Texas racing officials roll dice, stay the course on historical racing

Texas racing officials Tuesday refused to retreat from approving a controversial new way to gamble at tracks statewide, even though that decision could jeopardize funding needed to keep the agency and racetracks alike open.

Saying it’s needed to try to save their waning industry, commissioners on a 4-3 vote decided to keep rules in place to allow historical racing — the replaying of past races on slot-machine-like devices — at tracks throughout Texas, including Lone Star Park at Grand Prairie.

This flew in the face of a proposal, supported by conservative lawmakers, to repeal the rules and remove the possibility of historical racing in Texas.

“This is a very desperate industry,” said Robert Schmidt, a local orthopedic surgeon who heads the commission and supported repealing the rules. “This was an impossible decision.

“By repealing the rules, you offer the horsemen no hope and a pathway for the continued deterioration of the Texas industry,” he said. “By not repealing the rules, you risk that the commission won’t be funded after September and there will be a blackout period for the industry that can hurt it.”

This is the latest development in a yearlong fight between the commission and some conservative lawmakers who asked the commission to not approve the rules in the first place, and then sued and threatened to defund or dissolve the agency if commissioners did.

The agency’s funding remains up in the air, since lawmakers this year required that some funding, including for salaries and rent, be approved by the Legislative Budget Board for the new fiscal year, which starts Sept. 1.

That funding had yet to be approved Tuesday, leaving the commission in limbo, not knowing if the agency, and the horse and dog tracks it oversees, will have to shut down next week.

State Sen. Jane Nelson, who will help determine whether the funding should be granted, has been upset with the commission — calling it an “agency that has gone rogue” — since last year’s vote.

The Flower Mound Republican couldn’t be reached for comment Tuesday afternoon, but she has said the commission went beyond its authority in approving an expansion of gambling in Texas.

“If slots are introduced, our tracks become something entirely different,” Nelson, whose district includes part of Tarrant County, recently said. “Texas horse racing as we know it will cease to exist, and I don’t want to see that happen.”

Watching from the sidelines is what many describe as a fading racing industry made up of thousands of Texans who work as veterinarians, jockeys, grooms, breeders and more. State estimates show they contribute $5.5 billion to the state economy and create 36,000 jobs.

“The commission faced a difficult decision,” said John Elliot, CEO of Global Gaming Solutions, which owns Lone Star, and is owned by The Chickasaw Nation. “We hope the commissioners took the best path they feel is appropriate for the industry.

“We have to wait and see how it all unfolds now.”

A yearlong fight

Supporters have long said historical racing would help struggling Texas tracks compete with out-of-state venues that offer casinos and bigger purses. Opponents fear that the machines could bring a form of casino-style gambling to the state.

Historical racing, also known as instant racing, has long been an issue in Texas, where lawmakers reject requests to expand gambling.

It involves replaying races on devices with sounds and symbols similar to slot machines. Unlike slots in traditional casinos, the payoff is tied to past race results. The devices have no information that could help players identify the winners in advance, such as horse names, dates and tracks.

Last August, the commission approved historical racing at dog and horse tracks even though some lawmakers asked commissioners not to weigh in.

Rep. Matt Krause, R-Fort Worth, sought a restraining order to prevent the commission from voting. He also sued, unsuccessfully, saying commissioners lacked the authority to allow the machines.

A second lawsuit found more success. It was filed in Travis County by a coalition of charity bingo groups that said the machines might run them out of business. An Austin judge agreed, saying such decisions should be left to lawmakers.

Commission officials said they won’t appeal the ruling. A coalition of racetracks said it will.

“We are proud of the commission’s willingness to stand by the Texas horse and racing industries,” said Andrea Young, president and COO of the Sam Houston Race Park. “We look forward to having our day in court on historical racing and are confident that the Court of Appeals will uphold the validity of these essential rules.”

A rogue agency?

When lawmakers went back to work this year, Nelson — who has said she has “been an ardent supporter of the horse racing industry” — filed a budget that stripped $15.4 million from the commission and described the commission as “an agency that has gone rogue, in my opinion.”

The commission is funded by the industry it regulates. It collects millions a year in fees paid by racetracks and license holders such as owners, trainers and jockeys. That money is turned over to the state, which allocates it back to the commission.

The state budget that takes effect Sept. 1 includes funding for the agency, but it stipulates that the budget board must sign off on all central administrative funding.

Nelson serves on the board, as does Lt. Gov. Dan Patrick, House Speaker Joe Straus, and other House and Senate members.

Earlier this month, a complaint was filed, alleging that the racing commission “is being bullied and power misappropriated from Sen. Nelson to the legislative budget board,” according to the paperwork filed by Jan Haynes, president of the Texas Thoroughbred Association/Texas Horsemen’s Benevolent and Protective Association.

The Texas Department of Public Safety dismissed the complaint last week.

“Nothing in the materials you have provided thus far raises a plausible possibility that criminal conduct has occurred,” investigator D. Phillip Adkins wrote to Haynes.

Haynes has said she will look at her other legal options.

“I find it difficult to believe that what Sen. Nelson has engaged in isn’t abuse of power,” she said. “Sen. Nelson is not the Legislature. She doesn’t get to say what the law is.”

Patrick took issue late Tuesday with the continued attacks on Nelson, issuing a statement calling the criticism “inappropriate and offensive.”

Declared Patrick: “I will not tolerate politically motivated attacks on the character and integrity of Chairwoman Nelson or any member of the Senate by members of the Racing Commission or their supporters. If any member of the Racing Commission participated in this type of behavior, or does so in the future, I will ask Governor Abbott to request their immediate resignation.”

He said the commission owes Nelson and members of the Senate an apology.

Closing time?

Earlier this month, a Racing Commission official sent emails warning that the agency’s doors could close after Aug. 31.

If the funding doesn’t come, the agency can’t pay rent or employees “and will close at the end of the day on August 31, 2015,” Executive Director Chuck Trout wrote in a letter to an attorney representing tracks.

“If the agency closes, all racing will also stop.”

That also applies to races simulcast from other states, Trout wrote, because if the commission isn’t open, staffers can’t oversee or regulate the races.

“I sincerely hope everything will stay open,” Schmidt said. “I think the Legislature would be better served by letting this be settled in court.”

Staff writer John Gravois contributed to this report.

This story was originally published August 25, 2015 at 2:44 PM with the headline "Texas racing officials roll dice, stay the course on historical racing."