By DAVE URBANEK

Facing long odds in the home stretch

In its bid for a state rescue plan, Illinois' horse racing industry
confronts a hostile legislature, a skeptical public, a tainted history and internal bickering

Last October 7, Attivo, with jockey Gary Baze, finished the 1994 thoroughbred horse racing season at Arlington International Racecourse, winning the $100,000 Illinois Breeders' Futurity by a nose over the favorite, Venus in Spurs.

But as Attivo and Baze were celebrating their victory, many in Illinois' horse racing industry were wondering whether they would ever see thoroughbreds race again at Arlington.

Only a few weeks before that race, Arlington owner Richard L. Duchossois had told the Illinois Racing Board the chances were good he would not open his $200 million racecourse for the 1995 racing season. To stay open, Duchossois said, he would need the General Assembly to come to racing's rescue by enacting a bail-out package to help the industry — and especially Arlington — survive increasing competition from Illinois' riverboat casino fleet.

In particular, Duchossois, a multi-millionaire industrialist from suburban Barrington Hills, was worried about competition from the brand-new Grand Victoria riverboat in Elgin, just a few miles down the Northwest Tollway from Arlington.

"If I run with the Elgin boat," Duchossois said at the time, "I'll have a negative cash flow and will need to go into my own pocket for quite a few million dollars. I've said I won't do that.

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I'm willing to stay here, but I need a level playing field."

The storied "level playing field" is something often mentioned by leaders of the state's $1.2 billion horse racing industry as they struggle to compete against river gaming. Riverboat gambling has exceeded almost all expectations regarding popularity, attendance and revenue. For every dollar bet at a horse racing track in Illinois, $4.66 is bet at a river casino. So track owners want changes in the state's horse racing laws, and other guarantees designed to ensure a steady stream of revenue to Illinois' six operating race tracks and breeders.

Horse racing faces three problems that threaten the industry's economic vitality: Revenues in the horse racing industry, while not declining, have increased at a much slower rate than in past decades; racing is facing increased competition from other forms of gambling; and new forms of gaming are not as heavily regulated as racing has been.

Industry leaders have been warning state officials about these problems since 1989, when legislators began talking seriously about the legalization of river casinos. As the legislature heads into its final two scheduled months, lawmakers are being asked to help racing maintain a competitive edge in a changing marketplace.

But at best, the odds are even that the General Assembly will respond. Illinois racing traditionally has not generated wide support or sympathy in the legislature, or among the general public.

There's a credibility gap, a perception that the self-styled "sport of kings" is continually begging for help from taxpayers. There's the ongoing competition among wealthy track owners and breeders, a competition that makes it hard to develop an industry consensus on what's best for the sport. In fact, many times racing's worst enemy in its fight for economic vitality is itself.

Last fall, Duchossois' extensive staff, backed by business and community leaders from the Northwest suburbs, came to Springfield to pitch Arlington's proposal. The centerpiece of that plan was a guarantee that Duchossois could own and operate a riverboat casino next to the landmark grandstand in Arlington Heights. Track officials estimated that a boat at Arlington would generate between $100 million and $120 million annually in profits for the racecourse.

But the General Assembly ignored Duchossois' plan. Certainly, Duchossois didn't help the industry's image by threatening to keep Arlington closed during 1995 unless his racing reform package were enacted by the end of November. After the General Assembly adjourned in December, Duchossois made good on his threat and announced with great fanfare that there would be no racing at Arlington during 1995.

Though Duchossois' decision made nary a ripple outside the industry, within racing the shock was enough to cause owners and breeders to worry about the future of horse racing in Illinois. The owners of the other four Chicago-area tracks consider Arlington the linchpin of all racing in the state. Arlington is a state-of-the-art facility that compares with the best in the world. When top stables come to Illinois because of Arlington, they're more likely to go to other tracks. Other tracks benefit as well because they generate revenues through wagers placed on Arlington races through their off-track betting parlors.

Arlington had to open in 1995 in order for the rest of the industry to survive after 1995.

Consequently, the other owners agreed to a ground-breaking deal with Duchossois designed to help Arlington compete with the Elgin riverboat. They agreed to subsidize the purses, or winnings, for Arlington's races in order to help the track continue to attract the nation's top stables. In return, Duchossois agreed to shorten his season and share lucrative summer racing dates with the other tracks.

Experts say there is room to reform and modernize Illinois' horse racing laws

Still, all of the track owners agreed that their novel "share-the-pain" solution was only a temporary answer to racing's competitive problems. They would have to go to the General Assembly to win the changes in racing laws and other incentives they believe they need to keep racing afloat over the long haul.

"If we don't make any progress this session, we really are in trouble," said Edward T. Duffy, chief operating officer of the National Jockey Club, which runs at the south-suburban Sportsman's Park. "It's really up to us. Our own fate is in our own hands right now."

Racing experts say there is room to reform and modernize Illinois' racing laws. Pari-mutuel wagering is the oldest form of legalized gambling in Illinois; it was fitted with an extensive regulatory system in the 1920s. To combat fears about the integrity of racing and potential unscrupulous influences, the Illinois Racing Board has broad control over every aspect of the sport and its business affairs: When races can be held; what kind of wagers are allowed; how the races are run; how the horses, jockeys and drivers are cared for; even how much a track can charge for a hot dog.

For most of this century, those laws worked fine because racing was alone in the world of legalized, state-regulated gambling.

But in 1974, Illinois joined a growing number of states and sold the first tickets for its government-sanctioned lottery. The first winner collected $300,000 as a grand prize. Racing, until then the only game in town, was suddenly competing with another form of gaming that didn't face the regulatory restrictions that tracks face.

Lottery tickets are sold at nearly every corner store, and tickets can be purchased on a whim — $1 for two tries at the weekly Lotto jackpot along with a gallon of milk.

Racing's wagering handle — the amount of money horse players bet on races — and its revenues declined after the lottery, but not enough to take the industry down. This strained co-existence lasted 16 years. Then came the riverboats.

Seeking new ways to pump up sagging economies in river towns, a sharply divided General Assembly approved the legalization of as many as 20 river casinos in downstate counties and the suburbs of Chicago. At the time, few knew what to expect from the riverboats. Put simply, the river casinos are making a killing.

During 1994, 20.3 million patrons wagered a total of $11.3 billion at 13 boats. The casinos' combined, adjusted gross receipts for the year totaled $979.5 million. On average, during 1994 riverboat owners could count on taking $48.09 out of the pocket of every bettor who boarded an Illinois casino ship.

Further, riverboats, which are regulated to combat fraud and to protect the integrity of the games, are allowed to cruise almost 24 hours a day, 365 days a year. Tracks, on the other hand, are restricted to a set number of days and are only open for an afternoon or an evening.

But the National Jockey Club's Duffy says competition from riverboats is not the only drag on racing's viability. Essentially, the industry is asking the state to open the marketplace for pari-mutuel wagering by loosening racing regulations. Other states are lifting their racing restrictions, enabling tracks and betting parlors to be more competitive with newer forms of gaming. Indiana, for one, will have river casinos before long, but that state also legalized off track betting parlors that operate under far less restrictive rules than those facing Illinois' OTBs.

"They're doing things in the industry that the rest of the country's doing that we're not allowed to do yet," Duffy said of Indiana. "That is a way for our industry to help itself."

Gov. Jim Edgar, an avid racing fan, agrees. Last February, he convened a special task force on the future of racing in Illinois. And, though track owners and breeders are still interested in linking racing to riverboats, the governor is letting racing leaders know that his idea of helping the industry is to revamp existing laws and regulations.

Riverboats can cruise all year long, while race tracks can be open only a certain number of days

"We have now, by government monopolies, put in new competition in the form of riverboats. We see competition in other states," he said. "The times have changed and we in government have to take a fresh look at how we regulate and what parameters we set out for the racing industry."

Although Edgar's task force is still deliberating, the industry's wish list is well known, if a bit esoteric for the layperson. First on the priority list is a proposal to allow OTB parlors and intertrack facilities to telecast and accept bets on a full day's racing card from tracks across the country and throughout the world. During 1994, 66 percent of the total amount of money wagered on Illinois races was generated by the OTBs and intertracks.

Insiders say Illinois racing already is losing money to the newly opened Churchill Downs Sports Spectrum in Merrillville, Ind., which is a stone's throw from Chicago's southern suburbs. Indiana allows its OTB parlors to accept bets on a full day's racing schedule from out-of-state tracks.

Racing interests and their supporters are quick to explain the importance of the industry to Illinois, which, they say, extends beyond the state's six operating racetracks. "It creates 35,000-plusjobs in Illinois. That's a lot of jobs," the governor said. "From a purely economic point of view, even if you don't like horse racing, never go to a race, it's important for the state's economy."

Still, it's hard to convince legislators and the public that government should help the industry. For starters, horse racing has a checkered political past in this state. In the early 1970s, an up-and-coming U.S. attorney named James R. Thompson successfully prosecuted former Gov. Otto Kerner, then a federal judge, and other state officials on charges that Kemer was bribed into awarding favorable racing dates to then-Arlington Park Race Track. As his payoff, Kemer purchased stock in the track that was sold at artificially low prices by Arlington's principal owner at the time, Marjorie Lindheimer Everett.

The incident persuaded the General Assembly to enact legislation that prevented track owners from contributing money to political campaigns. That law was only recently repealed. Racing's image remains somewhat tarnished.

But the industry suffers from more recent credibility problems. In the mid-1980s Arlington's grandstand was destroyed by fire and Duchossis asked lawmakers for economic incentives to rebuild. The legislature balked, as did the other track owners. Eventually everyone agreed to a package designed to help the whole industry. The state tax burden on tracks was cut and OTBs were legalized as a way to increase revenues. The racing privilege tax for Chicago-area tracks is now 2 percent for a day's wagering handle. That money, around $47 million a year, is divided among a number of state programs, from financial support for county fairs to initiatives to help veterans. Still, the experience left a bad taste with lawmakers. The move only served to increase the amount of money the racetracks take in, while the state was left with a smaller take.

"Nobody understands," said Duffy, a former president at Arlington. "You walk around here and they'll tell you," Duffy said, sweeping his hand across the rotunda at legislators, '"Duchossois doesn't need the money.' Or they'll walk around and tell you, 'He's making a lot more money than he tells anybody.' And it's not just about Duchossois."

In fact, track owners have never publicly released detailed financial statements about their operations. What is known comes from statistics compiled by the Racing Board. During the 1994 racing season, horseplayers wagered $1.238 billion on thoroughbred and harness races at the state's six tracks, the Illinois State Fair in Springfield, the DuQuoin State Fair and at 21 off-track betting parlors. That's a 3.4 percent drop in the season's wagering handle from the previous year's total of $1.282 billion.

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Of the 14 major racing meets conducted last year, the board reported that the handle declined at all but three meets. During the thoroughbred meet at Arlington, the handle dropped slightly from $328.3 million in 1993 to $326.8 million last year. But to Duchossois and other track owners, the point is that the handle didn't grow to keep pace with rising costs.

Moreover, the amount of money actually bet at the racetracks continued to decline last year. Conversely, the steady increase in wagering handle at the state's OTB parlors reflected the increasing preference of horseplayers to test their skill closer to home and not at the track.

Of the three sources of revenues - the tracks, the intertrack parlors and the off-track parlors - off-track has become the money-maker. (Wagers at OTB parlors accounted for 42.3 percent of all wagers.) But racing cannot survive on OTB wagers alone. Industry leaders say horse players are needed at the tracks to provide the races that are telecast at the parlors.

Industry insiders say that while wagers were down, most of the tracks made money last year. Nonetheless, those same experts say when the wagering handle declines track owners don't have the revenue to offer attractive purses - or prizes -to stables.

But the track owners have not helped their cause by perpetuating rivalries. Such competitiveness makes it difficult for the industry to speak with one voice.

Duchossois, in particular, is more apt to go it alone. In the small world of successful, can-do people who own Illinois' race tracks, he is the wealthiest, the most competitive. Yet his methods and views many times run counter to those of the other track owners.

Even during the current discussions about racing's future undertaken by the governor's task force, the spirit of cooperation which broke ground in December does not survive below the surface. Says one task force member: "Everybody's in there looking to see how the other guy is going to screw them and thinking about how they can screw somebody else." *

After completing this story, Dave Urbanek closed out an 11-year career as state government editor for the Arlington Heights Daily Herald. He is now press secretary to Secretary of State George H. Ryan.

Photo by Mike Seeling of the Arlington Heights Daily Herald Richard Duchossois, owner of Arlington International Racecourse, is a man who rides alone. Duchossois: Who is this masked man? A few years ago, Arlington International Racecourse owner Richard L. Duchossois held a party at his sprawling Hill N' Dale farm in Barrington Hills outside Chicago to honor the Arlington Million. The party, which attracted many top state officials, including Gov. Jim Edgar and his wife Brenda, had a western theme. Party-goers came dressed in jeans, western shirts and ties, cowboy hats and boots. The host came dressed as the Lone Ranger. That choice of costume is somehow appropriate for Duchossois, 73, a man who rides alone. Richard Louis Duchossois is not afraid to use his considerable fortune, estimated at $360 million, to achieve his goals — many times in the face of adversity so great that others might have quit. So this spring, when legislators start to negotiate an aid package for horse racing, they should know what kind of man is sitting across the table from them. He's a perfectionist who once admitted his standards "are higher than some people are used to." Since he became the sole owner of Arlington in 1986, the racecourse has had five marketing managers, four security directors, three vice presidents of finance, three racing secretaries and two presidents. He can be a difficult man. That's why his relationship with state government many times is strained. In 1985, after a devastating fire completely destroyed the old grandstand at what was then Arlington Park Race Track, Duchossois sought state assistance to rebuild the facility. When he left the Capitol, he and other track owners had won three things: a cut in the state's racing privilege tax, the

authority for racetracks to open lucrative off-track betting parlors and the power to seek property tax concessions from local governments in the Northwest suburbs of Chicago if he would rebuild Arlington. Legislators had refused to grant him a guaranteed property tax break, although local officials of governments surrounding the track said they would look favorably on a tax break, rather than lose the track's tax revenue altogether. Duchossois did rebuild the grandstand, by himself, spending an estimated $200 million on a state-of-the-art racing facility. The property taxes on the place alone soared after the grandstand was finished, from $1.2 million to $5.5 million. But when Duchossois sought the promised tax relief from local governments, it failed to materialize. Only the Village of Arlington Heights granted the new track a tax break — one that barely dented the complex's tax bill. So it should be no surprise to anyone that Duchossois is now playing hardball with the General Assembly. Duchossois has become a major fundraiser and contributor to the Republican Party, counting the state's last two governors among the recipients of his checkbook. But his monetary aid to GOP powers hasn't always won him his way. In fact, despite helping Edgar over the last five years, the governor has flatly rejected Duchossois' repeated request that he be guaranteed a river casino license at Arlington to help subsidize the track's operations. Duchossois got his start in business after marrying his teenage sweetheart, Beverly. He took his father-in-law's Thrall Car Manufacturing Co. and made it the cornerstone of a vast and diversified conglomerate. The umbrella company, Duchossois Industries Inc., includes the Chicago Heights-based Thrall, which is one of the nation's biggest railroad freight car manufacturers. There's Chamberlain Manufacturing Corp., which makes Craftsman garage door openers for Sears, Roebuck and Co., and Chamberlain Group, which sells munitions to the U.S. Department of Defense, as well as car buffers and polishers. Duchossois Industries also used to own a number of radio and television stations, but has sold most of them in recent years. An article in Grain's Chicago Business about the Duchossois empire estimated that Duchossois Industries' annual sales of $1.1 billion would put the annual earnings for the company at $55 million. Aside from Arlington, Duchossois breeds and trains horses on Hill N' Dale's 600 acres. He scans the world in search of equine racing talent, especially horses to run in the Arlington Million, which for the last 14 years has been the highlight of Arlington's annual racing season. Dave Urbanek And what does he want? Duchossois and other racing leaders have proposed: • Reducing the state's horse racing privilege tax from 2 percent of daily handle for Chicago-area tracks to .25 percent. • Eliminating many of the regulations on tracks and OTBs that have nothing to do with the integrity of the races or the safety of horses, jockeys and drivers. • Lifting the restriction on tracks to operate solely on dates and at times set by the Racing Board. Tracks could operate according to local zoning ordinances. • Allowing tracks to keep the money from all uncashed winning tickets. Currently, this money helps fund programs for Illinois' military veterans. Racing also wants to keep all of the "breakage" collected from winning wagers, instead of splitting it with the state. In Illinois, a bettor's payout from a winning bet is rounded down to the nearest dime. When a horseplayer wins $4.66 on a horse, the actual payout is $4.60. The lost 6 cents is the "breakage." Photo by Ray Carlin of the Arlington Heights Daily Herald Plate Dancer, ridden by Earlie Fires, edges Little Bro Lantis, ridden by Francisco Torres, in the Stars and Stripes race in 1992 at Arlington International Racecourse, Arlington Heights. Illinois racing's wagering handle during 1994 was $1.2 billion. The handle is the total amount in bets.

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