Two Indiana Tracks Must Compete for Subsidy

By James Platz

The Indiana Horse Racing Commission, in close vote, has ruled that two racetracks will compete for a riverboat admissions tax subsidy rather than split the revenue 50-50.

The commission first instituted rules regarding riverboat admissions revenue in 1994 when it called for the portion earmarked for the 40% that goes to racetrack operators to be divided based on handle. The allocation rules were changed in October 2001 to pay an equal split between Hoosier Park and Indianapolis Downs, a track scheduled to open in early December.

The total subsidy was capped earlier this year by the Indiana General Assembly at $28 million, which left $11.2 million up for grabs between the two licensees.

On Sept. 11, the commission had the option to leave the rules intact, change them to a format reliant on handle, or phase the performance-based system in gradually over a few years. In the end, the slim majority favored phasing in the performance-based rules.

In 2003, Hoosier Park and Indianapolis Downs, which is currently under construction in Shelby County, will split the $11.2 million subsidy equally. In 2004, half the revenue will be shared 50-50, but the associations will compete for the remaining half.

Indianapolis Downs officials testified that an equal split of the riverboat admissions tax revenue, if not more, should to the new track. But they petitioned even more strongly to be allowed to operate an off-track wagering facility in Indianapolis.

"We do believe that competition is good, but how are we supposed to compete without the opportunity to compete in Marion County?" Indianapolis Downs attorney Doug Brown said. "All we're asking for is the same opportunity. Give us a Marion County OTB (parlor)."

When the commission granted Indianapolis Downs a pari-mutuel license last year, it did so under a number of conditions. One of the conditions bans the track from constructing an off-track wagering facility in Marion County until pull-tab machines (video lottery terminals) are approved by the General Assembly.

"We'd like to go mano a mano with Churchill Downs, provided the same playing field," said Paul Estridge Jr., a partner in Indianapolis Downs who claims that Hoosier Park has been given exclusivity in the state's only first-tier market. "Churchill Downs has been granted that (exclusivity) in the largest city in Indiana."

While Indianapolis Downs representatives suggested that a performance-based formula would create a war between breeds in the state, Hoosier Park officials argued that the scenario would create a better racing product. Members of the Hoosier Park camp also pointed to Indianapolis Downs' own revenue projections as reinforcement.

"Everyone should be offended by the misstatement of facts," said John Long, an executive vice president with Churchill Downs Management Co., the majority owner of Hoosier Park. "Numerous representatives have testified that their projections were reasonable. I think what we're hearing here is hocus pocus."

During hearings conducted in May 2001, Indianapolis Downs presented revenue projections that said the new track would generate slightly more in purses than Hoosier Park. These projections were based on a Standardbred-only track with four off-track betting facilities located outside the Indianapolis market. Indianapolis Downs, set to open in December, is now slated to offer Thoroughbred racing in 2003.

"The key to make the whole thing work is incentive," Hoosier Park president and general manager Rick Moore said. "Racetracks should compete for their portion of the subsidy. Horsemen do. We have never been more willing to compete."

The next big debate will come when both permit holders apply for 2003 racing dates. Indianapolis Downs officials have already said they will request 120 Standardbred dates. In order to retain all simulcast revenue, they will be required to conduct a 20-day Thoroughbred meet.