Illinois on the Brink - by Eric Mitchell

"At a crossroads" can no longer be used to describe the health of racing in Illinois. The industry there is teetering on the brink of collapse and whatever action is taken (or not) next year is likely to determine if it falls off the economic cliff.

The state of Illinois' Thoroughbred industry mirrors the Doomsday Clock, the graphic clock face created in 1947 by the still-published Bulletin for the Atomic Scientists—tracking how close humanity is to nuclear apocalypse, which is when the "clock" strikes 12. Right now the minute hand on the Doomsday Clock is three minutes before midnight, which, again, seems in line with the plight Illinois horsemen face.

By the estimates of some racing industry state leaders, if 2016 slips away without any progress toward allowing racetracks to offer casino gaming, then irreparable harm to an industry that produces more than 30,000 jobs statewide is not far behind.

"You have people holding on," said Glen Berman, executive director of the Illinois Thoroughbred Horsemen's Association. "The people who are here have their families here and don't want to leave. Often that's the choice—leave or get out of the business. A lot of people are choosing to get out of the business."

Illinois racing came close a couple of times to getting relief but was regularly rebuffed by former Gov. Pat Quinn, who felt the efforts to expand casino gambling did not provide new regulations to police the gaming industry. The 2011 legislation was never sent to Quinn because he was expected to veto it. Legislation got passed again in 2012, which Quinn did veto. The veto was repeated in 2013.

What Quinn did authorize was "casino cafes," which put video lottery terminals in bars, restaurants, and gas stations. Since the Illinois Gaming Board began granting licenses, more than 21,500 machines have been installed in about 5,100 locations, according to the Arlington Daily Herald.

No relief and more competition for racing.

In the meantime, a temporary salve in the form of the Horse Racing Equity Trust Fund—money paid by the state's 10 casinos to mitigate their impact on horse racing—began getting distributed to the tracks in 2011. In 2012 the average purses paid per day at Arlington International rose to $327,400 and to $214,050 statewide. No permanent momentum was gained, however, and average daily purses have now fallen to $175,000 for Arlington and $132,640 statewide.

In its third quarter earnings report, parent company Churchill Downs Inc. noted that Arlington performed the worst of its racing properties by net revenue from external customers—down 10% for the previous nine months. Churchill Downs' flagship track was up 6% and Fair Grounds Race Course & Slots' racing operation was up 5%.

When asked about the future of Arlington without gaming, CDI president and chief operating officer Bill Mudd said the company is still bullish on getting gaming at Arlington and believes the value of a viable racetrack and a casino still exceed the value of the land.

"Right now, it still makes sense to continue to play for the casino and racing establishment," Mudd said. And if a casino does not materialize? "Then we'll re-evaluate."

Say what you will about CDI and its commitment to racing, the reality is it is a publicly traded company that must answer to shareholders. The company will not stick with a racetrack that steadily loses money—Hollywood Park, Hoosier Park, and Calder Casino & Race Course are examples.

For Illinois horsemen, for CDI, and the future of Arlington, that make-or-break point could be reached next year. Some hope remains. Illinois has a new governor in Bruce Rauner, who has promised to give any gaming initiatives fair evaluation. That could include recognizing that racing—while gambling--supports a larger agricultural industry. In a market as saturated with gaming as Illinois, a casino will have to be a part of racing's future if the tracks are to be competitive.

"We have definitely reached that critical point," Berman said. "If there is no gaming next year, we'll probably see some big changes."

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