“This disadvantage in a hyper-competitive gaming market, coupled with substantial licensing and reconciliation fees and new, unviable horse racing requirements in the Illinois Gaming Act, makes construction of a casino at Arlington financially untenable,” Churchill CEO Bill Carstanjen said in a statement today.

The news won’t shock readers of Crain’s, which reported in early July about the prospect of Churchill selling Arlington and focusing on casino operations. Churchill controls the parent of Rivers Casino in Des Plaines and has said it will apply for one of six newly authorized casino licenses, choosing Waukegan.

Churchill today said it would operate Arlington at least through the 2021 horse racing season and apply for a sports betting license "while longer-term alternatives are explored." Among those options, Churchill could transfer Arlington’s racing license to Quad City Downs, a shuttered downstate track where Churchill operated an off-track betting facility.

The Illinois Thoroughbred Horsemen’s Association decried Churchill’s announcement, saying the company “immediately should be denied the enormous financial advantages it enjoys by virtue of its now-annulled commitment to Illinois racing. Those include Arlington's considerable property tax break ($2.47 million this year), the track's recapture subsidy ($4.47 million in 2019 alone, straight from horsemen's purses), and the chance to apply for a sports betting license linked to Arlington (a form of gaming that will do nothing to benefit purses).”

A recent JPMorgan report suggested Churchill could sell the 336-acre Arlington facility and utilize a 1031 exchange to limit tax liability. “Under this scenario, (Churchill) avoids cannibalizing Rivers Des Plaines (15 minutes from Arlington Park),” while “the Waukegan location allows (Churchill) to still tap into Chicago’s wealthy northern suburbs (and potentially Milwaukee/Kenosha),” the report said.

Of course, Churchill could use its announcement as leverage with lawmakers, in an effort to revise terms of the gaming act signed in June—something that’s certain to occur for an authorized Chicago casino with a projected effective tax rate of 72 percent. The act authorizes 1,200 “gaming positions” for Arlington but also allows casinos to increase their 1,200 positions to 2,000, part of an overall expansion that would more than triple the number of allowed positions statewide.

Churchill “and the team at Arlington will continue to work with legislative and community stakeholders, as well as Arlington’s customers, employees and horsemen, to find a solution that takes into account the many constituents across the state of Illinois who depend on horse racing for their livelihoods,” Churchill said.

“The Chicagoland market has seen a significant proliferation of video gaming terminals over the last several years and now faces the potential introduction of five new gaming facilities as well as increased gaming positions at existing casinos and video gaming outlets,” Churchill CEO Carstanjen said. “Arlington would enter this market with an effective tax rate that would be approximately 17.5 percent-to-20 percent higher than the existing Chicagoland casinos due to contributions to the thoroughbred purse account.”

Said Ray Paulick, publisher of the Paulick Report horse racing industry blog in Louisville: “This is a public company doing things that are in the interest of their shareholders, pure and simple. Unfortunately, the race product at Arlington, unless something changes, will continue to deteriorate. The purse levels are anemic and embarrassing for what was once one of the top five circuits in the country. They’re not even competitive with Iowa, Minnesota or Indiana.

“It’s unfortunate for the men and women who breed, own, train and work in the thoroughbred industry in Illinois who for more than 20 years (operated) in good faith that slot machines or casinos would somehow help them out,” said Paulick.

Just over one-quarter of the $179 million wagered at Arlington last year was bet on races at the track, a figure that fell to $47.9 million from $52.2 million in 2017, according to the Illinois Racing Board. On-track betting on Illinois races has plunged from more than $1.2 billion in 1990 to $76 million last year.

Churchill purchased Arlington in 2000 for $71.5 million in stock, which gave longtime Arlington owner Richard Duchossois a 9 percent stake in the new owner. Through his son Craig, Duchossois declined to comment on today’s news.

Arlington Heights Village President Thomas Hayes acknowledged the threat to the local economy. The track is the community’s largest employer and top attraction, though not an outsized contributor to the village budget, he said.

“It would be a great loss if they were to close, but I’m not thinking about it in those terms,” he says. “I prefer look at the positive aspects of it,” including a promise to continue racing for at least two more years. “Hopefully, the (racing) landscape with change.”