Minnesota and fell in love with Quad City Downs—a harness track in Illinois—chronicled the decade-long battle to get slots approved at racetracks. It began while McCaffrey was the head of harness horsemen. It began with a typical, historic cooperation between the state’s Thoroughbred and harness horsemen. “The harness and Thoroughbred horsemen, typically in the country, do not agree on much,” McCaffrey said.
McCaffrey and Thoroughbred trainer Mike Campbell, who was president of the Illinois Thoroughbred Horsemen Association, had met at the University of Arizona Racing Symposium in 2009. The following year, they decided to work together. “Both breeds were in such dire straits we figured we were stronger together,” McCaffrey said. “What’s good for us is good for you. We hooked up in a great alliance, and in three months we crafted a bill that I think is the best racino deal in the country. It would have produced 15 percent of adjusted gross revenue to purses. In other states, the casino revenue goes from the racetrack to the state to the purses. In Illinois, it would go straight from the track to purses—a huge difference. When other states are strapped, they don’t want to pay that money for purses. In Illinois, they never get their hands on it.”
Neither have Illinois horsemen because there are still no racinos at Illinois racetracks a decade later. What wet wrong? McCaffrey provided the two-word answer: “Illinois politics.”
In various stages, the racino bill was a victim of the city of Chicago wanting its own casino; the governor vetoing the bill; one house passing the bill but the other house declining to do so; a governor who couldn’t get anything through because both houses were of the other party. “They fought like cats and dogs for four years,” McCaffrey said. “The bill didn’t even get to the floor.”
Right before the election of a new governor, Jay “J.B.” Pritzker, who supported the gaming bill, in 2018, Churchill Downs, bought a 60 percent interest in the Rivers casino, 13 miles from Arlington. “I remember it being Halloween when that deal was announced,” McCaffrey said. “There was all this optimism that the damn gaming bill might finally be passed in 2019.”
Prtizker took office in January 2019. The gaming bill passed both houses and was indeed signed into law on June 27, 2019, authorizing Illinois’ three remaining racetracks: Arlington Park, Fairmount Park and Hawthorne to build racinos. But Churchill Downs didn’t even apply for a racino license. “Churchill Downs decided this gaming bill doesn’t work for them and were not going to apply for the racino license at Arlington despite the fact that they were screaming for the bill to get passed for 10 years,” McCaffrey said.
It got worse. The coronavirus pandemic struck this spring, and Arlington’s already reduced meeting of 70 days were slashed to 30 minus Arlington’s signature races including the Arlington Million.
On July 31, according to a story in Chicago’s Daily Herald, Churchill Downs Inc. CEO Bill Carstanjen, on a quarterly earnings call with investors, said, “The long-term solution is not Arlington Park. That land will have a higher and better purpose for something else at some point. But we want to work constructively with all of the constituencies in the market to see if there’s an opportunity to move the license or otherwise change the circumstances so that racing can continue to Illinois. For us, we’ve been patient and thoughtful and constructive with the parties up in that jurisdiction, but long term, that land gets sold.”
Mike Campbell is buying none of that. “I’ve repeatedly said I’ve had conversations with several gaming companies to buy Arlington Park—three gaming companies and a very wealthy horse owner all made inquiries to Churchill Downs. Churchill Downs said, `Not interested.’ They’re just not interested. Carstanjen said, `a higher use than a racetrack. Who the hell is he to say it’s suited for a better purpose? There are thousands of jobs involved. I think that what’s going to happen at Arlington is that in the middle of the night they’re going to come in and excavate that track in a manner that it can’t be fixed. Just do it and don’t ask questions.”
“It’s exasperating,” Campbell said. “I’ve been president of the horsemen for 10 years. I’m all in for my horsemen. I told my board I’ll do everything I can to step in front of the train to slow it down. But money always wins. I’m the first to recognize it.”
Phone calls to Churchill Downs, Inc. requesting a comment were not returned. …
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