The Week in Review: Commitment? What Commitment?

Earlier this month the Illinois Racing Board (IRB) challenged Churchill Downs, Inc. (CDI) to a game of chicken over the fate of CDI-owned Arlington International Racecourse.

This past Tuesday, the IRB lost–badly–while serving up a civics lesson of sorts about what can happen when gaming corporations clash with the politically appointed government entities tasked with regulating them.

Two weeks ago, the IRB threatened not to award 2020 race dates to CDI-owned Arlington after the corporation intentionally missed an August deadline to apply for racino licensure that would have bolstered purses at the state's premier track.

CDI's inaction on the racino license stunned the Illinois Thoroughbred community because the corporation had used the horsemen's decade-long support to partner on finally getting gaming legislation passed in June before CDI abruptly abandoned the idea of operating an Arlington racino, citing bottom-line financial concerns as the reason.

CDI's refusal to go after an Arlington gaming license is additionally controversial because CDI has an ownership stake in a nearby casino and has stated an intent to open another near Chicago.

Beyond the apparent conflict of CDI not wanting Arlington to compete against its other gaming properties, there have been numerous published reports in Chicago media speculating that the racino holdout is just a ploy to get the state legislature to rewrite portions of the Illinois Gaming Act with terms that are more financially favorable to the corporation.

At a Sept. 17 race dates hearing, the IRB verbally jousted with CDI executives over the corporation's lack of commitment to Thoroughbred racing at Arlington. IRB commissioner Thomas McCauley even scolded CDI for lacking “any regard for social responsibility whatsoever.” That meeting ended with the IRB mandating that CDI come back before the board in a week's time to demonstrate some form of long-term dedication to racing in Illinois. A figurative “or else” was thrown in for good measure.

On the national level, CDI is increasingly facing questions about whether it maximizes its gaming holdings at the expense of its Thoroughbred racetrack roots. It currently owns and runs Thoroughbred racing at Churchill Downs, Arlington, Fair Grounds, and Presque Isle Downs.

But CDI's stewardship so far this century also includes the demise of two key racetracks on the national landscape. The corporation owned Hollywood Park in California but sold it for development. And CDI now runs the former Calder Race Course in Florida as a casino while leasing out the bare-bones racing aspects of that facility to The Stronach Group to fulfill its state-mandated pari-mutuel requirement (while simultaneously battling for the right to do away with horses entirely in favor of jai alai).

So while the U.S. racing world waited with interest last week to see if a regulatory body would actually stand up for the sport by holding CDI accountable for its inaction at Arlington, those same seven days of waiting were quite likely viewed very differently by the nine IRB commissioners tasked with voting on whether Arlington would get dates in 2020.

Politically speaking, the focus in Chicago has zero to do with the long-term safeguarding of our sport and everything to do with making sure Arlington doesn't go belly-up and cause economic dysfunction under the watch of the current cast of elected officials and the racing commissioners they appoint.

That reasoning is probably why the entire IRB board about-faced from the previous week's hard-line stance and voted unanimously on Sept. 24 to grant Arlington the entire slate of 2020 dates CDI had requested without extracting even a single tangible concession or commitment to future racing from the corporation.

As David McCaffrey, the executive director of the Illinois Thoroughbred Horsemen's Association (ITHA), told TDN after the meeting, the entire spectacle unfolded like a bizarre soap opera whose plot lacked continuity from week to week. Why did the IRB go through the charade of delaying the vote and demanding some sort of show of dedication when, in the end, none was offered by CDI or strongly pressed for by the commissioners?

As is often the case when executives from publicly traded companies testify at public hearings, what is not said under oath can be more telling that what is revealed. And last Tuesday's IRB meeting did yield some corporate-speak tidbits that give subtle clues to CDI's intentions.

Commissioner McCauley engaged in a one-on-one grilling of Bradley Blackwell, CDI's senior vice president and general counsel, and their exchange included the following questions:

McCauley: “To the best of your knowledge and belief, have there ever been [CDI] meetings to discuss selling Arlington Park?”

Blackwell: “I cannot go into the specifics here. It would be irresponsible to do so and you shouldn't expect for [us to do so] in a public hearing.”

McCauley: “Have there been such meetings to sell the real estate known as Arlington Park?”

Blackwell: “Commissioner McCauley, if your line of questions are to breach the confidence that are in management meetings or board of directors' meetings, we cannot address any of those. We can only speak to what we've said publicly, and about our commitment to find a solution here.”

McCauley: “Has Churchill or Arlington agreed with any third party to not have a casino at Arlington?”

Blackwell: “Not to my knowledge. And again we cannot get into anything specific. But I'm not aware of anything.”

McCauley later asked if it was CDI's intent to seek legislative changes to the Illinois Gaming Act.

Blackwell: “We cannot speak about our legislative strategy here. Again, that would be irresponsible, and jeopardize or prejudice those efforts.”

McCauley (growing irked): “I think I know the answer to my next question, but I'll ask it anyway. Is it Churchill's intention to re-evaluate implementing gaming at Arlington Park if those [Gaming Act] modifications [happen]?”

Blackwell: “Again, we are examining and working towards the best solution.”

The obvious question remains, “best solution” for which entity? CDI or the sport?

McCaffrey, of the ITHA, took particular umbrage with one dubious point that CDI officials raised early in the meeting that the IRB commissioners willingly latched onto: Both the board and the corporation somehow fell into agreement that since no racinos were up and running just yet in Illinois, it would be premature to look too far down the road to speculate what the impact of gaming-fueled purses might be. By extension, there all of a sudden seemed to be little reason to hold CDI's corporate feet to the fire about what it might or might not do in the future at Arlington.

“It's a stunningly superficial understanding of the sport to say something like that because breeders, owners, and horsemen make their plans based on what the future looks like,” McCaffrey said. “If Arlington had committed to a gaming license like Hawthorne [and Fairmount Park] had, it would have had a gigantic 2020 effect on recruiting, people going out to buy horses, and future breeding plans. It's a superficial understanding of the industry if you don't think that good news like that would filter through the industry regarding breeding.”

McCaffrey related a recent conversation he had with the Illinois Department of Agriculture's bureau chief for County Fairs and Horse Racing, who acts as a liaison between the sport and the state.

“He told me the other day that between the time the legislature passed the Gaming Act and the governor signed it this summer, he had more phone calls in that one-month period asking about getting back into Thoroughbred breeding in Illinois than he had in the previous three years.

“Now here's the kicker,” McCaffrey summed up. “Since Arlington decided not to pursue their gaming license, he told me he's had an equal amount of people call him about breeding opportunities in Illinois to say, 'Forget it. I'm not going to do it now.'”