Indiana Horse Racing and Breeding Coalition
www.hoosiersforhorses.org
Louisville Courier-Journal
March 11, 2007
Horse Industry's Hopes Riding on Slot-Machine Bill
By Lesley Stedman Weidenbener
NABB, Ind. — The future of Killenaule, son of Kentucky Derby winner Fusaichi Pegasus, is in the hands of the Indiana General Assembly.
If state lawmakers authorize slot machines for Indiana's racetracks, the rambunctious stallion
will stand for breeding at Larry Smallwood's small Scott County farm.
The legislation would make Killenaule's offspring eligible for purse bonuses meant to boost the
state's horse industry, prizes that could increase substantially with the revenue that slots are
expected to provide.
"If the bill doesn't pass, he'll stand in Kentucky," Smallwood said last week.
Similar decisions by horsemen across Indiana await the outcome of House Bill 1835, which would
authorize 5,000 slot machines to be split between Hoosier Park in Anderson and Indiana Downs in
Shelbyville.
The House passed the bill 54-39, and new Senate President Pro Tem David Long, R-Fort Wayne,
pledged it will get a hearing there this month. If approved, Indiana would join about a dozen
other states using casino-style gambling to stabilize their foundering horse-racing industries.
Supporters say the Indiana bill has perhaps its best chance ever of passage thanks to years of
lobbying by racing interests, a need for revenue and the defeat of legislative leaders who in the
past blocked its path.
"The stars have seemed to align," said Rep. Matt Whetstone, R-Brownsburg, who is influential
on gambling issues. "The industry is well organized. The agricultural community is behind it.
There's a need for revenue. And this bill has been coming so long, it eventually just wears down
everybody."
But the Indiana Coalition Against Legalized Gambling is contacting senators to urge no votes and
has asked Gov. Mitch Daniels to veto the bill if it passes. Volunteer Daniel Gangler said the group
will meet with Daniels to remind him of his statements opposing an expansion of gambling.
"We want to make sure the governor continues that stance," Gangler said.
For years, powerful Republican Senate leaders -- President Pro Tem Robert Garton and Finance Committee
Chairman Larry Borst -- shelved proposals for slots at tracks, even after the House passed them.
But both men lost re-election bids -- Borst in 2004 and Garton in 2006 -- and Long has promised he won't
arbitrarily kill House bills without a hearing.
Senate Tax and Fiscal Policy Chairman Luke Kenley, R-Noblesville, said he will allow a debate and vote
on HB 1835, even though he hasn't decided whether to back it.
"It seems to me that maybe that we are doing something to save what is basically a failing
industry," he said.
But Kenley acknowledged the proposal has momentum.
As passed by the House, HB 1835 would authorize slots only at the tracks, not at their off-track betting
sites. Each track would pay the state $100 million for the right to install the machines plus a 37.5
percent tax on their revenue, which is the amount that gamblers lose.
The horse racing industry estimates if each machine earns $292 per day, the slots would generate nearly
$533 million annually. That would mean nearly $200 million in taxes for the state, the tracks' host counties
and other Hoosier counties that don't have casinos, the only places where slots are now allowed.
The revenue could be important because the Senate has passed unfunded bills for full-day kindergarten and
an expansion of health care for low-income families, said one of the bill's advocates, Rep. Scott Reske,
D-Anderson.
"This is the only source of revenue floating around," Reske said.
Even Kenley said the money would be useful to help him implement a property-tax-reduction plan.
Still, he worries the bill will make it harder for the legislature to say no in the future when communities
see land-based casinos as the answer to their economic woes. And he said the state would simply be replacing
one racing subsidy -- $27 million in annual casino tax revenue now dedicated to the horse industry -- with
another.
The bill would dedicate 15 percent of slot machine revenue to purses and breeding programs. The racing
industry estimates that would mean $35 million for thoroughbred breeding programs, $35 million for standardbred
programs and $6 million for quarter horses.
Supporters say that can't come soon enough.
Hoosier Park -- which Louisville-based Churchill Downs is selling to its minority partner Centaur Inc. -- lost
more than $3 million last year. Purses have fallen since 2001, when Indiana Downs opened and the tracks had to
begin splitting the $27 million annual subsidy.
That's led to a drop in the number of newly registered foals, which has plummeted from a high of 546 in
2001 to just 315 in 2005. Some owners and breeders are moving out of state or just quitting, finding that
it no longer makes business sense to continue racing in Indiana.
Smallwood, who leads the Indiana Horse Racing and Breeding Coalition, said he has put off decisions about
expanding his small farm in Nabb, between Scottsburg and Madison, until the legislative session ends.
He's currently breeding eight of his 10 mares to Kentucky stallions. If the bill passes he'll raise them
in Indiana. If not, he'll take them to Kentucky.
"I think the legislators understand that the horse-ag industry and the racetracks are kind of on
death row," he said.
That's the argument the racing industry is taking to the Senate, where ties to agriculture are strong.
Horsemen are located in every Indiana county and their livelihoods will increase dramatically if slots
are authorized, Smallwood said.
Doug Reed, director of the Race Track Industry Program at the University of Arizona, said that has been
the experience of other states that approved slots.
"The number of horses bred has increased and the activity and the value of the horses has gone
up," Reed said. "So what you get is trickle down economics. There are more horses being bred
and more people buying feed and more vet bills and everything that goes into agri-business."
Although Daniels has said he opposes a gambling expansion, he has been careful about the way he defines
the word and has given no public indication that he opposes HB 1835.
Racing lobbyists have identified 10 senators they believe are sure to vote against the bill because they
oppose gambling and have divided the rest into probable or possible yes votes.
On the list of members to target is Sen. Connie Sipes, D-New Albany, who is on the Tax and Fiscal Policy
Committee where the legislation will make its first stop.
Sipes said the issue is relatively new to her -- as it is to many senators who have seen it die without
debate -- and she's trying to prepare for the hearing.
"I'm real interested in seeing the pros and cons and we'll go from there," Sipes said. "I want
to see the trade-offs."