Los Angeles Business Journal: Out-of-state 'racinos' threaten Del Mar's horse race franchise

Opened in 1937 and rebuilt in the early 1990s, the Del Mar Racetrack, sometimes referred to as "Camelot," puts on summertime meets that are considered among the nation's best.

But thoroughbred owners and trainers fear that California's horse-racing industry, which carries a $2.5 billion annual economic impact statewide, will lose out to other states joining the trend of "racinos," or racetracks that also offer casino-style electronic slot machines.

Del Mar has tried to lure a younger demographic by putting on concerts and other nonracing activities, although American Indian casinos--largely considered the other game in town--are being blamed for stealing the show at many tracks.

Several states, including New Mexico, West Virginia, Delaware, Iowa and some parishes in Louisiana, have legalized slot machines on their tracks. Venues are funneling a portion of those profits into the purses they offer, enabling them to attract more horses and draw bigger crowds, said Drew J. Couto, president of the Arcadia-based Thoroughbred Owners of California.

Some of California's thoroughbreds have departed for greener pastures. "There's been no formal study," Couto said. "We know anecdotally, however, that there has been a migration of owners and trainers and horses to those states whose (racetrack) purses are subsidized."

The placement of slot machines is expected at tracks in Florida, New York and Pennsylvania. "Time is growing short to find a solution to the (racino issue)," Couto said.

The wake-up call came with word of Hollywood Park's sale earlier this summer. While the contract stipulates that the Inglewood facility will run as a horse racing facility for the next three years, the expectation is that it could be razed and redeveloped for other commercial uses.

"Del Mar does not want Hollywood Park and Santa Anita to do poorly," said Mac McBride, a spokesman for Del Mar's Thoroughbred Club. "If they do well, the spillover for us is good, as we rely on the horses and horsemen of the Southern California circuit.

If West Coast thoroughbred owners ship their horses to the Midwest or mid-Atlantic states to take advantage of the racinos, they'll have the opportunity to compete for purses that are typically from 20 percent to 30 percent higher than at other tracks, said Bob Bone, whose thoroughbred, Choctaw Nation, won the San Diego Handicap at the Del Mar track this summer for the second year in a row.

Del Mar could lose out, since horse owners who migrated east most likely wouldn't ship their horses back across the country just for one meet. "They'd be gone," Bone said.

While he would prefer to stay in California, economics will weigh into his decision--including the fact that it is less expensive to maintain horses and barns outside the state. "If the economics don't work out (in California), I will have to make a decision," he said.

Sid Craig, who heads the Craig Stables in Rancho Santa Fe--and who founded the Jenny Craig Inc. weight loss empire with his wife--says he would rather quit the business than move to other facilities. "I'd get out of racing," he said.

Since the defeat of Proposition 68, which asked voters to approve electronic slot machines at the state's tracks, the thoroughbred owners association has since turned its attention to talking to representatives of the state's American Indian casinos to come up with ways to compete with racinos.

"We have been discussing the impact that out-of-state racinos have had on the industry and what possible cooperative effort we can make with our California Native Americans to try and help this industry," Couto said.

"But we are not focusing on the idea of putting slots in at racetracks. I really don't see one particular thing as our salvation at this point. We're looking at an overall program that would be multifaceted and probably take care of a lot of interests and the tribes' needs, so that in a sense, we'd not be in competition anymore."

There's speculation within the racing industry that the tribes will be asked to sweeten the pot at the state's tracks in exchange for the right increase at their own operations. But at least one racing official, Mike Knapp, the manager of Surfside Race Place, the Del Mar Thoroughbred Club's satellite wagering facility, says that would be unlikely.

"If the state, with a deficit in the billions, is looking for more money, I can't see why the tribes would be allowed to pay money to the tracks vs. the government."