AP/CDI's Contract Takeaways
Message From ITHA Executive Committee
Concerning ITHA/AP Contract Negotiations
Dear Fellow Horsemen:
By law, a race track in Illinois must have a contract with the horsemen's association representing the largest number of owners and trainers that race at that track prior to the beginning of the racing season (230 ILCS 5/29(d)). For decades, the Illinois Thoroughbred Horsemen's Association and its predecessor, the Chicago Division of the HBPA, has been the contracting agent representing the horsemen racing at Chicagoland thoroughbred tracks.
Our current contract with Arlington runs through April 22, 2015. A contract committee of the ITHA has been tasked with negotiating a contract for the 2015 season. That committee, President Mike Campbell, Vice-President Chris Block, Director Marty Nixon, Director Steve Holland and Executive Director Glen Berman, has in whole or in part held several negotiation meetings since late last year with principals of Arlington Park/Churchill Downs Inc. including Arlington Chairman Dick Duchossois and CDI Senior Vice President and Arlington General Manager Tony Petrillo.
AP/CDI insists the primary disagreement is about fees to the ITHA. Yet AP/CDI is in possession of a signed contract from the ITHA that would have $875,000 paid to ITHA based upon the association's statutory authority to receive such fees to provide programs and services to horsemen. At the same time, AP/CDI presented a document to the IRB at its March meeting wherein it projected two scenarios, one where ITHA receives $500,000 and one where ITHA receives $750,000 from a percentage of retained handle at Arlington. A copy of AP/CDI's submission is available for viewing by ITHA members on our association's website (click here and navigate to the "Member Forms" section). The numbers we are discussing are not so far apart as to be the cause of such controversy.
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It's clear that other terms of the contract are driving AP/CDI to create this hostile environment.
AP/CDI Targeting Horsemen's Purse Account
During the 2012 contract negotiations, AP/CDI proposed billing the horsemen's purse account for significant operational costs of its own; for instance, it proposed charging stall rent and charging for manure removal (at a cost to the horsemen's purse account of $500,000 per season). ITHA negotiators, with the backing of membership, stopped that AP/CDI initiative.
AP/CDI still has its eyes on the purse account and has even had its lawyers prepare so-called legal memos to the IRB attempting to make an argument that the horsemen's purse account actually belongs to the track. Purse accounts do not belong to the tracks; the tracks collect the monies and distribute the monies but the monies themselves are a liability, not an asset, of a track, as they are monies being held for others. One of the reasons ITHA has had smooth contract negotiations with Hawthorne for the past five years is because Hawthorne, like all other fair-minded tracks, acknowledges that purse account monies belong to the horsemen.
Federal bankruptcy courts recognize the purse account as belonging to the horsemen. At the December 2015 IRB Meeting, Maywood/Balmoral's bankruptcy attorney Chad Gettleman testified that "the tracks regard the horsemen's purse account as belonging to the horsemen and not belonging to the track and it's in a segregated account and those funds ... don't belong to Balmoral and Maywood and they will be allowed to be used in the ordinary course to pay the horsemen." (Click here for audio of the December 2014 IRB meeting, and begin at the 33 minute mark.)
AP/CDI Seeking to Minimize Horsemen's Rights Under IHA
AP/CDI also has its sights set on changing the federal Interstate Horseracing Act, which, as currently written, ensures that horsemen have an absolute right to control the simulcast signal. These larger issues are behind the contract stalemate. It's not about a couple hundred thousand dollars from a purse account, from which AP/CDI gladly chooses to take more than $4 million each year in recapture subsidies to put in its own coffers.
On December 2, 2014, ITHA sent a signed contract proposal with minimal changes from our current contract, except instead of the flat payment to ITHA of $1,090,000 per year, we suggested returning to a 2% based fee utilizing statutory language - the same model as in our current Hawthorne contract and the same percentage as in our contract with Arlington, signed in 2012. A copy of the cover letter to the contract proposal to AP/CDI outlining the changes to the current contract is available to members on the ITHA's website. At the March 2015 IRB meeting, Tony Petrillo testified that, "We did receive a contract from ITHA with the same percentage as Hawthorne; we set that aside and decided to work on other issues...and much to our surprise we received another contract proposal with approximately $875,000 out of the purse account" (at the 2 hour and 50 minute mark of the March 2015 IRB meeting audio).
AP/CDI's response to that contract offer was actually quite different. It responded to our reasonable and signed offer of December 2014 by advising us that the ITHA's offer was "demonstrative of gross negligence," that ITHA's approach was "beyond comprehension," and that ITHA's proposal was rejected in its entirety.
Further negotiations resulted in a couple items we could agree on, a couple we could live with, and some we will never agree to.
On March 3, 2015, ITHA sent another signed contract proposal based upon the current contract with certain changes, including a self-negotiated 20% decrease in fees payable to ITHA. A copy of the cover letter to that contract offer is available online for ITHA members.
AP/CDI rejected that signed offer, too, and advised ITHA that it viewed our latest offer "as just another tactic for the ITHA to ruin Arlington's race meet," and that ITHA "may put Arlington out of business and damage Arlington as you have Hawthorne." AP/CDI went on to accuse ITHA of utilizing "tactics" that are "threatening the survival of racing in Illinois." AP/CDI finished its response by stating that it "will not let the ITHA or its national affiliates intimidate us, or weaken our desire or deter us from our commitment to rebuild racing in Illinois."
Who's kidding who here?
AP/CDI Contract Takeaways
In its rejection of the ITHA's current, signed contract offer to Arlington, AP/CDI attached an unsigned, redlined version of our current contract that left the amount payable to the ITHA blank. AP/CDI also proposed the following items in its draft contract:
- Adding a forfeiture clause of all monies due the ITHA if we publish anything that AP/CDI deems would reflect negatively on its race meet or would reflect negatively on the relationship between the horsemen and AP/CDI.
- Amending the horsemen's absolute federal right to withhold our signal at any time for any reason in our sole discretion. (This is the one true power horsemen have over the product we provide. It has been attacked and upheld in federal courts; we will not sign it away by contract.)
- Reducing training hours of 4 hours each day at both the main track and training track to 2 hours each day at both the main track and training track. AP/CDI apparently does not want to pay for two ambulances on standby, so it is proposing that when the training track is open for 2 hours the main track will be closed, and vice versa, for a total of 4 hours combined per day.
- Reducing the minimum racing opportunities at AP/CDI this year to 8 races per day from the current 9.4 races per day (8 races per day is the minimum required by law, so essentially this eliminates ITHA authority here, which could have an impact on the pending gaming legislation which includes minimum racing opportunities and which AP/CDI recently proposed to renegotiate - putting in question our agreed rates and the end of recapture)
- Removing any minimum purse amount (it's $10,500 in our current contract), and removing the requirement to consult with ITHA prior to reducing purses, etc.
- Removing the traditional authority of ITHA to direct payments of purses in case of purse underpayment. (Although underpayment is unlikely now, it could happen in the future. These provisions confirm ITHA's authority with respect to the purse account, which AP/CDI would like to diminish.)
- Requiring ITHA to publish how much money it has "diverted from the purse account" pursuant to statute and publish any reduction in overnights as a result. (AP/CDI attempted to characterize payments to the ITHA in the first condition book it published, though it failed to mention its own voluntary taking of $7,000 per race in recapture subsidies this year.)
- Removing ITHA's right to retain the services of a third party to be the horsemen's bookkeeper.
- Requiring the ITHA to agree not to "retaliate" against AP/CDI/TwinSpires, etc., "in any manner whatsoever" and requiring the ITHA to indemnify AP/CDI for legal expenses for such claimed activity. (AP/CDI can use this for any reason it deems appropriate in an attempt to overwhelm us legally and financially and put us out of business.)
- Requiring trainers to pay $20 per stall if they are not clean when they leave, plus pay for all damages, not just that above normal wear and tear.
- Removing the current ITHA requested language that provides $1,000 higher purse for Illinois restricted races over comparable open races. (AP raised this amount to $2,000 last year but now wants to eliminate it).
- Amending the agreement for no stall rent to be no stall rent "for horses participating in the race meet" with no definition of what that means. In the stall application, AP/CDI states that trainers are expected to start one horse per stall per month - a threshold that more than 90% of trainers cannot meet. This change puts stall rent back on the table.
- Removing the right of the ITHA to have a Track Committee inspect the condition of the track 10 days before the start of the meet, one week after the opening and every two weeks thereafter. AP/CDI also would strike its current contractual obligation to meet with the track committee to discuss the condition and maintenance of the racing strip.
- Eliminating the requirement for the track to provide an on-track insurance policy for jockeys. Another track recently tried to eliminate this insurance and was faced with a jockey strike. Elimination of this policy would shift more liability exposure to owners and trainers.
By order of the IRB, since no contract has been entered into 60 days before the start of the meet, the parties must participate in non-binding mediation. AP/CDI advised it was first available for mediation the week of April 13. Both sides have been contacted by the mediation service for selection of a date and mediator.
AP/CDI's Desire to Blame Others
Based on its actions and demands, AP/CDI appears to be deliberately trying to scuttle the start of its own meet - a calamity that it would then blame on others. Should such a plan come to fruition, ITHA anticipates there will be purse reductions and potentially vacated dates - with the blame, should AP/CDI have its way, being directed squarely at the ITHA.
Last year, AP/CDI blamed the IRB for the demise of Illinois racing - now it is blaming the ITHA. Who will it blame next?
ITHA has advised Arlington, despite its summary rejection of our signed offer, that our offer remains open until the date of mediation. If AP/CDI truly wants to get the 2015 meet started without a hitch it would have signed our offer or come back with a counter-offer specific to the dollars necessary to support ITHA programs and services for horsemen. It hasn't done that. Instead it has thrown a plateful of contract changes at us that it knows we won't agree to, while at the same time attempting to foment dissension among horsemen behind the ruse that our disagreement is only about money.
The ITHA Executive Committee:
President Mike Campbell
Vice-President Chris Block
Director Steve Holland
Director Marty Nixon
Executive Director Glen Berman