Finally, Help Officially Arrives for Illinois Racing

On June 28, Illinois Gov. J.B. Pritzker signed into law a sweeping expansion of Illinois gaming that includes authorization for the state's racetracks to conduct both casino gaming and sports betting.

The governor's signature ends the Illinois racing industry's quest, stretching back more than a decade, for an alternative funding source that would stop a steady and precipitous slide in all aspects of the business, from breeding through field sizes to wagering.

The legislation allows Chicago-area tracks Arlington International Racecourse and Hawthorne Race Course to operate up to 1,200 "positions" each and Fairmount Park in Collinsville, across the Mississippi River from St. Louis, to have up to 900. A "position" is a slot machine or a seat at a live gaming table.

The bill also authorizes six new casinos, including one in Chicago with up to 4,000 positions, and expands maximum capacity at the 10 existing casinos. State revenue from the sale of licenses and taxes on gaming handle are earmarked for a multibillion-dollar infrastructure plan, which the governor approved alongside the gaming bill. Cities, especially Chicago, lobbied for years for casinos as new revenue producers.

"We're responsibly expanding gaming at the request of cities that want to make sure they have the resources to pay for police and firefighter pensions and to fund vital services," the governor said.

The tracks also get a jump start on sports betting and can conduct that through their track locations and in as many as three off-track-betting facilities each. The equivalent of advance-deposit wagering also is approved, but initial signup, deposits, etc., will be done in person.

Racing industry officials were cautious about the financial impact of the legislation, particularly because, until the final two days of the spring legislative session, few expected that any bill would pass—much less one authorizing both casino gaming and sports betting.

But even cautious estimates have annual purse accounts swelling by tens of millions of dollars—revenue that could avert a total collapse of Illinois racing.

With no defense against rising purses in surrounding states in which tracks enjoy alternate revenue sources, Illinois field sizes have slumped, and on-track handle on Thoroughbred races has dropped from $413.5 million in 1985 to just more than $65.5 million in 2018.

Stakes races that once drew top horses from around the country have either been abandoned or suffered dramatic slashes in purses. In 2018, only the three grade 1 events on Arlington Million Day offered purses of more than $100,000. The Illinois Derby was abandoned after the 2017 renewal and, if revived, would have to re-earn graded status.

"It means the resurgence of horse racing in the state of Illinois," said Hawthorne president Tim Carey of the legislation. "It means Illinois can be on the map again. We've always said from a Thoroughbred standpoint, Illinois historically was No. 4. Now, we're probably 22 or 24 or 18 on a national scale. This will give us the bump we need.

"You'll see people moving back into Illinois," Carey added.

Brian Zander, president of Fairmount Park in downstate Collinsville, noted his track has been hanging by a thread while waiting for relief, surviving in large measure through the cooperation of horsemen as racing dates were trimmed to conserve purse money.

"This presents a fabulous opportunity for a track a lot of people didn't think would be around in 2020," Zander said. "We're going to keep the place together until all of this comes to fruition. There's certainly a lot on our plate."

Zander expects Fairmount's purses to at least double once revenue from gaming and sports wagering starts to flow.

"But the standard question is: 'If we have double the purses, will we have double the participation?'" Zander noted.

Another question is: How fast can all this get up and running?

The measure contains provisions to fast-track implementation and start tax revenue flowing. However, almost all regulation of the racing industry's quick plunge into gaming and sports betting will be conducted by the Illinois Gaming Board, rather than the Illinois Racing Board.

The Gaming Board, facing tight implementation deadlines, is without a chairman, and its new executive director attended his first meeting in June. The board, by all accounts, was not meaningfully involved in drafting the legislation and has no experience dealing with horse racing. Its next scheduled meeting is not until Aug. 1.

"In two days," Zander noted, "the legislature gave them the responsibility of licensing six (new) casinos and three racetracks and making up from scratch rules to regulate sports betting."

Despite all that, the pressure will be on to get the dice rolling. Tracks have 60 days to file an application for casino licenses with the gaming board, which then will have 120 days to award the licenses.

"We want to be up and running sports betting Sept. 1," Carey said, targeting the NFL season.

Hawthorne drew up comprehensive plans for expanding its facilities when earlier gaming bills were passed—but vetoed—twice before.

"We're tweaking those plans," Carey said, indicating a temporary facility could be put in place. "We have a master plan. But we don't want to build twice."

Zander said Fairmount owns its 135-acre site and is debt-free, providing a clean slate for quick action to implement gaming. Fairmount also controls the state's largest off-track betting outlet on the outskirts of the state capital, and Zander wants sports betting in that facility.

Implementation plans will be more complicated for Arlington, which is owned by Churchill Downs Inc. CDI also holds a majority interest in Rivers Casino, the state's largest and most successful gaming facility, which is located less than 15 miles from Arlington.

"It's a very complicated bill, and the gaming landscape now is incredibly competitive," said Arlington president Tony Petrillo. "We're still analyzing the bill and what might happen in the fall (during the legislative veto session) to see how we can best take advantage of the opportunities that are open to us."

Ultimately, the successful rebuilding of the state's racing industry will depend in large measure on renewal of the breeding industry, which has all but collapsed. The number of Illinois-registered foals has declined from a peak of 1,912 in 1983 to 187 in 2018, according to the Illinois Department of Agriculture. The number of Illinois-registered stallions dropped from 369 in 1986 to 41 in 2018.

The legislation provides substantial funding for breeder awards to address that issue.

"You have to have the horses," Carey said. "There has to be an Illinois breeding program that's funded and encouraged. And that's a three- to five-year time frame."

Zander agreed. "We're not going to have more Illinois-breds for four or five years," he said.

An early benefit for horsemen is the abolition of "recapture," a provision allowing tracks to recover revenue lost to simulcasts from wagering on Illinois races. Recapture removed some $11 million from purse accounts in 2018 and will vanish in the year after a track implements gaming.