'Archaic' horse racing laws led to decision to sell Arlington Park to the Bears, track owner says
Churchill Downs Inc. CEO Bill Carstanjen blamed "archaic" Illinois horse racing laws Thursday for the company's decision not to pursue additional gambling at Arlington Park and sell the property to the Chicago Bears instead.
At the same time, the corporate leader of the Louisville-based horse racing and gambling firm announced company officials wouldn't be submitting a bid for the proposed downtown Chicago casino ahead of a Friday deadline, which comes a month after their decision to pull out of the running for a Waukegan casino.
But Churchill's withdrawals from Arlington Heights, Waukegan and Chicago contrast with its interest in Des Plaines, where officials have gone all-in at Rivers Casino and an $87 million expansion set to open next year.
Carstanjen discussed the company's changing place in the Illinois gambling, hospitality and political worlds during a quarterly earnings call Thursday morning.
"I believe Chicago is a great American city. We've been a part of it and a part of the region for a long time," Carstanjen told investors and analysts. "So our decision to sell Arlington Park really wasn't any kind of comment on Chicago, or the Chicagoland region, or even the state of Illinois. It was really a comment on the archaic racing laws that really haven't been changed in any material way in that state in 30-plus years and no longer worked."
And while Gov. J.B. Pritzker and the state legislature approved a massive gambling expansion package in June 2019 that enabled Arlington Park and the two other Illinois racetracks to add slots and table games, the legislation "wasn't really passed in a form that was enough to make up for the racing paradigm in the state," Carstanjen said.
Churchill's surprising August 2019 decision not to add additional forms of gambling at Arlington came after its lobbyists pushed for those entitlements in Springfield for more than a decade. That effort was preceded by then-owner Richard Duchossois' fight with lawmakers in the 1990s to make racetracks more competitive amid newer forms of gambling like riverboats. Duchossois, now the 100-year-old chairman emeritus of the racetrack that held its last race Sept. 25, famously shut down the track during that battle in 1998 and 1999, before merging with Churchill in 2000.
But after the final version of gambling expansion legislation was signed by Pritzker decades later, Churchill brass blasted its economic terms and tax structure, while saying the proliferation of gambling elsewhere would make it hard to compete.
Carstanjen noted Thursday that Hawthorne Race Course in Cicero and Fairmount Park in downstate Collinsville have been slow to develop casinos at their racetracks.
"So we made the right decision moving forward with the sales process for Arlington," Carstanjen declared.
Thursday marks a month since the bombshell announcement that Churchill reached an agreement to sell the 326 acres at Euclid Road and Wilke Avenue to the Bears for $197.2 million. The sale is scheduled to close in late 2022 or early 2023, subject to completion of due diligence and other conditions.
"Although we are sad to close Arlington Park and would have loved to continue racing and investing in the region, we believe that the Chicago Bears will ultimately develop this prime real estate into a world class stadium and development with numerous amenities for fans and residents to enjoy over the coming decades," Carstanjen said.
Churchill plans to use proceeds of the Arlington sale -- along with those from an upcoming sale of 116 acres at the former Calder Race Course near Miami -- to purchase or invest in other real estate, such as at its namesake track in Louisville, where a number of upgrades are underway.
Under Internal Revenue Service rules, the company can defer federal capital gains taxes on the property sales through a so-called 1031 exchange. In addition to the racetrack improvements in Louisville and other capital projects across the company brand, Churchill will explore potential acquisitions that would qualify as "replacement property" under the IRS rules, officials said.
Churchill executives this week reported record third-quarter net revenues and adjusted earnings, for the portion of the fiscal year covering July 1 through Sept. 30. Part of what drove those earnings was a $5.9 million increase at Arlington Park, which saw a boost in handle and admissions for its final race meet, compared to the pandemic-shortened season in 2020, according to company balance sheets released Wednesday.
The announcement of the Bears purchase and sale agreement last month came the same day as the Illinois Gaming Board announced Churchill and partner Rush Street Gaming had withdrawn its joint bid for the planned casino in Waukegan.
Then Thursday, Carstanjen said the partnership wouldn't file an application for the downtown Chicago casino.
Instead, the joint operators are doubling down on their investment in Rivers -- the state's most lucrative gambling house -- where two floors worth of new gambling areas, a poker room and restaurant are scheduled to be complete in the first half of 2022.
"We decided it was really important to just focus on all that we have going on with Rivers," Carstanjen said. "And we are making a material investment in Rivers. We've had a great deal of success there."
Beyond Rivers, Carstanjen left open the door to Churchill's getting involved elsewhere in the region, saying the company would still look for opportunities and potential investments in Chicago and Illinois.