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* UPDATED x1 * Churchill Downs points finger at horsemen in threat to close Arlington Racecourse

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* Las Vegas Advisor last month…

JP Morgan‘s Daniel Politzer expects Churchill Downs to be a winner thrice over in Illinois: first, a lower tax rate on table games, starting in 2020; second, a potential 800 additional gaming positions at Rivers Casino Des Plaines (which will probably require physical expansion: it’s pretty packed in there); third, slots at Arlington Park, though Politzer thinks Churchill Downs may sell the latter now its real estate is more valuable, among several other options: “we could envision a scenario whereby CHDN would opt to sell its 336 acres of land at Arlington Park, utilize a 1031 exchange to limit tax leakage, and pursue an additional casino license in Illinois (potentially with Rush Street Gaming/Neil Bluhm; the Waukegan license seems most logical, in our view …).”

Since Arlington and Rivers are only 15 minutes apart, Churchill Downs might look askance at the obvious cannibalization. Arlington’s capacity will also be capped at 1,200 gaming positions, unlike Waukegan. Rivers can also absorb a nearby competitor, as its per-position numbers are out of sight, the most impressive I’ve ever seen in gaming: $800/win/slot/day and $7,300/win/table/day. Politzer estimates that the tax cut will translate into $45 million extra a year in cash flow, too. Churchill Downs bought 61% of Rivers at a well-above-average 11.25X cash flow, but one easily see why it was worth it. With the tax cut, that multiple goes down to 8.3X, closer to industry average. That number could go yet lower still if Rivers maxes out its gaming positions.

As for competition from the 4,000-position mega-casino in Chicago, “We acknowledge concern that a Chicago casino could be a negative for Rivers/Waukegan, but see potential for the political stars to once again align and the casino (if even feasible at the proposed 67% tax rate) being located on Chicago’s south side.”

* Crain’s last month…

With the looming super-saturation of the Chicago-area casino business, one theory is that Churchill Downs will opt to focus on its Rivers Casino stake, a pure-play gambling option, and one that comes with Rivers co-founder and Chicago real estate magnate Neil Bluhm, whom Carstanjen, 51, has said he values for his local political savvy.

“Local political savvy.”

Just the other day, Churchill Downs and Neil Bluhm’s Rush Street Gaming, put in a bid to jointly operate Waukegan’s casino.

* Today in Crain’s…

The owner of Arlington International Racecourse is threatening to close the storied horse track despite winning long-sought authority to add gambling options there.

Louisville-based Churchill Downs blames prohibitive tax rates that would penalize it relative to competing Chicago-area casinos, it said.

* The proximity to Bluhm’s Rivers Casino is clearly an issue, however. From the company’s press release…

All options will be considered, including moving the racing license to another community in the Chicagoland area or elsewhere in the state.

* Churchill Downs’ CEO did complain about taxes in the press release, but that was about the new state-mandated payments to horsemen…

Arlington would enter this market with an effective tax rate that would be approximately 17.5% - 20% higher than the existing Chicagoland casinos due to contributions to the Thoroughbred purse account.

* The Illinois Thoroughbred Horsemen’s Association was not amused…

We are stunned and profoundly disappointed by Churchill Downs’ decision not to pursue supplemental gaming at Arlington Park in order to do its part to grow jobs and economic opportunity for thousands of Illinois men and women both at the track and throughout the state’s agribusiness community.

For more than a decade, Arlington has lobbied Illinois governors and legislators for permission to offer casino-style games as a means to boost revenue at the track and generate funds to significantly improve the quality of horsemen’s purses. Indeed, Arlington in recent years elevated its lobbying push by insisting that the track be granted the authority to offer table games – in addition to slots – to ensure its racino would be economically feasible.

Yet now that it is finally poised to operate both slots and table games, as a direct result of the gaming law recently approved, Arlington’s parent Churchill Downs has, astoundingly, declined to apply for the license necessary to operate a racino. The company evidently plans to instead abandon its commitment to racing in Illinois and focus solely on its stake in the Rivers Casino and potentially other Illinois casinos not yet developed. Churchill has snubbed not only the working men and women of thoroughbred horse racing whose collective livelihood depends on live racing, but also all of the elected officials it has so intensely lobbied over the last decade.

As a consequence of its abrupt change in course to the detriment of this state and its taxpayers, Churchill immediately should be denied the enormous financial advantages it enjoys by virtue of its now-annulled commitment to Illinois racing. Those include Arlington’s considerable property tax break ($2.47 million this year), the track’s recapture subsidy ($4.47 million in 2019 alone, straight from horsemen’s purses), and the chance to apply for a sports betting license linked to Arlington (a form of gaming that will do nothing to benefit purses).

In clear contrast, Hawthorne Race Course has applied for its racino license and has, moreover, made clear its plan to maximize the benefit of that license for thoroughbred racing.

* More…

CDI’s decision not to move ahead at Arlington triggers another portion of the new law relating to the number of “gaming positions” allowed at each racino.

The law states: “Each applicant for an organization gaming license shall specify in its application for licensure the number of gaming positions it will operate, up to the applicable limitation … Any unreserved gaming positions that are not specified shall be forfeited and retained by the [Illinois Gaming Board].”

The board then is required to “allocate expeditiously the unreserved gaming positions to requesting organization gaming licensees in a manner that maximizes revenue to the State.”

Churchill Downs wants to protect Rivers, but slots at Arlington would threaten Rivers. So, it complains about taxation, blames the horsemen and hints that it will move the track elsewhere. And Rivers could wind up with even more gaming positions in the process.

…Adding… The Mayor is correct…

Arlington Heights Mayor Tom Hayes said he interprets the announcement as a corporate decision about Churchill Downs’ unwillingness to compete with its gambling operations at River Casino in Des Plaines.

That company should probably be broken up.

*** UPDATE *** Emily Bittner in the governor’s office…

This represents a significant reversal from the years and years of race track owners seeking additional ways to generate revenue to keep their operations working. In fact, the gaming legislation provides several opportunities for significant additional revenues, including table games and slots. Just as importantly, the legislation allows the racing industry to flourish instead of facing more years of decline. Just to be clear: actions taken around gaming will be done to benefit the people of Illinois, not solely for the bottom line of individual operators.

My question was: Should the Illinois Gaming Board break up the Churchill Downs/Rivers partnership? Not exactly an answer.

posted by Rich Miller
Wednesday, Aug 28, 19 @ 11:35 am

Comments

This shows me that Churchill is more concerned about Rivers’ revenue than they are about keeping Arlington Park as a viable entity.

Comment by Roger Abbott Wednesday, Aug 28, 19 @ 11:43 am
could Arlington move its operations to Springfield and use the fairgrounds? Is there enough room for a thoroughbred track inside the trotter’s track?

Comment by depressed in politics Wednesday, Aug 28, 19 @ 11:45 am
===could Arlington move its operations to Springfield and use the fairgrounds? ===

lol

C’mon. That’s so far away from where most of the people are.

Comment by Rich Miller Wednesday, Aug 28, 19 @ 11:45 am
Are we honestly to believe that Churchill Downs/Arlington Park will spend hundreds of millions of dollars to “move” Arlington Park to another locale?

As the late, great Henry Hill would say “pah-leeze”.

Comment by Colin O'Scopy Wednesday, Aug 28, 19 @ 11:48 am
-C’mon. That’s so far away from where most of the people are.-

People still go to Saratoga and that is about the same amount of travel from NYC as Chicago to Springfield.

Comment by SpfdNewb Wednesday, Aug 28, 19 @ 11:48 am
This is completely off topic but with the casino/hotel at Walker’s Bluff is there any appeal to try to get the Hambletonian Stakes back in DuQuoin? Not even sure when it’s up for bid again.

Comment by Almost the weekend Wednesday, Aug 28, 19 @ 11:49 am
With this decision CD is basically throwing AP into a death spiral. AP offers racing only 3 days/week, small fields and paltry purses. The the facility is way underutilized and the good trainers are going elsewhere. Adding gambling positions should be seen as a win for everyone. Higher purses would props up the horsemen and the table player may become a railbirds. Shame on CD

Comment by Donnie Elgin Wednesday, Aug 28, 19 @ 11:51 am
Yet another example of the insane amount of money Neil Bluhme will make off of the gaming bill. Whoever drafted the bill for him deserves a pay raise.

Comment by correction Wednesday, Aug 28, 19 @ 11:55 am
“People still go to Saratoga” Saratoga vs. Springfield…hm, let me think about that one for a second…

Comment by Skeptic Wednesday, Aug 28, 19 @ 11:58 am
This is what happens when the State legislates where gaming can and cannot be placed. Once the bill was finished it obviously became less attractive for Arlington to put a “racino” figuratively a stones throw from Rivers. One can only redistribute wealth only so many times in a geo-graphic area.

Comment by Commonsense in Illinois Wednesday, Aug 28, 19 @ 12:00 pm
=Saratoga vs. Springfield…hm, let me think about=

Let me help you. One is in the scenic Adirondacks, the other is in the sweaty Armpit.

Comment by Colin O'Scopy Wednesday, Aug 28, 19 @ 12:01 pm
=With the looming super-saturation of the Chicago-area casino business=

Seems like Vegas has a lot of casinos and Chicago is a much larger market with significant tourism. One problem is that they may only be thinking about local customers and not the bigger picture.

Comment by JS Mill Wednesday, Aug 28, 19 @ 12:01 pm
Purely a location argument, travel times are equivalent if they decided to use the state fairgrounds instead. Yes, Saratoga is a better venue, you will not hear arguments about that from me.

Comment by SpfdNewb Wednesday, Aug 28, 19 @ 12:02 pm
===This is what happens when the State legislates where gaming can and cannot be placed===

No, this is what happens when a Gaming Board allows way too much ownership concentration.

Comment by Rich Miller Wednesday, Aug 28, 19 @ 12:16 pm
==No, this is what happens when a Gaming Board allows way too much ownership concentration.==

Yes, the Gaming Board, which exists solely of its own volition and does not have its powers defined or limited by any elected body.

Comment by Chris Widger Wednesday, Aug 28, 19 @ 12:18 pm
It seems that yet again perhaps the haste in which we finzalize laws in this state has resulted in uninteneded (or intended but not forseen by all) consequences.

Comment by OneMan Wednesday, Aug 28, 19 @ 12:27 pm
The minute CDI bought a majority stake in Rivers, Arlington Park was disposable. Add in that they now want to be the Lake County casino operator and Arlington was going to drain from what they believe and are the more profitable gaming operations. What a stain on the Arlington/Rivers/CDI brand. Advocate for racing for 20 years and then thumb their noses at the whole industry. They should hope that if this gaming bill is opened up for Chicago that some creative penalties aren’t thrown in against them for good measure.

Comment by Nagidam Wednesday, Aug 28, 19 @ 12:28 pm
=== And Rivers could wind up with even more gaming positions in the process.===
The other two tracks, Hawthorne and Fairmount can bid on the unused positions that were allocated to Arlington. I doubt Fairmount will want many more than they are already getting because of the market in that area. Hawthorne probably could use some if not all. Especially if they want to have more table game positions.

Comment by Been There Wednesday, Aug 28, 19 @ 12:31 pm
Does Churchill still own Quad City Downs?

Comment by northsider (the original) Wednesday, Aug 28, 19 @ 12:32 pm
===“People still go to Saratoga===
Saratoga is a boutique racing meet. Similar to how the harness races use to be at Springfield and DuQuoin. Besides having higher wagering on their races because the best horses in the world race there they are also supplemented from the slots at Aqueduct. Not apples to apples by far

Comment by Been There Wednesday, Aug 28, 19 @ 12:35 pm
===Does Churchill still own Quad City Downs?===
Yes. What’s left of it. All they need to do is start racing there and they can get up to 900 gaming positions.

Comment by Been There Wednesday, Aug 28, 19 @ 12:36 pm
Not sure who their lobbyists are but I can only guess Reyes in there based on what was extracted from Springfield on behalf of Bluhm.

Comment by Regular democrat Wednesday, Aug 28, 19 @ 1:01 pm
The only reason Arlington Park was given the opportunity to get a gaming license is because they are a racetrack. A racetrack must pay purses or it doesn’t have a product.
Hawthorne and Fairmount apparently had no problem applying for the license and paying purses.

Comment by Horse's Mouth Wednesday, Aug 28, 19 @ 1:02 pm
… third, slots at Arlington Park, though Politzer thinks Churchill Downs may sell the latter now its real estate is more valuable …

It appears that even gaming analysts think that the real estate sale of AP, even after added gaming, is a better business decision than operating a racino at the existing location.

The owner of Arlington International Racecourse is threatening to close the storied horse track despite winning long-sought authority to add gambling options there.

Louisville-based Churchill Downs blames prohibitive tax rates that would penalize it relative to competing Chicago-area casinos, it said.

All options will be considered, including moving the racing license to another community in the Chicagoland area or elsewhere in the state.

Yeah, this is nonsense. Since they’re planning to close/sell Arlington Park (because of real estate and not tax considerations) they’re now trying to use that as leverage to get further concessions, nobody should fall for this.

Comment by The Captain Wednesday, Aug 28, 19 @ 1:05 pm
Didn’t a boat recently purchase property in Thornton?

Comment by {Sigh} Wednesday, Aug 28, 19 @ 1:14 pm
This had to be a long term plan. The Illinois horsemen and women were sandbagged. I would deny CDI a sports betting license also.

Comment by jimk849 Wednesday, Aug 28, 19 @ 1:19 pm
You could see an attempt by Churchhills Downs putting a bid in to build the racetrack in Tinley Park on the old Mental Health property. Such a move could give CHD gambling in 3 Chicago area locations. It would also put them in competition with the owners of Hawthorn Racetrack for the new race track in Tinley Park.

Comment by D Wednesday, Aug 28, 19 @ 1:22 pm
How much money will Churchill Down’s decision to not open cost Illinois in tax money? It’s a shame that an out of state company can so negatively affect so many people in Illinois.

Comment by Mickey Wednesday, Aug 28, 19 @ 1:26 pm
Regular Democrat, I believe Al Ronan’s firm were the lobbyists for Rivers Casino. That could also explain how well Rivers came out so well in the Gaming legislation.

Comment by D Wednesday, Aug 28, 19 @ 1:27 pm
We could see Churchhill Downs make a play for the new horse racetrack on the old Tinley Park Mental Health property. Such a move would give CHD ,three casinos in the Chicago area if they also get picked for Waukegan. Such a move would put them in a battle with Hawthorn racetrack that wants to be part of the new track in Tinley Park.

Comment by D Wednesday, Aug 28, 19 @ 1:33 pm
In light of Arlington threatening to close, how in the world should they be given a sports betting license?

Comment by Paul S. Wednesday, Aug 28, 19 @ 1:42 pm
If the Illinois Racing Board (almost entirely Rauner holdovers) grants Arlington any racing dates next year, Arlington gets tens of millions in property tax credits and recapture. Purely a gift.
Dollars to donuts Arlington gets every date it requests.

Comment by northsider (the original) Wednesday, Aug 28, 19 @ 1:45 pm
== If the Illinois Racing Board (almost entirely Rauner holdovers) grants Arlington any racing dates next year, Arlington gets tens of millions in property tax credits and recapture. Purely a gift.
Dollars to donuts Arlington gets every date it requests. ==

Sure the horsemen would love those dates going to a different track instead… (eye roll)

Also congrautlations for working Rauner into this.

Comment by OneMan Wednesday, Aug 28, 19 @ 1:48 pm
Neil bluhm and churchill will run rings around the gaming board. In racing parlance, they are stakes winners running against maiden claimers .Arlington will be closing soon.

Comment by Woodstock willy Wednesday, Aug 28, 19 @ 1:50 pm
Horsemen have already gone out of their way to praise Hawthorne and Fairmount so they must be ok racing there.
This is corporate greed at its ugliest.

Comment by Horse's Mouth Wednesday, Aug 28, 19 @ 1:56 pm
The Capitan is right!! This is positioning for Veto Session when Chicago comes back and says it needs to be a City owned Casino.

Comment by JAH Wednesday, Aug 28, 19 @ 1:58 pm
===You could see an attempt by Churchhills Downs putting a bid in to build the racetrack in Tinley Park on the old Mental Health property. Such a move could give CHD gambling in 3 Chicago area locations. It would also put them in competition with the owners of Hawthorn Racetrack for the new race track in Tinley Park.====
Doesn’t work like that. The law says the new south suburban track needs approval of any existing tracks within 35 miles. Every spot with those 7 townships are within 35 miles of Hawthorne. So any new potential track has to deal with Hawthorne.

Comment by Been There Wednesday, Aug 28, 19 @ 1:59 pm
I always enjoyed every visit to Arlington.
It is certainly one of the most beautiful race tracks
in the US.

Comment by Back to the Future Wednesday, Aug 28, 19 @ 2:10 pm
Been There. Your point is interesting but the owner of Hawthorne has already made a proposal to Tinley Park Board to build a track on the Mental HeLth property. Thus in theory Arlington Racetrack could also hold a veto over any involvement of Hawthorne in a track in the South Suburbs.

Comment by D Wednesday, Aug 28, 19 @ 2:21 pm
For nearly a decade, Arlington urged that horse racing and its agribusiness jobs be preserved and strengthened through purses supported by gaming revenues. The horsemen and all their jobs were held front and center as the reason to aid Arlington.

It’s now perfectly clear that Arlington/CDI cares little about horse racing and its jobs. Anyone who remotely understands horse racing and the history of how the debate has unfolded in Springfield knows that the net proceeds are intended to equally benefit tracks (through profits) and horsemen (through purses - representing only an opportunity to win money by racing). As context, the investment of the tracks in the racing facility is less than the aggregate investment of horsemen in the horses and their training and care - and unlike the tracks, the horsemen capital investment is renewed every few years as race horses retire.

Churchill has famously closed other race tracks (e.g., Hollywood in CA and Caulder FL), and is on its way to closing Arlington in IL.

Meanwhile, Arlington:

1. Continues to get its huge property tax break - which would have been phased out 2 years after a racino opened.

2. Continues to get the benefit of recapture - which allows the track to claw out horsemen purse money to hold them harmless (at the expense of horsemen) for the decline in horse racing. This would have been phased out with a racino.

3. Gets a sports betting license with nothing going to purses.

Comment by anon Wednesday, Aug 28, 19 @ 2:31 pm
===

Comment by Been There Wednesday, Aug 28, 19 @ 2:44 pm
Do the Horsemen put any $ toward construction of a racino? If they do they should get appropriate share if they don’t why should they get anything.

Comment by Etown Wednesday, Aug 28, 19 @ 2:45 pm
===Thus in theory Arlington Racetrack could also hold a veto over any involvement of Hawthorne in a track in the South Suburbs===
Nope. That site is a little more than 35 miles from Arlington Park. Either way Hawthorne and their potential partner can go anywhere in the 7 townships. It’s all up to Hawthorne to decide.

Comment by Been There Wednesday, Aug 28, 19 @ 2:46 pm
Arlington isn’t going to close. It is, however, going to be sold. They already have an offer and are talking terms. Who cares if CDI doesn’t own it anymore, they don’t do a great job with the place and it will be in better hands.

Comment by Ferris Buellet Wednesday, Aug 28, 19 @ 2:59 pm
===Arlington isn’t going to close. It is, however, going to be sold. They already have an offer and are talking terms. Who cares if CDI doesn’t own it anymore, they don’t do a great job with the place and it will be in better hands. ===
Well CDI missed the 60 window to put in an application for a gaming license. Not sure if a new owner could still apply. I think the 1,200 positions Arlington could have received will revert back to the Board to have Hawthorne and Fairmount bid on them if they want. And if a new owner wants Arlington without gaming their no one will want to race there. The horsemen would rather race all year at Hawthorne if their purses will be a lot higher.

Comment by Been There Wednesday, Aug 28, 19 @ 3:04 pm
===Arlington isn’t going to close. It is, however, going to be sold. They already have an offer and are talking terms. Who cares if CDI doesn’t own it anymore, they don’t do a great job with the place and it will be in better hands. ===

Without a racino Arlington will die. CDI would never sell to someone who has the intention of opening a racino for the same reason CDI will not open a racino. They will sell off the land and shut down the track at some point.

Comment by JJJJJJJJJJJ Wednesday, Aug 28, 19 @ 4:12 pm
Bait and switch

Comment by dr. reason a. goodwin Wednesday, Aug 28, 19 @ 4:15 pm
I just feel bad for Mr. Duchossois. He rebuilt the track, spared no expenses on upkeep, and now has to watch this happen. Hopefully, its just political maneuvering but if its as bad as it looks would be a disgrace to a man who served in Normandy and the Bulge, built a successful business, and built a shrine to horse racing that should be open for generations to come.

Comment by Anon Wednesday, Aug 28, 19 @ 4:55 pm
The GA: Hi this is the GA is Mr. Duchossois around?

Mr. D.: Who dis, new phone?

Comment by Frank talks Wednesday, Aug 28, 19 @ 5:10 pm
Disappointing but predictable from Neil Bluhm. Legislators acting blind-sided are either complicit in this or need to be better.

Comment by Chicagonk Wednesday, Aug 28, 19 @ 5:46 pm