Illinois lawmakers return to Springfield today for their fall veto session. The session is scheduled to last six days; lawmakers will work through Thursday of this week, and then Tuesday, Nov. 5, through Thursday, Nov. 7.
Tomorrow afternoon, the House will hold a hearing on the gaming expansion proposal that passed the Senate but stalled in the House last spring. The hearing Wednesday is “subject matter” only, so lawmakers are not expected to vote.
The Illinois Thoroughbred Horsemen's Association strongly supports this underlying proposal, which would authorize slots at tracks as a means to enhance purses and help Illinois racing more adequately compete with other states already bolstering purses with casino-style revenue.
However, it's unclear when House lawmakers may vote on whether to advance the proposal to Gov. Pat Quinn's desk. The governor has said he won't consider approving gaming expansion until after lawmakers approve a plan to address the state's public pension debt, which is estimated at upwards of $100 billion.
A special conference committee appointed at the behest of the governor more than three months ago has been working to negotiate a plan to address the pension debt, but that panel remains divided and it's unclear whether lawmakers will vote during the veto session on any solution.
ADW Must Be Revised and Renewed
The Illinois law authorizing advance deposit wagering will expire on Jan. 31, 2014. If ADW is not renewed, the Illinois Racing Board has said it will substantially reduce live racing opportunities in Illinois – hastening the demise of the Illinois thoroughbred and harness racing industry, which supports more than 35,000 jobs statewide.
Hawthorne Racecourse, Maywood Park, Balmoral Racetrack, the ITHA and the Illinois Harness Horsemen's Association support renewing and revising our state's ADW law to ensure the IRB is adequately funded to administer Illinois horse racing and to avoid draconian cuts to Illinois racing opportunities that would lead to catastrophic job losses throughout racing and Illinois agribusiness.
Moreover, our joint proposal will ensure that ADW revenue is fairly distributed among tracks and horsemen purses. It will ensure that ADW companies will no longer have the power to take far more than their fair and appropriate share.
Under the terms they negotiate with tracks, ADW companies routinely take more than half the profit – those dollars left after compensating bettors and paying taxes and other administrative costs. Tracks and purses generally then receive equivalent shares of the remaining revenue.
Advance deposit wagering in Illinois was not intended to enrich the ADW companies that facilitate wagering online. It was intended to support purses and the tracks that partner with those ADW companies, as well as generate revenue for the state.
In 2012, ADW handle totaled $122.17 million and purses received $3.37 million or 2.76 percent. In 2010, the first full year of ADW in Illinois, handle was $97.8 million and purses received $3.34 million or 3.41 percent. So while handle has grown, the percentage shared with purses has dropped. Illinois horsemen have moved their business to other states in recent years precisely because purses there are far more competitive.
The current ADW law has enabled an unintended and unequal distribution of commissions and purses. In 2012, out-of-state ADW providers received nearly $8 million in commissions from Illinois customers, while Hawthorne and thoroughbred horsemen purses there received just $360,000. Maywood and Balmoral received less than $200,000, and harness horsemen purses there received virtually nothing from ADW wagering (they received a minor subsidy created three years after original passage of ADW in 2009).
Illinois is heading into its fifth year of ADW, and it's past time for ADW to adequately support purses and all the host tracks. We support a fair and appropriate ADW extension law that will maximize support for purses and truly promote the interests of horse racing. ADW was intended to foster the growth of the entire industry for Illinois racing stakeholders (tracks and horsemen).
Illinois horsemen are hopeful that Arlington Racecourse – the only major horse racing entity in northern Illinois not in agreement with the joint ADW proposal – also will agree to support fair and equitable distribution of ADW revenue to tracks and horsemen purses.
However, it's no surprise that Arlington is defending the status quo and seeking continuation of the existing ADW structure to the detriment of its closest competitors and Illinois horsemen. When ADW company TwinSpires makes its revenue-sharing deal with Arlington, a fellow Churchill Downs Inc. subsidiary, CDI has no financial incentive to push for Arlington to keep more of the revenue because the parent company makes more money when its track and horsemen purses get less.
Under the status quo, a net loss for the track and purse account is a net gain for CDI.
Supporting the IRB
The IRB has also called for a supplemental appropriation of $725,000 to alleviate its budget stress. The ITHA has suggested two routes for identifying the funds necessary to reconcile this deficit in the short term – and better support the IRB's budget over the long term.
HFL Sport Science, Inc., a fully accredited lab located in Kentucky, has reported it could provide equine drug testing services to the IRB at an estimated savings of more than $600,000 annually over the IRB's current contract with a lab based at the University of Illinois at Chicago.
HFL Sport Science is accredited under both the ISO 17025 standard and the Racing Medication & Testing Consortium standard – a higher standard that's uniquely tailored for horse racing. The UIC lab currently testing in Illinois is not accredited under either standard.
The ITHA has urged the IRB to consider contracting with a different lab, such as HFL Sport Science or another fully accredited lab, when its current contract with the UIC lab expires on June 30, 2014, as a means to save potentially more than $600,000 on an ongoing, annual basis.
Separately, we have suggested that state lawmakers consider tapping a portion of the recapture subsidy that compensates Arlington and other Illinois tracks for the loss in live handle related to simulcasting their races across the globe.
In 2013 alone, Arlington will enjoy an estimated $4.1 million recapture subsidy – dollars that flow directly from horsemen purses at a rate of $46,000 a day. Less than a quarter of Arlington's subsidy would be more than sufficient to cover the IRB's projected deficit.
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