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No slots, no hope for tracks: State horse racing industry predicts continuing losses without gambling expansion

May 23, 2005

After taking what they said was another damaging blow in this year's General Assembly, the state's two parimutuel horse racing tracks said they'll survive 2005, but they guarantee little else.

Gov. Mitch Daniels and other key lawmakers killed a bill that would have allowed landbased slot machines in Indiana and generated new revenue for Hoosier Park, Indiana Downs and horse breeders. With those hopes sunk, the track owners are pessimistic and breeders are moving out of state, taking with them the hopes of a once-burgeoning industry.

"The breeding part of this industry has already started going down the tubes," said Larry Smallwood, manager of Swifty Farms, a breeding operation in Seymour. "In 2003, we had 161 mares bred here; this year, we'll have 40. Our stalls are empty. We don't even use two of our barns anymore, and we've dropped from 31 full-time workers to 14 fulltime and three part-time."

If horse breeders continue to move their operations out of Indiana where purses are richer, the industry-which the state has worked more than a decade to build-could soon be dead, said Jerry Walker, Indiana Horse Racing and Breeding Coalition chairman.

"At some point, one or both tracks will close," Walker said. "Whether we're there or not yet, I don't know. But we're close."

Breeders are shifting their operations to Pennsylvania, Oklahoma, Louisiana and New Mexico, where slot or pull-tab machine revenue is used to bolster purses, Walker and Smallwood said. And with Kentucky lawmakers expected to pass legislation allowing slots at horse tracks there in 2006, the worst, Smallwood said, is yet to come.

Owners of Hoosier Park in Anderson and Indiana Downs near Shelbyville have lobbied for a law that would allow slot or pulltab gambling machines they say would raise revenue to support the industry. When the Indianapolis Colts stadium initiative got tied to slot machines, horse racing officials thought they'd ride a stampede of support led by Indianapolis Mayor Bart Peterson.

Instead, the industry had its hopes trampled, with Daniels all but slamming the door on slots or pull-tabs, if not in Indiana, certainly in Indianapolis. A proposal died that would have allowed the two tracks to jointly operate an off-track-betting parlor and pulltab facility in the city's center.

Indiana's two parimutuel track owners, along with breeders statewide, are contemplating whether to saddle up another effort to get a law passed allowing slot or pull-tab machines or put the idea out to pasture. Industry officials expect an initiative to get a scaled-back law passed that would allow the gambling machines at only the two tracks.

The initiative has opponents on several fronts, including Senate President Pro Tem Robert Garton, R-Columbus, and other conservatives who, like Daniels, oppose the expansion of gambling. Most other opponents come from regions where the state's riverboats float. The riverboat operators fear the competition slots would pose.

Garton said he is not the obstructionist as has been portrayed, but questions why the horse racing industry-if so significant-needs subsidization.

"You have to question if the state can support two tracks," Garton said. "My position is to see what the House does [next year], because that's where the bill will be generated, and see what the governor says."

If efforts to expand gambling here fail, Indiana Downs, which opened in December 2002, is in the most immediate peril. Its ownership doesn't have the deep pockets of Hoosier Park owner Churchill Downs Inc.

"The ownership is committed to this industry, but no company can continue to lose money forever," said Indiana Downs General Manager John Schuster.

Indiana Downs lost $3.9 million in 2003 and $2 million in 2004, and Schuster projects another $2 million loss this year. Indiana Downs officials are betting Indiana lawmakers will change course on slots or pull-tabs in next year's General Assembly. In addition to generating more revenue, the gambling machines also would bring in a new crowd and expose them to horse racing, thus growing the sport locally, Schuster said.

"If we didn't have hope for this issue, we probably wouldn't stay in this industry," he said.

Hoosier Park has seen its profit dwindle since Indiana Downs opened. The new track reduced Hoosier Park's take of a state-mandated subsidy that riverboats generate for the track operators. The riverboat subsidy, which fuels purses, is now split between the tracks. The subsidy is capped at $27 million annually. Before Indiana Downs opened, Hoosier Park got it all. Track owners have offered to give up the subsidy in exchange for permission to install slots or pull-tabs.

Hoosier Park's earnings dropped from $7.67 million in 2002 to $1.86 million in 2004. "Going forward, this business is going to be difficult," said Hoosier Park General Manager Rick Moore.

Rumors have begun to swirl that Churchill Downs is looking to unload Hoosier Park. While that remains a possibility, Moore added, "Churchill Downs is committed to Hoosier Park and Indiana at this point."

Churchill Downs CEO Thomas Meeker in recent conference calls blamed the Indiana Horse Racing Commission for creating a situation that is killing Indiana's horse industry, noting that Hoosier Park's $274,000 fourth-quarter profit in 2002 turned into a $2 million loss during the same period of 2003, the first full year Indiana Downs was open.

Daniels has been busy overhauling the Indiana Horse Racing Commission during this critical time, appointing three new members to the five-person commission in recent weeks.

The IHRC's new chairwoman, Sarah McNaught, who joined the commission in April, said she has not discussed slots or pull-tab machines with the governor.

"We realize this is a significant issue, but we're not considering the gaming issue, nor is it something we've discussed with the governor," McNaught said.

While the governor is "dubious about expansion of gambling, the door can't be closed on any option forever," said Daniels' spokeswoman Jane Jankowski.

Sen. Bob Jackman, R-Milroy, who led a study committee last summer that supported the idea of pull-tabs at the horse tracks, is mystified why the idea can't make it to the House and Senate floor for a vote.

"It's beyond my wildest dreams why we'd put this initiative forth to build this industry, then let it die," Jackman said.

As much of a focal point as Hoosier Park and Indiana Downs are, Walker said the industry runs much deeper. "We can't seem to make our point that this is to save an agricultural industry," Walker said.
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