Anne M. Eberhardt/Blood-Horse Publications

Dispute Threatens Portland Meadows Meet

A dispute on source-market fees could jeopardize the Portland Meadows fall meet.

Oregon horsemen claim they are caught in the middle of a battle between TVG and Magna Entertainment Corp. over source-market fees, a dispute they claim could jeopardize this year's Portland Meadows fall meet.

The Oregon Horsemen’s Benevolent and Protective Association issued a news release July 15 claiming TVG and MEC are embroiled in a standoff over purported reduced source-market fees, which are paid to a track and horsemen on wagers made by residents in a given area, in this case, the entire state of Oregon.

The Oregon HBPA claims TVG recently reduced from 10.5% to 2% its source-market fee, an agreement of which is a condition for any advance deposit wagering outlet to be hold a hub license in the state. MEC has reacted in part by closing the backstretch at Portland Meadows in Portland, and suspended negotiations with horsemen on purse contracts for the upcoming meet, which traditionally begins in October.

“As far as the horsemen go, we are frustrated because we are caught in the middle,” Dick Cartney, executive director of the Oregon HBPA, said in a telephone interview. “TVG wants to pay less. And (MEC/Portland Meadows) are not pleased with that, and neither are we.”

A TVG official said the company has always paid its fair share of source-market fees.

“We are always reviewing our policies in lieu of changing market conditions, and Oregon is no different,” said TVG general counsel John Hindman, who declined to confirm any fee revisions. “We feel really good and proud of our record of paying source-market fees. Any implication that we haven’t paid our fair share is inaccurate.”

Hindman said TVG has paid more than $2 million in source-market fees since it began operating in Oregon in 2001, paying about $650,000 last year alone. He said the other seven ADWs operating in Oregon last year paid less than $250,000 combined.

“We don’t think TVG should be the sole savior of racing in Oregon,” he said.

TVG has by far processed the most wagers of any Oregon licensee past or present, handling more than $2.1 billion in bets through the state’s hub since 2001, according to data published by the Oregon Racing Commission., which for a period also utilized a California hub system in addition to Oregon, is second with more than $1.5 billion.

Portland Meadows general manager Will Alempijevic said source-market fees from ADWs are intended to make up for wagers that would have otherwise gone through Oregon outlets at a higher takeout rate, such as off-track betting locations.

“Those source-market fees are integral part of our revenues,” he said, adding there was no guarantee for a fall meet at Portland Meadows. “As a cost-saving measure, we have closed the backstretch. We had every intention of opening it July 1, but unfortunately, without a source-market agreement, we have no other choice.”

Alempijevic said Portland Meadows operates on a small margin, and the proposed reduction from TVG in source-market fees, which are mandated by law to be shared 50-50 with horsemen, poses as a large threat to future purses. He said TVG waited until its annual license was renewed by the ORC in May before cutting a check reflecting reduced source-market fees.

“When we got it, it was for just more than 2%,” he said, estimating the received figure at close to $20,000 instead of an anticipated $100,000 or more., which is owned by MEC and also licensed in Oregon, is part of the TrackNet Media Group joint venture that also features Churchill Downs Inc. The source-market agreement has in Oregon is not public information, but TrackNet has advocated paying those fees only on wagers made by residents living within a 25-mile radius of a track.

Alempijevic said Oregon law clearly mandates the entire state as a source-market area. Attempts to obtain clarification from the racing commission wasn't immediately successful.

MEC, which owns a 22% minority interest in Portland Meadows property, according to the company’s most recent earnings report, operates the track on a lease agreement. The company has included the track’s ownership interest as among those assets listed for sale in a debt-reduction plan, and like the other offered tracks, which include Great Lakes Downs, Remington Park, and Thistledown, has been designated a discontinued operation by MEC.

Cartney, who heads a membership he estimates at 1,500 horsemen, said Portland Meadows has usually either opened its backstretch area 60 days prior to meets, or left the barn area open throughout the summer. Dates for the fall meet, which traditionally opens the first weekend of October, have not been set.

“Portland Meadows has told us they weren’t going to open the barn area or negotiate with us until this was resolved,” he said. “We don’t have very many good options. We have talked with both sides, but we can’t seem to get any movement to go forward toward a race meet.”

The July 17 meeting of the ORC lists as an item on its agenda an update on the source-market agreement between TVG and MEC.