Calif. Racing Backs Off as Tribes Expand Gaming

As expansion of gaming for four Southern California casino tribes lurched toward approval in the Legislature June 28, it did so with little interference from the state's racing industry.

Rather, the Thoroughbred Owners of California and most of the state's other racing organizations opted to not oppose 25-year operating compacts for four tribes that allows for up to 17,000 additional slot machines -- potentially a 30% increase in the number of slots in the state. Both houses of the Legislature had to approve the gambling expansion, a key hurdle in passing a state budget. While a fifth compact awaits in legislative limbo, the nonpartisan Legislative Analyst's Office said additional gambling revenue could be close to $200 million next year.

Drew Couto, president of the TOC, said the group's decision to abstain from the fight -- which pitted labor groups against tribes -- was the result of ongoing negotiations with the casinos for future business that could benefit racing. He also said it was "a fallacy to believe" that racing could acquire the rights to slot machines either legislatively or at the ballot box within the current political climate.

That's a remarkable change for a racing industry that has fought tribal gaming expansion at nearly every turn.

"Now that we've taken that pressure off the tribes, it has been possible for us to continue to engage in negotiations that could bring substantial results," Couto said. "There are no promises, but (not opposing the compacts) was the dynamic that made business discussions possible. We're keeping our fingers crossed."

Couto said he hopes an alliance with the tribes can lead to "some stabilizing legislation for the industry" to help the sport rebound from the damage done to its pari-mutuel handle by slot machines.

"A deal with the tribes has to make political, business and public relations sense for them to do something with us," he said. "I'm optimistic the solution is going to come through a negotiated business dealing. What we have wanted with the tribes is a true partnership."

Some in the industry, including Bay Meadows Land Co. -- the owner of Bay Meadows and Hollywood Park -- and the California Thoroughbred Breeders' Association continued to fight the new gaming rights, believing that talks with the tribes have shown little movement in three years. By not opposing the exclusive compacts, racing takes itself out of the alternative gaming picture for the next quarter-century or more, they say.

Passage of the new compacts is  a necessary step in order for racing to gain any mitigation from tribal casino encroachment, Bob Alvarez, chief of staff for state Sen. Dean Florez, said recently.

Such mitigation was the basis for Senate Bill 873, a measure introduced by Florez that would allow racing jurisdictions to keep an estimated $38 million in annual license fees to reinvest in purses and improvements. Funding for those purposes would come from tribal casinos via the new compacts. A trust fund, supported by tribal casino monies, would be created to help stabilize the industry’s economics and better compete with racino states. As part of the bill, fair racetracks -- which are on state property -- could bond against $20 million a year for facility upgrades including the installation of synthetic tracks.

SB873 stalled in the state senate's appropriations committee. Florez will consider bringing back "a comprehensive bill with 873 as a basis -- maybe 873 on steroids," Alvarez said. "It could also address other issues in the horse racing industry. We want to protect the state's interest in horseracing."

“The legislature can’t amend the compacts, the tribes don’t want to open compacts,” said Alvarez. “So, how do you address these ancillary issues? Sen. Florez believes there still needs to be some mechanism to keep the state’s racing healthy. 

“People forget, the state owns racetracks,” Alvarez added. “The state has an interest to make sure horse racing stays healthy.”   

SB 873's components also could resurface attached to an Assembly bill, Alvarez said.
Alvarez noted the state's advance deposit wagering statute sunsets on Dec. 31. "That will be the next big fight," he said.

Relief for the industry and ADW could be tied together in future legislation. Assemblyman Anthony Portantino (D-Pasadena) , whose district includes Santa Anita Park, is developing a bill to modify and continue ADW.

The four gambling tribes whose compacts won approval are the Sycuan Band of the Kumeyaay Nation in San Diego; the Pechanga Band of Luiseno Indians in Temecula; the Agua Caliente Band of Cahuilla Indians in Palm Springs; and the Morongo Band of Mission Indians in Cabazon.

A fifth, the San Manuel Band of Mission Indians in San Bernardino, would not agree to provisions favorable to labor.

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