Illinois horsemen to governor, regulators: Supports jobs, not recapture

Posted: Jan. 17, 2017

The Illinois Thoroughbred Horsemen’s Association, Illinois Horsemen’s Benevolent and Protective Association, and Illinois Harness Horsemen’s Association, in a lengthy memorandum issued Jan. 17, have asked Gov. Bruce Rauner to use his influence to end the practice of recapture—purse money being shifted to racetracks to compensate for declines in live pari-mutuel handle—and in turn support thousands of jobs in horse racing. The groups also have asked the Illinois Racing Board, which meets Jan. 24, to honor the intent of the Illinois Horse Racing Act in regard to recapture.

The memorandum follows:

Illinois regulators will soon decide whether horse racing tracks can take for themselves more than $11 million in purse money intended to pay backstretch workers, jockeys, drivers, blacksmiths, veterinarians, hay and feed suppliers, trainers and other workers.

If the Illinois Racing Board on Jan. 24 votes to allow the tracks to raid purses, it will expedite the collapse of an industry already shedding jobs and struggling to compete with racing in other states, such as neighboring Indiana and Iowa, where gaming revenue is used to boost purses, enhance competition and improve racing quality.

Illinois Thoroughbred and Standardbred owners and trainers ask the IRB to vote against allowing tracks to take dollars explicitly earmarked—as a percentage of handle (the amount wagered)—for purses. We respectfully request that Gov. Bruce Rauner use his platform to make it clear to IRB commissioners, the majority of whom he has appointed, that they should side with the thousands of men and women who work each day for a share of those purses.

With Illinois unemployment higher than the national average, this state cannot afford the job cuts that inevitably will result from a significant purse reduction. Every dollar the tracks remove from purses represents a dollar of lost economic opportunity.

In 2016, Arlington Park alone took $4.4 million from purses, depleting them by nearly $60,000 per race day. The track took that purse money even as its parent company, Churchill Downs Inc., reported “record net revenue” during each of the first three quarters of last year. Had Arlington not raided the purse account, daily overnight purses would have been 46% greater, rising from $130,730 to $190,324. That would have dramatically strengthened overnight races at that track and helped stanch the loss of jobs across Illinois’ horse racing industry.

“Recapture” Means “Corporate Welfare”

The practice of “recapture” was never intended to become corporate welfare, enabling tracks to subsidize their own operations while squeezing the life out of live racing. But since 1995, when recapture began, the IRB has signed off on diverting a staggering $262.1 million in purse money to track owners. (Even after accounting for reimbursements the state made to purse accounts more than 15 years ago, purses still have lost more than $200 million.) While the racetracks enjoy that herculean subsidy, horsemen compete for purses that, at best, cover less than half of our cost to buy, train, feed and care for the horses around which our sport revolves.

Recapture is unique to Illinois and from another era of horse racing—one in which tracks feared the loss of live handle relating (at the time in 1995) to the growth of simulcasting of races from other states. Since 2009, track owners here and across the nation have embraced advance deposit wagering, a technology that has largely supplanted full-card simulcasting and which has been highly profitable for them.

When a dollar is wagered via ADW, a portion of that dollar goes to the ADW operator and that leaves less for the track and the purse account to split. But while it may appear that track owners get less when bets are made over ADW, they are in fact making more because all the tracks in Illinois are financially tied to the ADW companies taking those bets.

Arlington, for example, is connected to—a fellow subsidiary of Churchill Downs Inc. and the self-described “largest legal online gaming platform in the U.S.” When a bet is made on TwinSpires, the horsemen’s purse account earns less while Arlington’s parent company (which enjoys the shares of both the ADW company and the track) keeps more. In its third-quarter report for 2016, CDI said “TwinSpires handle grew 14.3%, outpacing the U.S. Thoroughbred industry performance by 13.5 percentage points.”

IRB Must Act in Accordance with Horse Racing Act

Until such time that Illinois lawmakers authorize tracks to host gaming for the purpose of bolstering purses, the surest way to immediately and dramatically improve purses would be unceremoniously stopping the tracks from draining them—an act by the IRB that can and should occur under existing law. (Prior to the legislature’s recent “lame duck” session, the IRB unsuccessfully promoted legislation that, in its view, would have allowed the transfer of up to $500,000 in pari-mutuel tax dollars from its own budget to the purse account. The ITHA’s statement on that proposal is available here.)

With Illinois Thoroughbred and Standardbred racing now rapidly contracting—handle and purses are down dramatically, as is the state’s racing horse population—continuing to award recapture would contradict the spirit, if not the letter, of the law underpinning our sport.

The Illinois Horse Racing Act requires the board to consider “the need to ensure reasonable purse levels” before it can permit any amount of recapture. The Act further specifies that its entire purpose—and by extension, the IRB’s mission—is to support and enhance the racing industry; ensure that Illinois racing stays competitive with other states; stimulate growth of racing; promote the growth of tourism; encourage the breeding of Thoroughbred and Standardbred horses in our state; and maintain public confidence and trust in the credibility and integrity of racing operations and the regulatory process.

On Jan. 24 the IRB can vote to honor the law’s intent, truly promote Illinois racing, and end recapture, which will halt the exodus of racing jobs from our state, preserve what remains of breeding, attract additional bettors, and, ultimately, grow field size and handle. Or, it can maintain the status quo and hasten the demise of Illinois racing.

(THA photo)