Des Moines Register
12-19-07
Knapp seeks to rein in cost of horse track
By JEFF ECKHOFF and DAN JOHNSON • REGISTER STAFF WRITERS •
Des Moines-area real estate mogul Bill Knapp wants state lawmakers to scale
back horse racing at Prairie Meadows Racetrack and Casino in Altoona and
direct at least $10 million to charities and economic development.
Knapp said the effort is driven by recent estimates that $29.2 million from the
Polk County-owned casino went to support the facility's racing operation last
year. Knapp, who is among a handful of local philanthropists regularly
approached to find money for civic projects, said some of the horse-racing cash
might be better spent on other things.
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"Getting bond issues passed is damned near impossible; raising taxes is a tough
deal," he said. "But we've got Prairie Meadows out here raising all this money,
and we're pouring it all into horse racing?"
The philosophy behind the racing operation is the subject of a meeting today of
the facility's board of directors.
Knapp, whose real estate company was a major donor to last summer's failed
"Yes to Destiny" campaign for a 1-cent sales tax increase in central Iowa
designed to pay for nature trails and regional cultural projects, stopped short of
suggesting that racing money could be used for those purposes.
"It would suit me if it all went to charitable groups or part of it could be used for
economic development, too," he said.
But racing costs, Prairie Meadows officials said, contain rent and other fixed
expenses that would remain as long as there is a casino. The $29.2 million figure
"is arbitrary," said Ann Long-Richards, the facility's vice president of finance.
Jack Peters, the horse owners' representative on the Prairie Meadows board of
directors, said that he thinks racing's subsidy is closer to $20 million, but that the
deficit is nonetheless "a red flag."
"We need to find out what the real costs are and get them in line ... to get to the
bottom of why it costs so much to run our business," he said.
The debate over racing costs has flared periodically since Prairie Meadows
opened in 1989 as a racetrack-only venue. It went bankrupt a few years later,
which left taxpayers on the hook for borrowed construction money. Slot machines
were added in 1995, and the bonds were paid off within two years. Prairie
Meadows has since returned more than $360 million to Polk County, which has
helped keep property taxes down and drive development of the Iowa Events
Center, among other things.
How gambling profits should be divided has been a source of argument since the
track added slots. When Prairie Meadows opened, profit was supposed to go to
charity. When legislation to permit slot machines was approved in 1994, horse
interests lobbied for its passage and told rural lawmakers that higher purses
would lead to more breeding and strengthen the state's agricultural economy.
A 1999 study for Prairie Meadows by Iowa State University professor Dan
Otto estimated that horse racing and breeding in Iowa had a $252 million impact
and was responsible for 3,261 jobs.
"I don't think it's fair to say horse racing is losing all this money when it also
brings money into the state," said Pam Connolly of Madison Country
Thoroughbreds, a 500-acre farm in Macksburg.
Polk County Supervisor John Mauro, a Democrat and frequent critic of racing
purses in the late 1990s, said he recognized from the beginning that the purses
were too big for a publicly-owned casino, "but I couldn't get anybody to pay
attention."
Knapp said he does not to want to see racing end at Prairie Meadows but will
"absolutely" push the Legislature to cut the number of races, reduce winners'
purses and stop long-term plans for an artificial track surface. Those moves, he
estimates, should free up at least $10 million for local governments and
nonprofits.
Other county supervisors are reluctant to wade into a debate over the volume or
quality of racing at Prairie Meadows, but some agree that the subsidy deserves
attention.
"I don't understand how anybody can look at that and see that it makes sense for
the Legislature to mandate that any organization lose $30 million a year," said
Robert Brownell, a Republican.
However, things are viewed differently by some at the Capitol. Democrat Kevin
McCarthy of Des Moines, the House majority leader, said he and other legislators
recognize "an intrinsic value of horse racing as a sport that contributes to the
economy."
As a result, Iowa horse breeders have been able to wield clout at the Statehouse.
A law that took effect last year requires Prairie Meadows to spend 11 percent of
its casino revenue, minus the county's annual $15.6 million rent payment, on
purses. The measure, supported by horse interests who saw purses drop from
$19.9 million in 2003 to $15 million in 2005, was included in a bill that allowed
Prairie Meadows' casino to add table games such as blackjack and craps.
"One thing that really bothers me is everybody agreed to this," said Scott Pope, a
horse owner and lobbyist for thoroughbred interests. "Now, here we are, years
later, and everybody seems to forget about that. It's frustrating."
Long-standing tensions emerged again last year, when Prairie Meadows sought
unsuccessfully to end Iowa's requirement that casino gambling be reapproved by
voters every eight years. The next vote on Prairie Meadows is scheduled for
2010.
Prairie Meadows officials intend to continue the push for referendum restrictions.
Troy Skinner, lobbyist for the casino, said the law has limited Prairie Meadows'
ability to build a hotel and parking garage, because banks are reluctant to loan
construction money beyond the date of the next referendum.
Enter Knapp, who believes there's a solution that benefits all sides. He envisions
lower purses and a ban on out-of-state horses who have collected roughly 55
percent of prize money over the past few years. Part of the extra money would
go to Polk County charities or economic development projects, while the rest
would be distributed to county fairs.
"If I'm running a company, and I've got a subsidiary out there that keeps losing
money, there comes a time that you close it down or you revamp it somewhat,"
Knapp said.
Jim Cownie, president of the Greater Des Moines Partnership economic
development group, described Prairie Meadows as "an extremely important asset
to central Iowa" and noted that "all parties concerned need to manage it
appropriately."
The partnership, he said, supports Skinner's drive to limit gambling referendums
but has not debated the issues Knapp raises.
"It's not that we're avoiding it; we just haven't teed it up," he said.
McCarthy, the Democratic House majority leader, said he hopes casino backers
and horse breeders can find a compromise. Otherwise, the referendum bill - "It's
still a live round" - could be shelved out of reluctance to reopen a contentious
gambling debate.
"Its chances are a lot less likely of getting 51 votes if the horse industry is against
it," he said.
Reporter Jeff Eckhoff can be reached at (515) 284-8271 or jeckhoff@dmreg.com