By T. D. Thornton
After working in partnership with Illinois horsemen for over a decade to finally achieve passage of expanded gaming at racetracks, Churchill Downs, Inc. (CDI), the owner of Arlington International Racecourse, stunned the state's racing community Wednesday by announcing that it intentionally missed this week's deadline to apply for slot machines and table games at the track, citing the requirement of having to contribute gaming revenues to the Thoroughbred purse account as a competitive disadvantage that it did not want to undertake.
In addition, CDI said in the same press release that it would only be willing to guarantee live Thoroughbred racing at Arlington through 2021, “while longer-term alternatives are explored…including moving the racing license to another community in the Chicagoland area or elsewhere in the state.”
The Illinois Thoroughbred Horsemen's Association (ITHA) countered with a press release of its own that said ITHA members were “profoundly disappointed” by CDI's decision, which comes against the backdrop of CDI's 61% ownership stake in Rivers Casino Des Plaines, a gaming facility about 25 minutes southeast of Arlington that is considered the dominant casino in the region.
“The company evidently plans to instead abandon its commitment to racing in Illinois and focus solely on its stake in the Rivers Casino and potentially other Illinois casinos not yet developed,” the ITHA release stated. “Churchill has snubbed, not only the working men and women of Thoroughbred horse racing whose collective livelihood depends on live racing, but also all of the elected officials it has so intensely lobbied over the last decade.”
On the national level, a common reaction on social media and in racing-related internet forums was that Arlington is about to become the latest example of CDI maximizing its gaming holdings at the expense of its Thoroughbred racetrack roots.
Under CDI's stewardship so far this century, Hollywood Park in California was sold and the land was eventually developed, and CDI now runs the former Calder Race Course in Florida as a casino while leasing out the bare-bones racing aspects of the facility to The Stronach Group to fulfill its state-mandated Thoroughbred dates requirement.
David McCaffrey, the executive director of the ITHA, told TDN via phone Wednesday that his organization was blindsided by the sudden switch in plans after working together with CDI for so many years to finally get the sweeping Illinois Gaming Act passed in June.
Asked if he could pose just one question to CDI's executives about the decision not to pursue gaming at Arlington, McCaffrey did not hesitate in answering: “Do you give a damn about racing?”
The only other two Illinois Thoroughbred tracks, Hawthorne Race Course (35 miles south of Arlington) and Fairmount Park (300 miles downstate in Collinsville), have already met the racino application deadline and are moving ahead with plans for the maximum statutory allotment of gaming amenities at each venue.
R. Alex Rankin, the chairman of the board of directors for CDI, did not return a Wednesday voicemail message prior to deadline for this story requesting the opportunity to ask follow-up questions beyond what the company issued in its press release.
Bill Carstanjen, CDI's chief executive, said in that release that “the economic terms under which Arlington would be granted a casino gaming license do not provide an acceptable financial return and we cannot responsibly proceed.”
Noting the soon-to-increase competition in the Chicago casino market (which includes CDI's own interest in Rivers), Carstanjen added that “Arlington would enter this market with an effective tax rate that would be approximately 17.5 [to] 20% higher than the existing Chicagoland casinos due to contributions to the Thoroughbred purse account. This disadvantage in a hyper-competitive gaming market, coupled with substantial licensing and reconciliation fees and new, unviable horse racing requirements in the Illinois Gaming Act, makes construction of a casino at Arlington financially untenable.”
Carstanjen continued, “Arlington will conduct horse racing in 2020 and 2021 and also will apply for a sports betting license while longer-term alternatives are explored. CDI and the team at Arlington will continue to work with legislative and community stakeholders.”
One theory reported by several Chicago-area news outlets is that CDI is using its non-application for racino licensure and the threat of closure as leverage to get the Illinois Legislature to make changes to the Gaming Act that would be more favorable to the corporation's bottom line.
But the ITHA's McCaffrey said that if it is CDI's intent to get the law changed, it would have made more sense to apply for racino status first to ensure that the track had a foothold under the current statute.
“If they wanted to do that, they should have at least applied for the license and then tried to [renegotiate the law]. But the fact that they missed the deadline knowingly and completely is very telling,” McCaffrey said.
“Their silence [while Hawthorne and Fairmount were openly announcing their own racino plans] was also telling,” McCaffrey continued. “The conventional wisdom was that they were at least going to apply for the license. Whether they proceeded with it was the unknown. I'm surprised that they didn't apply for it. Now, per the statute, they're taken out of the equation. They've left themselves no option to turn the place into a racino under current law. They've closed the door.”
McCaffrey said the next move for Illinois horsemen is unclear. In the ITHA press release, the organization advocated for CDI to be stripped of current tax breaks and the chance at future gaming privileges.
“Churchill immediately should be denied the enormous financial advantages it enjoys by virtue of its now-annulled commitment to Illinois racing,” the ITHA release stated. “Those include Arlington's considerable property tax break ($2.47 million this year), the track's recapture subsidy ($4.47 million in 2019 alone, straight from horsemen's purses), and the chance to apply for a sports betting license linked to Arlington (a form of gaming that will do nothing to benefit purses).
Added McCaffrey: “I have to think that there are a lot of legislators [who are miffed] after being lobbied for 12 years by Arlington Park to get this thing passed. I have to think there are some legislators who are going to think that they've had the rug pulled out from under them.”
The Chicago Sun-Times quoted both the current and former Illinois governors on their takes on CDI's announcement.
Current Gov. J.B. Pritzker said the move was “a significant reversal” on the legislation he shepherded, which he said was designed to allow “the racing industry to flourish.”
Former Gov. Jim Edgar told the Sun-Times that CDI should sell Arlington to another operator.
“Churchill is a business, and I think it's pretty obvious they're in the casino business. They own a big chunk of the casino down the road, and they'd rather do that.”
Regarding the possibility of a Thoroughbred racing license transfer, Crain's Chicago Business identified Quad City Downs, a decades-defunct harness track about 165 miles west of Chicago, as a possible target for CDI's relocating of its race meet. CDI operated that property as a simulcast center until 2015.