Archive for California

Gaming Decisions Dating Back to 1999 Doomed Hollywood

This week’s LET IT RIDE.COM HOT TOPIC comes from Matt Hegarty of…take a read and VOICE AN OPINION!

Losing bet on gaming doomed historic track

When Hollywood Park closes its doors for good Sunday, it will become the inevitable financial casualty of two bets reaching back to 1999. Those wagers worked out well for the two companies that tied their money to the track – a perverse turn of events considering the gaping hole the track’s closing will leave on the national racing landscape and the track’s deep history.

Hollywood Park was first targeted for a big payoff by Churchill Downs Inc., which bought the track in 1999 as part of a national expansion that had two goals: acquiring simulcast signals and planting stakes in potential casino-gambling markets. Six years later, however, frustrated by the state’s opposition to expanding casino gambling beyond Native American reservations, Churchill unloaded the track – at a $120 million markup from the price it paid.

The buyer in 2005 was a real-estate company, Bay Meadows Land Company, controlled by a California Democratic businessman with deep ties to the state’s legislature, Terry Fancher. His company, too, was betting on getting slot machines or casino games at the track, but unsuccessful efforts supported by Fancher and the rest of the California racing industry to improve Hollywood’s chances at reaping the rewards of expanded gambling failed miserably in the next three years.

Then the real-estate market collapsed.

That collapse was the only reason Hollywood Park held on until 2013. With the track located on valuable real estate, with quick access to nearby LAX and the city’s ports, Hollywood Park’s owners kept it operating solely because razing the facility and redeveloping the land wasn’t prudent until the real-estate market recovered. What’s more, it’s become apparent since a referendum failed in 2007 that the state has no interest in giving racetracks slot machines, and so Hollywood’s owners are finally cashing in their chips for the lucrative world of retail and housing development.

That reality might be off-putting to many local racing fans and historians, but the simple fact is that real-estate developers look at one crucial statistic in gauging the worth of a property: profit per square foot. Hollywood Park sits on a lot of square feet, 238 acres worth of sprawling property that includes a backside generating far more expenses than revenues and a spacious infield unused but by birds, a pretty park no one can picnic in, with value only as a backdrop for photographs that rarely make the papers these days.

Meanwhile, handle nationally on racing went into a free fall at the start of the 2008 economic meltdown after years of stagnation or small declines, although it has stabilized over the past two years. Handle at Hollywood’s summer meeting in 2008 averaged $11.8 million a day, a number that declined to $9.1 million in 2012, while average handle at its 2008 fall meeting was $8.3 million, below its 2012 fall meet average of $8.9 million. At the same time, real-estate values have been steadily creeping up.

“From an economic point of view, the land now simply has a higher and better use, so, unfortunately, racing will not continue here once the 2013 autumn meet is completed,” said the track’s president, Jack Liebau, when finally announcing the closing earlier this year.

Both Churchill Downs and Bay Meadows Land Company made no secret of their goals for Hollywood – slot machines. Churchill decided to bow out as the result of a breathtaking miscalculation by the state’s racing constituents in 2004 to support an industry-drafted referendum that would have forced Native American casinos to contribute 25 percent of their gambling revenues to the state and to local governments. Under the language of the referendum, if a single Native American casino refused to make the payments within 90 days of the referendum passing, the state’s racetracks and card rooms would get a backdoor right to operate as many as 30,000 slot machines.

The referendum was shot down by 84 percent of the voters. In defeat, the racing industry came off as petty and vindictive, eroding support for their efforts for expanded gambling while simultaneously serving up a stark reminder of the unbreakable political clout of the Native American casino lobby.

Frustrated by the vote and bowing to reality, Churchill reached its agreement to sell the track to Fancher’s company in 2005 for $260 million. Tom Meeker, Churchill’s chief executive when the company purchased the track for $140 million in cash from a company controlled by R.D. Hubbard, said after reaching the deal that the state “seems to have forsaken racing,” a reference to the company’s inability to get any authorization for casino gambling. That comment probably didn’t endear the state racing industry to lawmakers, either.

The sale allowed Churchill to retire nearly all of its long-term debt and post a $72 million profit for the quarter. Hollywood’s average handle when Churchill acquired the track in 1999 was $10.38 million for the summer meet and $9.66 million for the fall meet. When the company sold the track in 2005, those numbers were $10.42 million (little change) and $8.94 million (a 7.4 percent decline), respectively.

Fancher picked up right where Churchill left off, even if his language was coded in the type of business-speak that is familiar to anyone who has watched a racetrack set the stage for lobbying efforts to get slot machines. During a conference call to discuss the purchase of the track, Fancher said: “[We] will seek alternative uses for the current racetrack site, in collaboration with the city of Inglewood, in the event that our best efforts are unable to improve the underlying economics of the horse racing industry and stem the tide of horses leaving the state.”

Then he issued a warning to Gov. Arnold Schwarzenegger: “It would be tragic to see racing fall off the landscape in California. Governor, you can do something about it.”

Fancher and supporters of expanded gambling wasted no time in pursuing their goals, working behind the scenes to try to strike a deal to bring slots to the state’s tracks. Those efforts failed to bear any fruit. In 2007, a referendum that would have nullified the state’s agreements with Native American tribes – and opened the door to slots at tracks – failed nearly as spectacularly as the 2004 vote. Efforts to revive the issue have fallen flat ever since.

Fancher had vowed to keep Hollywood up and running as a racetrack only until 2008, but any plans for redeveloping the property then faded in the wake of the dramatic pullback in real-estate investment when credit and land values collapsed as part of the recession. Just in case anyone had any lingering confidence in Hollywood’s future as a racetrack as a result of the delay, however, the owner quickly put those hopes to rest when Bay Meadows Race Course, the company’s other racetrack holding, located in an industrial area south of San Francisco, was torn down late in 2008 and promptly redeveloped.

The larger concern for the racing industry is whether Hollywood’s fate will be shared by other similar racetracks. While crosstown circuit member Santa Anita is probably safe from redevelopment over the short run due to a combination of its billionaire owner’s ability to absorb losses and the property’s few viable redevelopment options in a tony location already crowded with retail and housing, other tracks without expanded gambling will face the same pressures over the long term unless they receive the right to operate slot machines.

With casino-type gambling reaching into nearly every nook and cranny of the continental United States, tracks without gaming have now become few and far between. Tracks in Illinois, Arizona, and Washington fit the bill. Kentucky, surrounded by casino states, obviously stands out, but only one Kentucky track, Turfway Park, is in dire financial straits. Churchill has the cash-cow Kentucky Derby; Keeneland is a not-for-profit that has consistently posted record attendance and handle figures despite the recession (and has sales revenue to fall back on); and both Kentucky Downs and, to a lesser extent, Ellis Park are reaping revenues from Instant Racing machines, devices that so nearly resemble slot machines that they are hardly distinguishable from the real things.

But in Texas and Virginia, two states where casino gambling seems a longshot at best, the future is grim. Tracks in those states, each with its own long equine pedigree, opened in places where racing seemed a sure thing, and at a time when the national gambling expansion was beginning to carry racetracks with it to the land of riches. But that has changed, seemingly irreversibly. Unless racing finds a way to resurrect its fortunes – and wean itself from the slot-machine subsidies that have so distorted the economic and political incentives shaping its present and future – more tracks will go the way of Hollywood Park, white elephants whose once best uses expired long ago.


If Hollywood Closes, Will Del Mar Pick Up Fall Dates?

This week’s LET IT RIDE.COM HOT TOPIC comes from Lyndsay Winkley and Ed Zieralski of UT San Diego…take a read and VOICE AN OPINION!

Del Mar considering fall racing dates

DEL MAR — It’s been apparent for some time that horseracing’s days are numbered at Betfair Hollywood Park, but only recently have tracks in Southern California begun to address it, starting with Del Mar and Los Alamitos in Orange County.

Joe Harper, president and CEO of the Del Mar Thoroughbred Club, said Del Mar would like to host a short fall meeting so long as it included the Breeders’ Cup dates in late October or early November. Del Mar plans to expand and install a new turf course for the 2014 meeting and has designs on hosting the Breeders’ Cup Championships as early as November, 2015.

Los Alamitos would like to house more horses and stage more thoroughbred racing and training in addition to its year-round night racing for quarter horses, according to a recent article in Bloodhorse Magazine. Los Alamitos officials plan a $12 million expansion that will add 700 horse stalls to the 300 stalls they currently have dedicated to present thoroughbred racing. They’ll also improve a grandstand that holds 15,000 spectators now. Los Alamitos currently houses 1,100 quarter horses.

Harper said Los Alamitos would be a good location for a limited, three-days-a-week meeting in the spring and a year-round venue for training.

“A year-round training facility won’t work at Del Mar,” Harper said. “It won’t work at Santa Anita. Los Alamitos, from my point of view, is the best place. We have a very good relationship with (track executive and consultant) Brad McKinzie and Doc Allred (owner of the track). Doc’s word is his bond. We’d love to do business with them.

“But for us, any expansion of dates will be done with one thing in mind,” Harper added. “Don’t screw around with the summer meeting. Those dates work great. So we’re not going mess with that at all.”

The matter was discussed Tuesday at the Del Mar Race Track Authority and Race Track Leasing Commission meeting. Tim Fennell, CEO and general manager of the Del Mar Fairgrounds and Racetrack, said he would be in favor of additional dates in the fall for racing. Any expansion of racing would have to go through a series of state governing bodies, but Fennell said he would push for the approvals.

Harper said Del Mar’s fall racing would be an “Oak Tree-type meeting.” Santa Anita Park hosted the fall meeting and the Breeders’ Cup last November and will do so again this November. Del Mar has been in discussions with the Breeders’ Cup and sent a proposal last spring in hopes of luring a future world championship to the surfside track.

For now, Del Mar has no plans to add racing until Betfair Hollywood Park is closed. Bay Meadows Land Co., which owns the track’s 238-acre site, has been approved for a $2 billion commercial and retail development on the site. But financing has been an issue. Bay Meadows refused to commit to more racing after its racing meet ends in December.

Fairplex Park in Pomona was considered the ideal place to expand thoroughbred racing and add additional stalls for stabling the horses that will be stall-less when Hollywood Park closes. But Fairplex Park officials withdrew from consideration as an alternative to Hollywood Park, leaving the industry scrambling to find another year-round stabling and training venue.


Is Takeout the Key to California Racing’s Struggles???

This week’s LET IT RIDE.COM HOT TOPIC comes from Art Wilson of Inland Valley Daily Bulletin…take a read and VOICE AN OPINION!

TOC just doesn’t seem to get it

The guys and gals who comprise the Thoroughbred Owners of California may soon be receiving a huge thank-you note from the folks at Tampa Bay Downs in Oldsmar, Fla.

The TOC may not realize it, but it had a huge hand in Tampa Bay Downs’ 8 percent increase in all-sources handle for a 90-day record meet that wrapped up last Saturday.

A lot of large bettors who normally might have been wagering on California races turned to Tampa Bay Downs this year after a new bill in Sacramento, strongly supported by the TOC, raised the takeout on exotic bets as much as 3 percent and spurred a players’ boycott of the California tracks.

The biggest winner was Tampa Bay Downs, which lowered the takeout on its pick three, pick four, super high five and pick six from 19 to 18 percent and saw its business flourish during a time when others in the industry are blaming the economy for slumping numbers instead of looking in the mirror.

The officials at Tampa Bay Downs obviously get it – less (takeout) equals more (handle).

It’s a simple formula, really, but one the folks at the TOC seem to have trouble grasping.

“I am very pleased with the outcome of our season,” Tampa Bay Downs vice president and general manager Peter Berube said in a statement. “Fans and horsemen alike enjoyed a relatively dry and warm winter here, which certainly helped us increase attendance and on-track handle.

“Overall, we credit our lower takeout, large fields, 18 percent more turf racing and greater access to the California market as key to our success, as well as a larger simulcast following nationwide.”

Large fields?

Whereas local bettors are stuck with more six- and seven-horse lineups than we can stomach, Tampa Bay’s field size increased 1.8 percent to 9.11 horses per race this meet.

Track management also rolled the dice and went with an 18.5 percent increase in turf races, which generally draw more horses, as a way to boost field sizes.

It all led to $30.4 million more in all-sources handle.

The boom in business also led track officials to raise purses in February, and they were able to do it without an increase in takeout like the one that hamstrung Santa Anita this past meeting.

Santa Anita president George Haines admitted on closing day of the Arcadia track’s meet that he would love to have had a low-takeout early exotic bet like the 50-cent pick five that Hollywood Park debuted on opening day of its spring-summer meet.

Unfortunately, the TOC didn’t see the need until it was too late for Santa Anita.

Now, Hollywood Park is reaping the rewards of an early pick five that has a 14 percent takeout and is quickly becoming the most popular bet in Southern California.

Want proof?

On Thursday, Hollywood Park had its first pick five and pick six carryovers of the season. Guess which one had the larger handle – the low-takeout pick five or the pick six, which includes a takeout of 23.86 percent?

Uh huh.

The pick five had a total handle, including a $107,487 carryover, of $907,117, compared to the pick six, which produced a handle of $655,774, including a carryover of $91,681.

There was $235,537 more bet into the pick five Thursday than the pick six, which is quickly taking a backseat to the new kid on the block.

As one longtime bettor wrote in a mass e-mail to industry officials: “It’s not rocket science yet it took how many months/years to get the (low-takeout pick five) put in? Good for Hollywood Park and everyone else that fought for this bet. I wonder how many CHRB board members and TOC board members get it? Lower the takeout and get on the right side of things for once.”

According to Equibase charts, Hollywood Park’s all-sources handle was down 8.4 percent through the first three weeks of the meet, and the total exotic handle showed a 10.8 percent decline from a year ago.

Hollywood Park’s numbers for all-sources handle would be down even more if not for the pick five, which has generated more than $2.7 million through the first 13 days of the meet – $352,750 more than pick six wagering.

The field sizes, which we were told would increase with the larger takeout, have shown a small decrease from 8 horses per race in 2010 to 7.72 – a 3.5 percent decline.

Yes, the TOC needs to wake up and admit that lower takeout means higher handle, which in turn leads to an increase in purses.

The folks at Tampa Bay Downs get it.

Let’s hope the TOC realizes the error of its ways soon, before we’re all betting Tampa Bay Downs when there’s no more racing in California.


Back To The Future: Santa Anita’s Dirt Returns

This week’s LET IT RIDE.COM HOT TOPIC comes from Steve Andersen of the Daily Racing Form…take a read and VOICE AN OPINION!


ARCADIA, CALIFORNIA – Santa Anita’s newly installed dirt track is scheduled to open for training Monday, the completion of a project that ends a troubled three-year period with synthetic racing surfaces at the historic track.

By opening the main track Monday, and the barn area Sunday, Southern California horsemen will have less than three weeks to acclimate their horses to the new surface in advance of the opening of the winter-spring meeting on Dec. 26. Santa Anita will have the only dirt track at the three major Southern California venues. Hollywood Park has a Cushion Track synthetic surface, while Del Mar has a Polytrack surface.

Installed over the last six weeks, Santa Anita’s new surface consists of 90 percent sand, using two types of sand, and 10 percent clay.

Because most horses are making a transition from synthetic surfaces, Santa Anita officials are urging horsemen to take a slow approach to introducing their runners to the new track.

“We’re asking them to give it some time to jog their horses and let horses get comfortable with it,” track president George Haines said. “It’s important to get open three weeks before opening day, so we can make any adjustments, if necessary.”

Earlier this fall, Haines said the new racetrack installation cost more than “$3 million.” Richard Tedesco, who has maintained Santa Anita’s track in recent years, will oversee maintenance of the new track, Haines said.

The track was designed by Ted Malloy, with frequent input from horsemen’s groups.

“We get horsemen every day looking at it,” Haines said. “We had a transparent process.”

Haines said Santa Anita’s maintenance crew was scheduled to begin grooming the track Wednesday and will work the surface for five days before Monday’s opening.

The timeline for installation has been largely met, despite a few weather-related delays in recent weeks, Haines said.

“We had a couple of hiccups but we were able to keep the schedule,” he said.

Santa Anita track chairman Frank Stronach committed to the installation of a dirt surface during the summer at the urging of horsemen’s groups. After the existing Pro-Ride synthetic track was removed in October, the base of the new track was installed in mid-November. In the last week, the installation of the upper layer of the surface was completed.

The base and upper layers of the surface will have a depth of 15 to 17 inches.

Santa Anita’s three-year era with synthetic tracks was plagued by maintenance problems and poor drainage. The track lost 11 days of racing during the 2007-08 meeting, the first with a synthetic surface, and five days of racing earlier this year because of poor drainage.


Does This Signal The End of Plastic Tracks?

This week’s LET IT RIDE.COM HOT TOPIC comes from Tracy Gantz of…take a read and VOICE AN OPINION!


ARCADIA, CALIFORNIA — Removal of Santa Anita’s synthetic surface began Oct. 11 as the first step in replacing it with a dirt surface. Track officials are close to deciding the mix of materials to be used as the surface material, with input from horsemen.

Plans call for installation of the dirt surface to be completed by about Dec. 1, said project manager Ted Malloy. Horses are expected to be allowed to begin training Dec. 5 for the Santa Anita winter meeting, which opens Dec. 26.

Malloy said the removal of the synthetic surface will take two to three weeks. Track management and horsemen are investigating several different dirt mixes to come up with the best and safest surface. Several plots of material are undergoing testing in the area just west of Santa Anita’s main oval.

Malloy and George Haines, Santa Anita’s president, said that the dirt surface will be made up of a sand component, clay and silt, and pond fines. The testing is examining several different mixes of these three materials.

Once Santa Anita management determines the best mix, it will undergo further testing under the direction of the California Horse Racing Board, Haines said. The University of California at Davis will test it, as will Dr. Mick Peterson from the University of Maine. Peterson is the executive director of the Racing Surfaces Testing Laboratory.

“We want to make sure we have the right parameters for the soil,” said Haines.

The CHRB still must approve a waiver for Santa Anita to return to a dirt surface. Originally, the CHRB mandated that all major California Thoroughbred tracks convert to a synthetic surface.

Santa Anita has undergone two renovations of its initial Cushion Track surface, installed in 2007. The track has not drained properly, leading to the loss of several days of racing. Santa Anita owner Frank Stronach in August announced he would replace the synthetic surface with dirt in time for the 2010-11 winter meeting.


California Jockey Now Has 66 Unserved Suspension Days…When Is Enough Actually Enough?

This week’s Let It HOT TOPIC comes from Steve Andersen of Daily Racing Form…take a read and VOICE AN OPINION!


INGLEWOOD, Calif. – Jockey Christian Santiago Reyes received two suspensions earlier this week for causing interference during recent races at Fairplex Park, and has amassed 66 days of unserved penalties since May.

The champion apprentice jockey of 2009, Reyes has been the subject of nine penalties from track stewards since May, ranging from two three-day penalties for causing interference to a 30-day penalty issued earlier this month for “weighing out with a prohibited item in his possession” at Hollywood Park in June. He has served one suspension, a three-day ban for causing interference at Del Mar.

Reyes, 21, recently received decisions by the California Horse Racing Board on two suspensions that were appealed.

Last week, acting on the opinions of designated appellate judge Steffan Imhoff, who heard the appeals, the racing board upheld Reyes’s three-day suspension for causing interference in the fourth race at Hollywood Park on May 19 and reduced a 10-day suspension to a five-day suspension for appearing to grab the reins of a rival jockey near the finish line of the second race at Hollywood Park on May 12. Dates for those suspensions have not been issued.

At Fairplex Park, Reyes was given a three-day suspension by stewards Darrel McHargue, Jon White and Randy Winick for causing interference in the fourth race on Sept. 25 aboard Love Five Plus Two. He was given a five-day suspension for causing interference aboard Michailasheartlite in the 10th race on Monday.

Because of the large number of days of unserved penalties, the Fairplex Park stewards ordered Reyes suspended Dec. 11-12 and Dec. 15 for the three-day penalty and from Dec. 16-19 and Dec. 26 for the five-day penalty.