Expand gambling? Save an Idaho industry? A look at the claims facing voters this fall

Editor’s note: This is the second of two stories on Idaho’s Proposition 1. For a closer look at the group who put the measure on the ballot, follow this link.

One of the most contentious and expensive items on Idaho’s November ballot centers around a piece of electronics the size of a fridge.

This machine — a “historical horse racing” terminal — could either boost Idaho’s horse racing industry and economy, or send the state down a path of gambling and casinos, depending on whom you ask.

And how the machine’s appearance and operations stack up against the Idaho Constitution could land the state in an expensive court battle.

First, some background: For historical racing, also known as instant racing, people place bets on past races that are replayed without any identifying information. Along with their spinning wheels, sounds and animations, the machines have small screens to display the replays.

The Idaho Legislature approved historical horse racing in 2013. Two years later, lawmakers repealed that measure, upset that the terminals resembled slot machines more than video replay devices.

Gov. Butch Otter vetoed the repeal in April 2015, but not quickly enough for the veto to survive a court challenge. Idaho’s biggest horse racing track is Les Bois Park in the middle of Garden City. Operator Treasure Valley Racing unplugged its machines, and while some horse racing has continued at other Idaho tracks, the group has chosen to let Les Bois and the Turf Club sit dark since September 2015.

Proposition 1 is a citizens’ effort to bring back historical horse racing. It authorizes historical horse racing wagering at locations authorized by the state to conduct live or simulcast racing. To qualify, tracks must hold at least eight live days of racing annually. Live and simulcast racing sites must be approved by the local county commission and the state racing commission.

The state currently has eight horse race tracks; of those, Les Bois was the only one to hold at least eight racing days in 2014 and 2015. None have done so since. Additionally, under the proposition, a defunct dog-racing track in Post Falls already authorized by the state to offer simulcast racing would be able to offer historical horse racing.

Under the initiative, for every dollar wagered, 90 cents would be returned in winnings to bettors. Nine cents would go to the historical horse racing operator for expenses, race purses and profit. One cent would go to the Idaho Racing Commission, a division of the Idaho State Police tasked with overseeing and regulating horse racing; that would be split several ways, including half a cent given to Idaho’s public schools.

Who’s involved?

Two opposing political committees, The Committee to Save Idaho Horse Racing, Create Jobs and Fund Public Schools and Idaho United Against Prop 1, each are spending millions of dollars trying to sway voters.

Treasure Valley Racing is the sole contributor to Save Idaho Horse Racing. As of Sept. 30, the latest campaign finance information available, Treasure Valley Racing gave $3.45 million to the committee.

The Coeur d’Alene Tribe, which owns and operates a casino in Worley, contributed all but $5,000 of the $2.75 million Idaho United Against Prop 1 raised by Sept. 30. The tribe also is the sole funder of another political committee working against the proposition, North Idaho Voter Project, and gave it $242,219 through Sept. 30.

Combined, Treasure Valley Racing and the Coeur d’Alene Tribe have already spent $6.4 million on Proposition 1.

For comparison, Idaho’s gubernatorial primary this year was one of the highest-interest races in more than a decade. The three leading GOP candidates combined spent $5.5 million. The two top Democrats together spent $2.7 million.

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Why is this an issue?

“Proposition 1 is, in no uncertain terms, about reviving live horse racing in Idaho, which has struggled in recent years,” said Save Idaho Horse Racing spokesman Todd Dvorak.

There sits one of the major points of dispute on this measure. Opponents have repeatedly pointed out the vote is about gambling machines, not actual live horse racing, and accused Save Idaho Horse Racing of trying to confuse residents. The horse racing group, in turn, has argued the machines give it the revenue needed to maintain tracks and raise purses to a level where horse owners are willing to race.

A Boise State study from 2015, when Idaho horse racing was on the rebound, showed the industry contributed more than $50 million to the state economy and employed more than 530 Idahoans.

Treasure Valley Racing President John Sheldon points to Kentucky Downs as an example of how historical horse racing revived live horse racing.

Until seven years ago, Kentucky Downs was a little-known track located about 35 miles north of Nashville. Today, it’s a popular destination offering “monster” purses thanks to “historical horse racing, which in its simplest explanation, is what you would get if you bred video of past races to a slot machine,” L.A. Times horse racing columnist John Cherwa wrote Sept. 9.

In 2011, Kentucky Downs’ purses totaled $746,810 for 30 races, for an average of $25,660 per race. The track installed historical horse racing at the end of that live racing season. Purses paid out to horse owners have since skyrocketed, reaching $8.6 million total and an average of $172,508 for 50 races last year, the Bowling Green Daily News reported Aug. 31.

In September, Kentucky Downs held a five-day meet offering $10 million in purses. “That $2 million-per-day purse average is the largest in the world outside Japan, topping even the $1.63 million a day in Hong Kong,” the paper reported.

“Kentucky Downs is a perfect example” of how historical horse racing is saving the industry, Sheldon said. “There is no reason we cannot do the same thing in Boise, Idaho.”

Larry Williams told the Statesman that when he was running his horses at Les Bois, which he regularly did until 2015, he still would have lost money if he had won every race because the purses were so small.

The historical horse racing machines installed at Les Bois proved lucrative. During the 16 months they were active, people wagered $127.5 million, an average of nearly $2 million a week. In comparison, total live and simulcast wagering at Les Bois in 2014 and 2015 totaled just $17 million.

The influx of cash also increased winnings for racehorse owners. Purses awarded at Les Bois in 2012 totaled $1.3 million, with an average purse of $4,053. In 2014, the first year with historical racing revenue, Les Bois’ purses increased more than 70 percent to $2.3 million, with an average purse of $8,285.

At the three locations where it was offered statewide — Les Bois, Greyhound Park in Post Falls and Double Downs in Idaho Falls — historical horse racing generated a total of $716,569 for public schools.

Treasure Valley Racing started its Les Bois lease with Ada County in 2011. Had the gambling machines stayed legal, the company expected to make a profit for the first time in 2015.

“We were on the right track and it just stopped” when the machines were banned, Sheldon said.

What’s the problem then?

First and foremost, the proposal seems destined for a court showdown.

Idaho’s Constitution allows parimutuel wagering, which is when players bet against each other rather than against the house. It does not allow slot machines, nor “any electronic or electromechanical imitation or simulation of any form of casino gambling.”

The question, then: Should the historical horse racing machines be judged by how their money is handled, which follows the parimutuel model — all money goes into the same wagering pool — or their appearance, heavily resembling slot machines?

In its review of the Proposition 1 ballot language, the Attorney General’s Office said “equating historical horse racing wagering to parimutuel betting may be legally vulnerable” and “absent a constitutional amendment, litigation likely appears the only means for resolving these issues under Idaho law.”

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“Based on the Attorney General’s review, it seems apparent Prop 1 will immediately be challenged in court. However, it is too early to speculate on who would be the one to file the lawsuit,” said Ken Andrus, a former state lawmaker who is now chairman of Idaho United Against Prop 1.

The issue divided legislative candidates in this year’s Idaho Statesman voter guide (available online now and in print Oct. 24). Lawmakers like Sen. Grant Burgoyne, D-Boise, who voted to ban the machines still describe them as “slot machines prohibited by the Idaho Constitution.” Burgoyne added that if the machines are ever made legal, they “should be run like the lottery with all proceeds going to help horse racing and education, instead of private gambling interests.”

Save Idaho Horse Racing’s latest advertising includes a similar charitable argument. In late September, the Treasure Valley Racing owners announced a new nonprofit foundation they said will receive all of Les Bois Park’s profits — should the group choose to reopen the horse track.

“The Treasure Valley Racing Foundation for Rural Idaho is dedicated to supporting education, scholarships and health care and economic programs that serve rural families and communities all across Idaho,” Dvorak said. “Every time the casino interests claim that much more money goes into these operators’ pockets than goes to schools, they’re deceiving voters.”

As noted earlier, Proposition 1 directs more money back to operators than to schools — 9 cents on every dollar vs. half a cent, respectively. How much of that operators would pocket as profit is unclear at this point.

And, it’s unknown if other track operators will follow Treasure Valley Racing’s lead on donating their profits instead. Despite being a talking point in the political ads, the nonprofit is only set up around Les Bois — and nothing in Proposition 1 requires anything like it.

Idaho United Against Prop 1 has seized on those points.

“The wealthy funders pushing Prop 1 are now trying to distract voters by talking about a private foundation they’ve started, and making promises to give the net income from one park (not every park the machines would be located at, and certainly not the dog track) to that entity,” Andrus said. “If they wanted to give that money away to a private foundation, they should have written Prop 1 that way — instead, they wrote it to benefit themselves. The foundation isn’t in proposition language.”

Didn’t the tribe do this same thing awhile back?

In 2002, Coeur d’Alene Tribe Chairman Ernie Stensgar organized a ballot initiative allowing video gaming at casinos on Idaho reservations. The Coeur d’Alene and Nez Perce tribes contributed nearly all of the $3.5 million spent promoting the initiative, which Idaho voters passed 58 percent to 42 percent.

Now, Stensgar is treasurer of Idaho United Against Prop 1, and his tribe has already spent the aforementioned $3 million opposing the historical horse racing machines.

“In 2017, former Coeur d’Alene Tribal Chairman Chief James Allen testified before the House State Affairs Committee on the subject of Historical Horse Racing. In his remarks, he said if HHR promoters wanted to change the law they should take it to a vote of the people — as the tribe did in 2002,” Save Idaho Horse Racing’s Dvorak said. “Treasure Valley Racing is following their advice and taking their case for saving Idaho horse racing directly to the people.”

Treasure Valley Racing’s John Sheldon told the Statesman: “That is the big hypocrisy or irony here, is the people that are funding the opposition are the same people that have tribal gaming machines. They are saying gambling is bad, it is evil, it is going to raise crime, yet they are the ones that are doing it. Now they are using that revenue to fight our initiative.”

Why the discrepancy? For an answer, Idaho United provided the Statesman with an Oct. 6 Coeur d’Alene Press guest opinion in which Stensgar declared the ballot measure “threatens (his tribe’s) ability to provide for our community and contribute to Idaho.”

He claimed historical horse racing’s history makes it different than tribal gaming: “The (historical racing) law was repealed when it became clear the promoters misrepresented the machines and their real intentions. Politicians didn’t shut down racing or kill jobs. The fact is that a few track owners decided on their own to shut down horse races in Idaho.

“Idaho’s past experiment with instant racing contrasts sharply with 20 years of limited Indian gaming which is highly regulated through federal, state and tribal law. Indian gaming has allowed the Coeur d’Alene Tribe to firmly establish our self-reliance, provide jobs and fund programs, creating a better place to live for our people and we have shared those benefits with many others.”

What does the next governor think?

The major-party candidates for governor are split on this measure.

Republican Brad Little, a sheep rancher whose family used to race horses, has consistently sided with the horse racing industry. The five members of Treasure Valley Racing are friends of his, and have contributed a total of $30,000 to his gubernatorial campaign.

Little is supporting Proposition 1.

“What matters is Rigby and Jerome and Malad, all these little communities, because they are just not having enough racing days and they are about ready to close down,” he told the Statesman. “That is why they need historical horse racing, to generate the cash to get the purses up to keep the live horse racing industry alive.”

Democrat Paulette Jordan is a member of the Coeur d’Alene Tribe. She sat on its tribal council for three years, and currently serves on the board of the National Indian Gaming Association, which works to promote nearly 500 Indian gaming establishments in 29 states across the nation. She has said several times she will support the will of the people on Proposition 1, but that she personally will vote against it.

During an Oct. 13 KBOI debate, she said Prop 1 is “going to expand legalization of casinos in the state of Idaho. If you want more casinos in the state, more slot machines, then vote for Prop 1.” She told 670 KBOI’s Nate Shelman on Sept. 21 that casinos and gambling “drive a different kind of ilk, or interest, into our community.”

When asked by the Statesman how she reconciles those statements with the casino and gambling machines already operated by tribes in Idaho and her work for the National Indian Gaming Association, she gave this written statement:

“I, myself, will vote against Prop 1 because I don’t want to see more tax dollars going to issues of security, police force, educating people, such as the gaming commission. This is not about horse racing itself; it’s simply about slot machines. If people pass it then I will support the will of the people.”

Cynthia Sewell is Idaho Statesman’s government and investigative reporter. Contact her at (208) 377-6428, csewell@idahostatesman.com or @CynthiaSewell on Twitter.