The Indiana Horse Racing Commission recently approved an “initial distribution agreement” of revenue from slot machines that will allow Centaur Gaming to refinance in 2014. Representative from the Indiana Horsemen’s Benevolent and Protective Association, Indiana Standardbred Association and the Quarter Horse Association of Indiana had joined Centaur to petition the IHRC to approve the agreement.
Centaur president Rod Ratcliff said capital improvements could total $36.5 million over the seven-year term of the agreement, allowing the company to upgrade its Indiana Downs and Hoosier Park Racing & Casino racetracks. Indiana Downs, which now offers only Thoroughbred and Quarter Horse racing, would receive major racing surface improvements, new and renovated dormitories and 100 new stalls for Quarter Horses. The funds also would cover a “substantial rebuild” of the clubhouse and grandstand.
The agreement stirred some controversy as it allows slots revenue to be subordinated to the claims of senior lenders in the refinancing should Centaur default. However, attorneys with Ice Miller LLP, which prepared the petition for Centaur, said approval of the interim distribution agreement “does not mean the parties would immediately enter in a subordination agreement.” They said there are “numerous other conditions that would have to be satisfied” in regard to regulatory and financial approvals.
The racing and breeding industry gets roughly $54 million a year in slots revenue from machines located at the two racetracks. A 2013 state law authorized 10-12 percent of adjusted gross revenue from slots can be paid to horsemen. Centaur and the horsemen’s groups agreed to the maximum for 2014.
In other Indiana gambling news, last year the state’s riverboats last year generated $2.6 billion and paid state and local governments more than $806 million. Casino revenue is the fourth largest source of state government funds.
The local governments and communities in Lake County, Indiana especially have benefited from $1.1 billion in casino revenues since the county’s four riverboats opened in 1996. The Majestic Star in Gary, Horseshoe in Hammond and Ameristar in East Chicago have received 75 percent of the revenues. Lake County, municipal governments and the South Shore Convention & Visitors Authority have received the rest.
Casino funds have paid for Gary’s $45 million Steel Yard baseball stadium, 60 percent of Hammond’s road upgrades, $12 million to make county government buildings more energy efficient, government vehicles and employee healthcare benefits. Lake County officials said casino revenue also has promoted economic development, repaired crumbling infrastructure, assisted churches and sports organizations and funded a college tuition program.
However, in 2006 the state diverted about $84 million to taxpayers in the form of property tax reductions. The legislature also took another $14 million annually for the Northwest Indiana Regional Development Authority, a state-created body that invests money in Northwest Indiana’s lakefront, the Gary/Chicago International Airport and other major projects. In addition, recent tax breaks for the casinos, plus competition from neighboring state casinos, the state lottery further reduced revenues for Lake County and other casino-host counties.
Lake County Council President Ted Bilski said, unlike the early years, casino tax revenue “is not a steady source of income that you can count on. We have had to put more casino money into making sure our bills are paid. That is something we need to get away from. It should be reserved for capital projects.”
Ed Feigenbaum, publisher of Indiana Gaming Insight, said local government officials should expect further cuts in the casino revenue they receive as the state’s discretionary income decreases.
