The corporate owners of Arlington International Racecourse announced Wednesday they won’t apply for newly authorized state licenses for slot machines and casino table games, putting the fate of the struggling 91-year-old suburban racetrack in limbo and leaving industry advocates in shock.
Churchill Downs Inc. CEO Bill Carstanjen said high taxes and a “hyper-competitive” Illinois gambling market make it “untenable” for the corporation to invest in the additional gaming positions that have long been viewed as a financial lifeline for Illinois’ floundering horse-racing industry.
Instead, the corporate gambling giant — which also controls Rivers Casino in Des Plaines and wants to open a gambling den in Waukegan — will apply for a sports-betting license “while longer-term alternatives are explored” — including moving the storied racetrack from Arlington Heights to another Illinois locale.
Arlington will host races in 2020 and 2021 — but after that, all bets are off.
“Notwithstanding our steadfast commitment to the Illinois Thoroughbred racing industry and despite the good faith intentions of everyone involved in the passage of the Illinois Gaming Act, the economic terms under which Arlington would be granted a casino gaming license do not provide an acceptable financial return and we cannot responsibly proceed,” Carstanjen said in a statement.
He cited high licensing fees and competition from the thousands of video gambling terminals spreading across the Chicago area, plus up to six new casinos authorized under Illinois’ sweeping new gambling expansion. He also said the effective tax rate for a potential Arlington racino would be up to 20% higher than competitors due to the racetrack’s required contributions to a state fund for thoroughbred purses.
“It is with a heavy heart that we conclude that we can’t make this work,” Carstanjen said.
Churchill Downs’ announcement caught horse-racing advocates off guard.
“We are stunned and profoundly disappointed by Churchill Downs’ decision not to pursue supplemental gaming at Arlington Park in order to do its part to grow jobs and economic opportunity for thousands of Illinois men and women both at the track and throughout the state’s agribusiness community,” a statement from the Illinois Thoroughbred Horsemen’s Association said.
“The company evidently plans to instead abandon its commitment to racing in Illinois and focus solely on its stake in the Rivers Casino and potentially other Illinois casinos not yet developed. Churchill has snubbed not only the working men and women of thoroughbred horse racing whose collective livelihood depends on live racing, but also all of the elected officials it has so intensely lobbied over the last decade.”
The association said Churchill Downs should have to forfeit “the enormous financial advantages it enjoys by virtue of its now-annulled commitment to Illinois racing,” including millions of dollars in property tax breaks and a potential sports-betting license — which won’t help racing purses, they said.
Illinois’ two other existing racetracks, Hawthorne in Stickney and Fairmount Park in western Illinois, have both applied for casino licenses, according to the Illinois Gaming Board. Hawthorne general manager Tim Carey is also part of the lone group vying for a newly authorized racino in Chicago’s south suburbs.
During an Aug. 1 investors call, Carstanjen had said Churchill Downs would apply for at least some of the 1,200 gaming positions racetracks can have under the new law, saying the “timing and full scope of the plan are still being sorted out.”
The company notified the federal Securities and Exchange Commission of its “strategic update” in a Wednesday disclosure.
The announcement could be a grab for leverage in a bid to tweak racino license terms with lawmakers during the fall veto session in Springfield.
The company now says it “will continue to work with legislative and community stakeholders, as well as Arlington’s customers, employees and horsemen to find a solution that takes into account the many constituents across the State of Illinois who depend on horse racing for their livelihoods.
“All options will be considered, including moving the racing license to another community in the Chicagoland area or elsewhere in the state,” a company statement said.
But an in-state move wouldn’t significantly alter the corporation’s tax burden.
In March, Churchill Downs acquired a majority stake in Rivers Casino in Des Plaines — a 25-minute drive from Arlington — fueling speculation it could sell the racetrack.
And it’s not the first time Arlington’s owner has threatened drastic action. Longtime owner Richard L. Duchossois shut the racetrack down in the late 1990s to protest the introduction of riverboat casinos into the state gambling market. That holdout won tax breaks for the track before Churchill Downs acquired a controlling interest in 2000.
Churchill Downs has already said it will add the 800 newly allotted positions to Rivers in Des Plaines, expanding the state’s highest-grossing casino to 2,000 positions. And it’s among six groups vying for the Waukegan casino license.
