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| Indianapolis Star June 3, 2004 Industry Slows to a Troubled Trot Tracks: We're doomed without pull-tabs By Michael Pointer Saturday's Belmont Stakes marks the biggest event of the year for horse racing, as Smarty Jones bids to become the first horse to win the Triple Crown since 1978. More than 90,000 fans will pack Belmont Park outside New York City; millions will watch on TV. In Indiana, Hoosier Park and Indiana Downs will be abuzz over the simulcast. But when the race ends, a grim reality returns. Ten years after coming to Indiana, the horse-racing industry faces a crisis. Hoosier Park in Anderson lost $555,000 last year. The state's other pari-mutuel track, Shelbyville's Indiana Downs, lost nearly $4 million. These losses came even though each track received more than $5 million in subsidies from the state of Indiana, the largest state subsidies given to horse tracks in the United States. Now some legislators question whether there is enough interest to support two tracks -- or even one. The people who run Hoosier Park and Indiana Downs and area horsemen insist there is -- if the state legislature reverses course and allows the installation of pull-tab machines at the tracks and at their off-track betting facilities. They say they need the extra revenue to increase purses, which would make the tracks more attractive in simulcasting, where the bulk of the money is made. Opponents, including Senate President Pro Tempore Robert Garton, argue that Indiana has enough gambling with riverboats. They worry that pull-tabs, which are like slot machines, would essentially turn the tracks and OTBs into casinos, and that any economic benefit to the state would be outweighed by the costs of increased gambling addiction. This past February, Garton sidetracked a bill that would have added pull-tabs by assigning it to committee. The measure will resurface in the next legislative session, beginning in January, and critics vow to fight it again. Local horsemen say they cannot survive without pull-tabs -- and that they don't have a Plan B. "If we're not in position to get alternate gaming," said Jerry Walker, head of the Indiana Horse Racing and Breeding Coalition, "both tracks will cease to exist and Indiana racing will basically be nothing." Falloff at the track Backed by the finances and simulcasting power of majority owner Churchill Downs Inc., Hoosier Park opened in 1994 as the state's first pari-mutuel track. "Betting on a boom," declared a front-page headline in The Indianapolis Star on opening day; and indeed, from 1997 through 2002, the track averaged annual profits of more than $2.2 million. But that was due largely to the state subsidy. Concerned about the competitive blow of riverboat casinos, which opened in 1995, lawmakers agreed to award the racing industry 65 cents for every $3 riverboat admission. That amounted to $98,000 in 1995. As the riverboats' success skyrocketed, so did the subsidy, reaching $10.9 million in 2003. Until December 2002, Hoosier Park had the subsidy all to itself. But when Indiana Downs opened that month, the tracks were forced to split the money, and since then Hoosier Park has seen a falloff in virtually every economic indicator of the business, including purses, attendance and quality of horses. Last year, the track reported a loss of $555,083, its first loss since 1996. Indiana Downs, meanwhile, has not gotten off the ground. The track reported a loss of $3.9 million last year, its first full year of racing. On typical nights, a few hundred fans sprinkle the stands. Officials at both tracks vow they will remain open, and they hope for a turnaround this summer. But they also say the only long-term answer is adding alternative gambling, specifically pull-tab machines. Some of the money from these would go into purses, which are the critical lure for a business in which 90 percent of the bets come from simulcasting, a form of remote, off-site wagering. The legislation that stalled in February would have allowed Hoosier Park and Indiana Downs to each install 1,000 pull-tab machines, and let them share betting parlors at OTBs in Indianapolis and Fort Wayne, each of which would have gotten 1,500 pull-tabs. The measure passed the House 53-39 before Garton, R-Columbus, blocked it in the Senate. As part of the measure, 13 percent of the revenue from the pull-tabs would have gone into the tracks' purses, which, horsemen said, would have meant an annual boost of $25.9 million to $42 million. The measure also would have removed the subsidy. "I hear legislators say all the time, 'You need to get more people in the stands,' " said Indianapolis car dealership owner Ed Martin Jr., a former member of the Indiana Horse Racing Commission. "That is not where the industry is. We have to improve our purses to make it attractive in the simulcast market." Horsemen point to Prairie Meadows Racetrack near Des Moines, Iowa, which raised its purses from $40,000 per day in 1995, the year slot machines were introduced, to between $150,000 and $200,000 in recent years, according to Iowa racing officials. Tracks in other nontraditional racing states, such as West Virginia and Delaware, also have benefitted by adding slot machines or similar forms of gambling. New Mexico, Louisiana, New York, Minnesota and Florida also offer alternative gambling. "The trend in the industry is for these 'racinos' to support the industry," Walker said. "If Indiana chooses not to do that, it chooses not to participate." Hoosier Park and Indiana Downs may have caught a break last month when state Sen. Lawrence Borst, R-Greenwood, one of the main opponents of adding pull-tabs, apparently lost the GOP primary election by a few dozen votes to Brent Waltz. (A recount is ongoing.) But obstacles remain. Garton noted that the measure only narrowly passed the Democratic-led House, and party control of that chamber is up for grabs in the fall. Also, both Democratic Gov. Joe Kernan and his Republican opponent, Mitch Daniels, indicated through spokesmen that they do not support any new gambling. Nor was the horsemen's cause helped by an Indianapolis Star-WTHR (Channel 13) poll released last week that showed that although 47 percent of Hoosiers think riverboats have been good for the state, 55 percent oppose expanding gambling. Martin, for one, said he remains hopeful that some alternate-gambling measure will pass during next year's legislative session, in part because it won't be an election year. "I know what this industry can mean to Indiana, and the industry has done a good job educating legislators," he said. Moral argument Garton said he's not in a position to evaluate how important pull-tabs are to horse racing's survival. Rather, he and others who object argue on moral grounds. Warning that "it won't stop with pull-tabs," Garton said he fears adding more gambling would further erode the character and complexion of the state. Richard Hamilton, a retired Methodist minister in Indianapolis and a leader of the Indiana Coalition against Legalized Gambling, said pull-tab machines are among the most addictive forms of gambling. Putting them at racetracks would give problem gamblers even easier access, he said. "The combination of personal and family damage is very real and very anguishing," Hamilton said. "The accessibility increases the number of people caught in really damaging personal habits." He points to Indiana's riverboats, which took in $2.16 billion for the fiscal year that ended in June 2003. During that same time, nearly 1,100 people called Indiana's problem-gambling hotline -- (800) 994-8448 -- and the state spent $1.8 million to prevent and treat problem gambling. Hamilton also notes the subsidy, and he questions why gambling should be used to support a struggling industry. "How many industries do we put such importance on that we sustain as a matter of public policy when it can't sustain itself?" he asked. Hoosier Park president Rick Moore said combining the pull-tab argument with the subsidy isn't fair, because this year's legislation would have done away with the subsidy. He also argued that riverboats are, in essence, land-locked casinos because they are no longer required to leave the dock, and that tracks should have the same opportunities. Horsemen also contend that Central Indiana's tracks bring jobs and money to communities that need them. Anderson officials praise Hoosier Park, which employs 67 full-time workers and nearly 300 during its Thoroughbred meet (Sept. 2-Nov. 21), as a development tool in an area hit hard by layoffs and manufacturing-plant closings. Indiana Downs employs 200-250, said marketing coordinator Julie Metz. Moore envisions a situation similar to the one in Chester, W. Va., which underwent a boom after alternative forms of gambling were added at Mountaineer Park. "We plan on surviving," he said. "But we want to do more than survive. We want Hoosier Park and Anderson to become a destination point." Horsemen also say that unlike riverboats, horse tracks create benefits statewide. Better racing leads to more in-state breeding, which creates a trickle-down effect throughout agribusiness. They hope during difficult times, these kinds of economic arguments gain weight. "The state is looking for a lot of money," Moore said. "This is a way to raise money without raising taxes. I think it is something the public would welcome. . . . There's not one state you can point to where (added gambling) hasn't had a positive impact." Countered Hamilton: "When gambling began, the idea was to use this money to support some special things. Build a part of the road somewhere. Now, of course, it's built into the very ongoing part of the budgetary structure." In 2003, Indiana's 10 riverboat casinos paid $671 million in state and local taxes. Gambling tax revenues are expected to account for 5.5 percent of Indiana's $10.6 billion operating budget in 2004. Layoffs and uncertainty Beyond the arguments are the faces of an industry in decline. Smaller purses have caused potential breeders and owners to look to other states to take their horses. The number of Indiana-bred foals, which had greatly increased because of Hoosier Park's presence, has decreased the past two years. Larry Smallwood, general manager at Swifty Farms near Seymour, said falling purses caused the company to lay off about half of its 31-member work force earlier this year. He expects to breed about 60 mares at the farm this year after breeding 151 in 2003. Swifty Farms sent two of its nine stallions to out-of-state barns. The next to go may be Crown Ambassador, the state's top stallion in recent years. "You can't keep throwing money down a hole," Smallwood said. "If we don't get (the alternative gambling legislation) done this coming year, you can just about put a nail in the coffin." Gary Wilcox, who owns a harness-racing farm near Wabash, said the Indiana Horse Racing Commission allowed the industry to grow too fast. A second track should have been put in the northern part of the state, not in an already crowded Indianapolis sports market, he said. The chief argument for opening another track was to add racing dates, which would help grow the industry. Proponents argued there would be enough interest in the Indianapolis area to support both tracks. Wilcox worries that both Hoosier Park and Indiana Downs will fail and that harness horsemen will be forced to rely again on the far-less-lucrative county-fair circuit -- which, he said, would force him out of the business. "I guess the thing that bothers me the most is the legislators don't elaborate on what the economic impact is to the state and the industry," Wilcox said. "(People) think the riverboat money is coming to us. But quadruple the impact is coming back to the state." Among the most disappointed is Thomas H. Meeker. Meeker is president and chief executive officer of Kentucky-based Churchill Downs Inc., which remains the majority owner of Hoosier Park. Of the five tracks CDI owns other than Churchill, Hoosier Park is the only one it built from scratch. Meeker said CDI remains committed to Hoosier Park but added that the track is essentially starting over. Much of the gains the Indiana racing industry made early in the track's existence have been wiped out, he said. "It's like taking a 5-year-old or a 6-year-old and moving it back to a 2-year-old. Now you have two infant, weak tracks without a concerted focus on marketing or on simulcast product. . . . Fortunately, for us in Anderson, we have the commitment and the financial resources to maintain our operation." Indiana Downs has bigger problems. While Hoosier Park is part of the Churchill Downs Simulcast Network, Indiana Downs is owned by a family-run business out of South Bend called Oliver Racing LLC, and it must market its simulcast signal on its own. Making matters worse, Kentucky horsemen don't allow simulcasts from Churchill to be shown at Indiana Downs' OTBs in Evansville and Clarksville. Also, the Indiana Horse Racing Commission last year refused to allow Indiana Downs to open an OTB in Marion County because it didn't think the county would support a second one in addition to Hoosier Park's Trackside. Indiana Downs is expected to request that again this year. Indiana Downs general manager Jon Schuster said he's confident owner Oliver Racing LLC can overcome these challenges. But the most critical issue, he said, is one that only lawmakers can address: adding pull-tabs. "It's an absolute must," he said. Star reporters Kevin Corcoran and Tim Evans contributed to this story. Call Star reporter Michael Pointer at (317) 444-6641.  |
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