Odds On Racing - Harness Racing

On the Illinois Scene: Analysis of House Bill 1918
The following is an analysis of House Bill 1918, sponsored by Representative Bob Molaro, which passed out of the General Assembly on May 5, from IHHA President Marty Engle.

May 18, 2006

We are optimistic that the governor will soon sign it into law. The bill provides for the horse racing industry to receive 3% of the adjusted gross revenues from the four riverboats that have an AGR of over $200 million. This will produce approximately $37.5 million for the industry. The law provides for horsemen to receive 60% of these proceeds and for harness purses to receive 43% of the 60%, with the balance going to thoroughbred purses. The horsemen's purse allocation is based on each track's percentage of purses earned from the previous year.

The IHHA entered into a separate agreement with Balmoral, Maywood and Hawthorne. The agreement calls for the IHHA and the tracks to pool all revenues they receive under the law; the entities will then split the revenues according to the agreement and the tracks will forgo any future recapture.

This side agreement comes closest to what the IHHA had been demanding ever since Rep. Molaro first proposed this bill: that the horsemen were willing to split 50/50 with the tracks and the tracks would have to give up future recapture. Because of the relationship between the thoroughbred horsemen and tracks, the thoroughbred horsemen were not willing to put these provisions into law, and the IHHA was forced to work out this separate side agreement. The agreement calls for determining the amount that the harness horsemen would have received if there was a 50/50 deal, deducting $1,068,000 and, in return the tracks will forgo future recapture.

The IHHA estimates that if the horseracing industry is scheduled to receive $37.5 million from the riverboats, the harness horse purses will see an infusion of approximately $7 million. From previous contracts, the tracks have deferred $9.5 million in past recapture which will now be due and payable. Provisions in the contracts called for these monies
to be repaid over a period of time in order to minimize their impact.

This law also has a two year sunset provision, which will allow us to receive these funds for only two years. But the law also called for the horseracing industry to give up any claim to the 15% of the tenth riverboat license that we are entitled to under the current law. This
provision will also sunset after two years and the 15% of the tenth riverboat license from the 1999 law will revert back to the horseracing industry.

This law and our side agreement will allow harness purses to benefit for a short period, while at the same time the tracks will forgo recapture and will allow us to pay back deferred money owed to the tracks. The IHHA worked diligently to get the best deal possible for the horsemen, even while dealing with many obstacles, such as having to negotiate a side deal without the support of any of the other horsemen groups and thoroughbred tracks.

When the bill was first introduced it would have provided for all of the riverboats except one to pay the 3% of AGR. This was estimated to have produced $55 million for the industry. The following shows the scenarios of what was offered, hoped for and negotiated during the past few months that the IHHA worked on this legislation.

What we wanted: 50/50 split with the tracks and no future recapture: At $55 million $11.8 million to purses; At $37.5 million $8.1 million to purses

What was offered: 50/50 split but recapture stays: At $55 million $6.6 million to purses; At $37.5 million $3.4 million to purses

After telling the legislators that we would not agree to the bill unless recapture was waived, the sponsor changed the language to increase the horsemen's share to 60% but recapture would still not be waived.

At $55 million $14.2 million less $5.2 million in recapture for a net to purses of $9 million
At $37.5 million $9.6 million less $5.2 million in recapture for a net to purses of $4.5 million

The IHHA however demanded that recapture be waived. The IHHA continued to negotiate with the harness track owners and came to an agreement that pooled the money that the horsemen and tracks receive and splits these funds in an arrangement that calls for the horsemen to receive what they would have if the law was 50/50 with no recapture minus $1.1 million. At $55 million $10.8 million to purses and At $37.5 million $7 million to purses. As is shown by the above figures, at the $37.5 million level, the IHHA finalized an agreement that will give the harness purses $3.6 million more than what was first proposed in the legislation ( and agreed to by all other interested parties except the IHHA) and $2.5 million more than what the legislation that passed calls for. And if riverboat revenues
increase above these estimates or the 10th license is issued, the increased amount negotiated by the IHHA will be even greater. For questions on HB 1918 please contact Jack Kelly, IHHA Executive Director at 800-572-0213 or by email jkelly@harnessillinois.com .