Is The River Dry?

by Ed Meyer

posted on January 24, 2009 in News | No Comments >>

Its 85th season might be the finale for River Downs.

After a fifth straight year of operating losses at the Anderson Township horse track, General Manager Jack Hanessian said the facility will close if state leaders fail to expand gaming options for the track in 2009.

“We’re committed to racing this year,” Hanessian said. “If things don’t improve, we’re going to have to face that decision. I don’t think our owners have the stomach to keep it up.”

Revenue has fallen for Ohio racetracks for more than a decade, as rival tracks in neighboring states continue to add slot machines to their revenue mix. Tracks with expanded gaming can offer richer purses, better horses and higher levels of betting. The total handle, or all bets placed at River Downs, dipped to $56.6 million last year, down from $110 million in the late 1990s.

Operating losses for 2008 were roughly $1 million, and the track hasn’t posted a profit since 2003, Hanessian said.

Hanessian represents a group of California investors who purchased River Downs and expanded its grandstand and restaurant facilities in the mid-1970s. The group enjoyed some lucrative seasons in the 1980s, but industry trends like simulcasting and “racinos” steadily eroded its revenue base. With a site that covers 160 acres, River Downs could make an attractive casino location. But Hanessian said his ownership group has been frustrated by the repeated failure of Ohio ballot issues to legalize casinos.

While gaming companies are floating rival plans for a new ballot issue, Hanessian is hoping Ohio legislators take a different approach – authorizing the Ohio Lottery Commission to allow video lottery terminals, which operate like slot machines, at Ohio racetracks.

“To get a full casino, you’d have to amend the constitution,” Hanessian said. “We’ve been down that route. I don’t know if we have the appetite to do that again. If the prospect for gambling or slot machines is bleak…it would be useless to keep the track open.”

‘They’re not crying wolf’

The threat of a River Downs closure is real, said Ohio State Sen. Bill Seitz, whose bill to authorize “instant racing” terminals at Ohio tracks failed in 2007.

“I have no doubt they’re on their last legs,” said Seitz. “They’re not crying wolf.”

Seitz said he is “truly baffled” by the unwillingness of Ohio’s elected leaders to embrace casino gambling as a way to preserve jobs and solve the state’s budget crisis. He points to a 2005 study by Deloitte Consulting LLC on behalf of the American Horse Council Federation. It estimates the Ohio horse industry produces goods and services valued at $1.4 billion and provides 16,600 full-time equivalent jobs. Hanessian said River Downs employs about 300 during the summer months, not including trainers, veterinarians, security and concessions personnel who work at River Downs but aren’t employed by the track.

“The amount of money we’re willing to throw at job creation in new industries is interesting, given the losses we’re seeing in long-standing Ohio industries,” said Seitz. “The horse racing industry is flat on its back, but we want to talk about green-collar jobs, wind turbines, advanced energy, advanced polymers.”

Ohio Gov. Ted Strickland offered hope to gaming companies recently when he expressed a willingness to consider new proposals to legalize casino gambling in Ohio. But Strickland stopped short of endorsing such a plan, and Senate President Bill Harris said no gaming proposal will originate in the Ohio Senate unless Strickland requests it.

Seitz expects gaming companies to cobble together another ballot issue to place before Ohio voters in November. He sees little chance for an expanded gaming proposal to be offered by the Ohio Lottery Commission, adding that revenue has fallen well short of expectations in the lottery’s newest offering, Keno. The Bingo-like numbers game, introduced at Ohio bars in August, generated $32 million in revenue and $8 million in profits in its first three months.

Keno way short of projections

That’s far short of the pace that will be needed to match first-year goals of $292 million in revenue and $73 million in profits.

“According to latest budget footnotes I saw last week, they’re projecting Keno will offer $20 million in deficit relief. That’s a little different than $73 million,” said Seitz. “I think everybody has their fingers crossed that we’re going to get a huge amount of money from Obama. If that fails, I think gambling returns full-force, front and center.”

Whether the help arrives in time for River Downs remains to be seen.

“I’ve been here 32 years, so I’m not ready to throw it in,” said Hanessian. “We’re fighters. We’re survivors. But this is a serious threat. The losses are real, and it’s just like any other business. How long do you have to endure losses? You just can’t do it, if there’s no prospect for getting a return.”