Indiana Horse Racing Commission Meeting Notes

Date: May 22, 2007

Please note: These are NOT official minutes of the IHRC meeting.  They are notes developed by our representative attending the meeting.

The Indiana Horse Racing Commission (IHRC) met on Tuesday, May 22, 2007, at Indiana Downs.  The brief meeting covered several topics important to racing in Indiana.  As with the January 2007 meeting, it was likely one of the shortest in duration of any in the history of IHRC meetings.  Chairman Sarah McNaught called the meeting to order at 2:00 p.m.  Minutes from the March 16, 2007 meeting were approved by the Commissioners, as written.  The meeting then progressed to the other items included on the agenda.

The first item on the agenda was the presentation of the Chairman’s Award to William P. Diener.  Diener was a longtime attorney for Hoosier Park, active with them until their recent sale to Centaur, Inc.  Chaiman McNaught noted giving this award was a fun aspect of her job on the commission because it allows her to recognize effort in the industry.  She stated she hopes to present such awards from time to time in the future, noting bestowing the first award on Diener sets a high standard of excellence for all who may follow.  Admitting she had only worked with Diener for about 2 years, with all positive interaction, Chairman McNaught deferred to the IHRC Attorney, Robin Babbitt, for additional comments.

Babbitt agreed presenting the award is one of the more enjoyable aspects of working with the commission.  While speaking about Diener, he dispelled the myth that he and Diener always got along.  Babbitt even shared an example of a time when Diener had an objection to action taken by the IHRC and submitted it in written format.  As he continued his comments, he said working the an attorney like Diener marked a movement to more civility in the relationship of lawyers working together.  He said Diener epitomized civility, by stating, “He was always agreeable, when disagreeable.”  Babbitt went on to say Diener never took things personally nor made them personal toward others.  When receiving filings from Diener, Babbitt stated he always knew the filings were fair and accurate, so they were taken seriously.  Having worked with the commission in the formative years, Babbitt said he believes Diener knows as much about the regulatory aspects of the IHRC as anyone.  He added that Diener always acts with high standards and the highest degree of integrity.  In conclusion, Babbitt congratulated Diener on earning the award and thanked him for his role in shaping the Indiana horse racing industry.  These comments were met with a standing ovation from those in attendance.

After accepting his award from Chairman McNaught, Diener spoke briefly.  He stated he was honored and humbled to receive the award.  Further, he said it was an honor and privilege to work with the IHRC to grow an industry.  In dealing with the commission, he always sought impartial decision making.  Throughout the years, he felt he got that from the IHRC and issues were always handled professionally.  He closed his comments by giving rave reviews to Joe Gorajec and his staff.  He felt they exemplified fairness and integrity.

The next item on the agenda was a report on the Association of Racing Commissioner's International (RCI) 2007 annual convention in Jackson Hole, Wyoming.  Chairman McNaught said she had attended 3 days of the convention.  She noted learning a lot from things going on in other places in the industry, both nationally and internationally.  She concluded by stating Joe Gorajec, who has worked with RCI for many years, will become the Chairman of RCI in April 2008.  She then asked Gorajec to share more from the recent convention.

Gorajec shared the fact he has been attending RCI conventions for about 20 years, stating his first had been in 1988 or 1989 in Arizona.  Since then, he has attended 14 or 15 separate conventions.  He stated the recent convention in Jackson Hole, Wyoming was probably the best he has ever attended.  He found a consensus of opinion on a lot of issues.  Some of those issues are addressed in the RCI Model Rules.  The IHRC is expected to take up considering the adoption of some of them in the near future.  He went on to describe a few of those.

One RCI Model Rule deals with a ban on toe grabs.  As of now, this applies only to Thoroughbreds.  Gorajec mentioned working with the commission’s chief veterinarian, Ursala Jedra, to see if the rule should also apply to Standardbreds.  He noted the Quarter Horses usually follow the same rules as the Thoroughbreds.

The second RCI Model Rule discussed was the regulation of anabolic steroids.  Of all things considered at the RCI convention, Gorajec felt this had the most interest.

A third RCI Model Rule deals with safety reins.  Gorajec noted the subject was familiar to the IHRC.  It was approximately one year ago, at the same location, that the issue was addressed in Indiana.  At the time, the IHRC decided not to mandate safety reins.  The issue is now being considered by national bodies and other states, considered regulatory colleagues of the IHRC, have adopted the rule.

Another RCI Model Rule addresses out-of-competition testing.  This is testing of horses not currently entered in a race.  It would occur outside of the race day and not necessarily on the grounds of a race track.  The testing targets drugs clearing the horse’s system quickly, with no business ever being there in the first place.

The final RCI Model Rule mentioned was the blanket of wagering integrity rules.  These rules are lengthy and cumbersome, but deemed necessary by Gorajec.  He stated they need to be addressed not only by those racing, but also by the tracks.

To conclude his discussion of the RCI Model Rules, Gorajec presented a timeline for consideration and approval of the rules.  He noted all industry stakeholders will be given the opportunity to offer input and testify, if necessary.  A motion was made to approve the timeline, which passed unanimously.  The following timeline will be utilized:

- July 18, 2007 – Toe grabs

- September 27, 2007 – Anabolic steroids

- November 15, 2005 – Wagering integrity & Safety reins

- Consideration of the rule for out-of-competition testing will be addressed at a date to be determined.

Indiana’s newly enacted regulation on suspended trainers was then discussed.  Gorajec noted this was a topic of discussion at the recent RCI convention.  In March, the IHRC passed the first rule in the country concerning this topic.  Since then, 3 other racing jurisdictions have taken up the issue and followed suit.  Gorajec stated the RCI has taken on the task of developing an RCI Model Rule on the subject.  In crafting the rule, the RCI will look to Indiana’s rule for structure.

Returning to the numbered items on the meeting agenda, Gorajec then gave a report on the status of the RCI’s wagering monitoring system.  He gave a historical account, stating the subject first came up about 18 months ago, when it first was included as a part of the “Integrity ‘06” program.  Gorajec said a project of this magnitude takes a while to get started, so it has taken some time to get everything in order.  Recently, the software has been developed and the first client is now on board.  Included in the packet distributed to those in attendance was a press release about the wagering monitoring system and its first client, Youbet.com.  With an expected commencement in June 2007, Youbet.com is going to be the first to use the system.  Provided it works over the summer as described, Gorajec said he would ask that the commission mandate the tracks use it when opening for live racing in 2008.

Moving on, the agenda included approval of the Standardbred horsemen's contract with Hoosier Park.  Rick Moore, representing the track, spoke to the commission.  He noted there were not a lot of changes from previous contracts.  The only real change was a shift in the payment of some Third Party Liability Insurance.  Moore went on to thank the horsemen’s group for working with them to draft the contract.  The contract was approved unanimously.

Approval of the Thoroughbred horsemen’s contract with Indiana Downs was also discussed.  Jon Schuster of Indiana Downs reported the negotiations went well, with little change to the previous contract.  While on the subject of Indiana Downs, Chairman McNaught took the opportunity to thank Schuster and his staff for hosting the meeting.  With a unanimous vote, this contract was also approved.

The next item on the agenda was consideration of a petition dealing with the purchase of additional ground.  Brady Wright spoke on behalf of Indiana Downs, indicating their desire to purchase approximately 27 acres adjacent to the current facility.  He explained that the counter-offer included was simply a requirement by the seller to pay rent if no deal was completed by a designated date.  Chairman McNaught asked questions about the intended use of the property.  Wright replied the plans currently included adding additional barns to the facility.  After making a motion, the petition was unanimously approved by the commission.

The commission then moved on to considering a petition from Centaur to sell shares to a few additional parties.  Attorney Robert Hagemier explained the petition for his clients.  Basically, he gave the names of 5 individuals who wished to become shareholders.  Gorajec cited a letter from Richard Wilbur, IHRC Investigator, which included his findings.  Within the letter, Wilbur stated nothing was found which should obstruct the transaction.  A motion was made to approve the petition.  It passed unanimously.

Discussion of the newly enacted legislation permitting slot machines at Indiana’s two pari-mutuel racetracks was next on the agenda.  Chairman McNaught opened the discussion by offering her congratulations to the many people in the room who had worked long and hard on the legislation, noting some had been working on it for years.  She went on to say the legislature and governor have given the industry an opportunity to create one of the finest and most profitable programs in the country.  As we move forward, she advised keeping in mind what a wonderful opportunity we have been given.  Secondly, she reinforced the idea that we have a great groundwork in place for future growth.  To illustrate her point, she gave one example of the many articles concerning racing in Indiana which as appeared over the past 18 months.  She quoted from the article, “Indiana is hardly the center of the horse racing universe, but Gorajec and his staff are doing important work….Indiana is leading.  It’s time for others to follow.”

The IHRC Executive Director, Joe Gorajec, echoed the thoughts of Chairman McNaught with respect to this being a fantastic opportunity.  He believes the potential for the tracks and racing program are unlimited on what they can become.  “Indiana currently has two good racing programs (tracks).  In the slot era, they could become phenomenal,” said Gorajec.  He then gave a brief synopsis of the slot machine legislation.  Up to 2,000 slot machines will be allowed at each track (not their off-track facilities), with language written to allow an increase in the future.  Oversight of the slots will be handled by the Indiana Gaming Commission, not the IHRC.  There will be come interaction between the two, but the IHRC expects a fine working relationship with the sister agency.  Gorajec stated he has confidence that the gaming commission is up to the task and will do a fine job of regulating the new slot machines.  He then explained the $250 million licensing fee, noting $150 million will be due November 1, 2007, with the remainder due one year later.  In addition, he noted the slots legislation includes both a minimum and maximum days of live racing required.  Gorajec also mentioned the provision for establishing a gaming integrity fund.  The fund will get $250,000 annually from the tracks, in addition to a percentage of the revenue generated from the slots.  The total amount of money going to the fund will be $1 million each year.  With respect to purses, 15% of the adjusted gross revenue is allocated to the horsemen.  A significant and generous amount goes into a benevolent fund.  Money also goes to the horsemen’s groups to administer various activities.  When considering the amount of money projected, he stated, “Slots have potential to generate substantial money for the industry.”  Gorajec closed his discussion about the bill by explaining the industry’s movement away from the current riverboat subsidy.  He explained that it will dissipate over time.  As the slot revenue increase, the riverboat revenue will decrease.  It will eventually be completely replaced by slot revenue.

Gorajec then looked ahead to what this means to different aspects of the industry.  He admitted the tracks currently have more work than any other sector of the industry.  They are responsible for funding the licensing fee, as well as a temporary - and eventually a permanent – structure to house their slot machines.  His past experience with the tracks leads him to believe everything will be done and in a first class manner.

The horsemen, he continued, would be looking to the commission and the tracks to see how it impacts them.  This will help in crafting programs, both for the industry and their individual businesses.  Gorajec noted they must work together and refine their relationships over the next few months.

Gorajec stated the IHRC will be in charge of the racing program itself.  The commission will help determine how the racing program is structured, while working with the gaming commission.  Though included in the statute, the IHRC will be charged with establishing exact racing dates.  They will have to work with the tracks and industry groups to find a number that is best for the industry.

The breed development fund currently receives around $7 million.  Reports indicate this could increase to $30 million, or more.  The IHRC is responsible for making recommendations and appointing advisory committees to work on efficient expenditure of this money.  Over the next several months, communication with industry stakeholders to work on crafting a future program and establishing innovative ways to “spend” the money will be necessary.  Input is always welcome by industry leaders.

At the end of the discussion of the recently passed slots legislation, Chairman McNaught asked if there were any specific questions from those present.  Commissioner Armstrong posed a question.  He asked if there was any plan to integrate slots with the racing program, by sharing part of the facility or even a parking lot.  Gorajec replied that the decision is up to the tracks and gaming commission.  Armstrong added that he certainly hopes they do!

The final item on the agenda was an updated calendar for future IHRC Meetings.  The following meeting schedule was shared:

- Friday, June 22 – Indiana State Library – 10:00 a.m.

- Wednesday, July 18 – Hoosier Park – 10:00 a.m.

- No August meeting is currently planned, but may be necessary

- Thursday, September 27 – Indiana Downs – 10:00 a.m.

- Thursday, November 15 – Hoosier Park – 10:00 a.m.

With no further Old Business pending, and no New Business to consider, the meeting was adjourned.

The next meeting will be Friday, June 22, 2007 at 10:00 a.m. (see above).