CDI Grilled by IRB About Arlington's Control of ITWs

Exactly 50 days after executing a purchase-and-sale agreement that will see Arlington International Racecourse demolished to become the future site of a football stadium, the gaming corporation Churchill Downs, Inc. (CDI) came before the Illinois Racing Board (IRB) Thursday to request 2022 licensure to retain control over simulcasting at its inter-track wagering (ITW) locations even though it won't be hosting any live racing next year.

The IRB heard contentious pro-and-con testimony on the Arlington-related agenda items, but in the end essentially punted on the matter by voting 10-0 to “lay over” the decision-making process until its December meeting.
Four issues stood out during the extended debate Nov. 18:

Firstly, Arlington president Tony Petrillo is intent on spinning the ITW licensure as a “demonstration of the [corporation's] continued commitment to be involved in horse racing in the state” that will preserve jobs.

Secondly, Hawthorne Race Course president and general manager Tim Carey said that Hawthorne Race Course is “absolutely” interested in taking over the operation of the most lucrative of the simulcasting parlors should Arlington not be granted a license to run them. And IRB commissioners appeared in agreement that those locations will end up generating roughly the same amount of revenue if Hawthorne operates them instead of Arlington.

Thirdly, the Illinois Thoroughbred Horsemen's Association (ITHA) is against Arlington retaining control of the parlors, citing the fact that since Arlington doesn't hold a license as a track, it can't then be granted ITW privileges.

Finally–and perhaps most surprisingly–the IRB itself repeatedly questioned the motives of CDI after commissioners had remained largely mute on the devastating topic of the Arlington sale for the better part of the last year.

“I just have a concern, as a board member, in how we've been treated by Churchill Downs,” said IRB commissioner Marcus Davis, noting that CDI could have opted to work out a plan to sell its land while preserving racing at Arlington in the short term, thus allowing for a smoother transition to year-round, dual-breed racing at Hawthorne.

“I don't get the sense that I can trust what Churchill has to say when they do the things that they do [like closing Hollywood Park and Calder Race Course],” Davis said.

IRB commissioner Alan Henry went a step further, advocating against granting ITW licensure to CDI.

“I don't think it's in the best interest of the public or horse racing to have [CDI] operate these parlors,” Henry said. “This is the same company that shut down the most beautiful track in the country…and it was just thrown in the ash heap for an alleged higher purpose that doesn't make any sense to me. I don't know that we should be rewarding the company with parlors when they don't have a track to run at.”
Henry said that in recent years, CDI has “torched” IRB directives aimed at fostering and promoting the sport.

“What I see in these [ITW] requests seems an awful lot like the farmer who sells his prized Holstein, then expects to still get paid for some of the milk it produces,” Henry said.

Henry noted that Arlington closed two of its parlors in 2020, and is set to “offload” four of its least-profitable remaining ones over the next few weeks.

Petrillo kept reiterating that CDI still wants to be involved in racing in Illinois, although he was vague on specifics.

“Our commitment to racing in the state and the product is indicative of our pursuit of these licenses,” Petrillo said. “At this time, we don't have any locations that we could identify, but we continually pursue this each day for another location.”

Petrillo said that keeping the ITW locations under Arlington's control will generate only a relatively small amount of revenue for CDI itself–about $250,0000 to $300,000–but that horsemen would reap the benefits of purse money derived from ITW bets.

“These licenses overall will produce a significant amount of handle–$76 million in handle, and will see about $8 million in host fees and purses going directly to Hawthorne,” for 2022, Petrillo said.

“We feel it's important that the board take action on these licenses today, as 80 to 100 [ITW workers] would be sitting in suspense on whether they have jobs or not,” Petrillo said.

“It would cause a lot of unrest for the public as well,” Petrillo added–without explaining how that strife could ever top the industry-wide calamity CDI triggered by deep-sixing Arlington.

IRB commissioner Beth Doria politely but firmly upbraided Petrillo by saying, “I've heard you reference the loss of jobs multiple times in your presentation today. And I'm just wondering where that concern was when you actually closed the racetrack itself.”
Davis underscored that it won't make much of a fiscal difference which licensee operates the ITWs.

“There may be a small [operational] hiccup. But if Hawthorne took over the OTBs, that money will still flow to the state; it will still flow to the horsemen. But at least we know that [Hawthorne has] a commitment, because they've committed to racing year-round. I don't see anything like that ever coming from Churchill Downs,” Davis said.

Despite some of the commissioners' misgivings about licensing Arlington to run the ITWs, the now-defunct track does have some relative precedents on its side.

Petrillo pointed out that when Arlington was rebuilding from its fire in the 1980s and was later emerging from a separate closure in the 1990s, the IRB let it keep operating ITWs without live racing.

And John Gay, the attorney for the IRB, said when asked during Thursday's meeting that “it is my opinion that the plain language of the [state] statute allows the board to issue these licenses if it so chooses.”

Henry disagreed.

“I am well aware that [CDI] can apply for these licenses because they raced for 60 days in 2021,” Henry said. “And yes, they may have operating control of a racetrack because they control the property. But they turned down their right to request 2022 racing dates, and they do not have a license to conduct pari-mutuel racing in 2022, nor have they requested one.

“I know it's a matter of legal dispute, and there are what I consider dissimilar precedents that allowed previous [ITW] approvals,” Henry said. “But common sense tells me that ITW licenses should only be granted to viable track operators that actually want to engage in horse racing, and that disqualifies these applications.”

When asked by Davis why CDI should be trusted to be involved with Thoroughbred racing in Illinois based on the Hollywood and Calder closures, Petrillo answered by saying that with regard to Hollywood, the current CDI management team was not involved in that decision. He didn't address Calder, which did close under the corporation's current regime.

As for the decision to sell Arlington, he said it was a “very heart-aching decision” for Bill Carstanjen, CDI's chief executive officer, to make.

When Petrillo was asked by Henry if he thought CDI's decision to rid itself of Arlington represented “fairly dramatic damage to the Illinois racing industry in the near term,” Petrillo admitted that Arlington's closure “could be construed as negative.”

But, Petrillo added, shifting into spin mode, “the one racetrack [Hawthorne] that will be remaining to conduct Thoroughbred racing will also see a significant amount of revenue being sent to their facility.”

Henry asked Petrillo if he had any regrets about CDI intentionally missing a deadline in 2019 to build a racino at Arlington after more than a decade of working with the ITHA to get the Illinois Gaming Act passed.

“I don't think that my personal feelings or my personal opinion is of any relevance in this matter,” Petrillo replied.
Henry said that as racinos at Hawthorne and Fairmount Park do open in the state, “The industry in a post-CDI world, in my opinion, will emerge on stronger and more reliable footing. Further, I see no signs that CDI's commitment to racing is going to improve.”