Tribes express concerns about historic racing machines entering Oregon

By Dean Rhodes

Smoke Signals editor

Six Tribal leaders, including Grand Ronde Tribal Council Vice Chair Chris Mercier, signed an Oct. 6 letter to Gov. Kate Brown and Oregon legislative leaders to express their concerns about a new generation of historic racing machines that may be introduced into the Oregon gaming landscape at the proposed Flying Lark in Grants Pass.

The Tribal leaders also sent a separate letter to Secretary of State Shemia Fagan asking her office to review whether the small Oregon Racing Commission has the regulatory framework, statutory authority, security controls and staff expertise to adequately regulate a gaming facility with more than 200 of the machines.

“We are at a critical moment where the state is about to approve the largest expansion of state-regulated gambling in decades without public or legislative input,” the Tribal leaders’ letter states. “If something isn’t done, HHRs will arrive in Oregon without any serious discussion of their impacts on the state, on Tribes and the citizens of both.”

Dutch Bros founder Travis Boersman is expected to soon submit an application to state regulators to build the entertainment center adjacent to his Grants Pass Downs racetrack. The centerpiece will be the 250 historic racing machines that allow guests to bet on horse races that have previously occurred on machines that are similar to slots.

Accompanying the letters, Tribal leaders submitted two studies by C3 Gaming Consultants Consortium and ECONorthwest that estimate the introduction of 250 historic racing machines at Grants Pass Downs will siphon off revenues currently being made by the Oregon Lottery and Oregon Tribes to the tune of $13 million and $6 million, respectively.

The ECONorthwest study also estimates that if the machines expand in the same amount to the other four fairgrounds race tracks in Union, Prineville, Tillamook and Burns that the lost revenue will increase to $62 million for the Oregon Lottery and $31 million for Tribes. In addition, if the machines expand into the 11 off-track betting locations operated throughout Oregon by Grants Pass Downs at 250 machines per site, the losses could increase to $174 million for the Oregon Lottery and $86 million for Tribes.

“In the first scenario, Tribal income would fall approximately 5 percent,” the ECONorthwest study states. “In the second, where machines appear at all racetracks in the state, the amount Oregon Tribes earn from gaming and use to pay for necessary Tribal services would fall about 23 percent. With the third scenario, the loss would be 72 percent.”

Historic racing machines are electronic gaming devices whose outcomes are predicated on pari-mutuel wagering – when the public bets on a race. After a player places a wager and presses a button, a video showing the last few seconds of a race that occurred previously is displayed and prizes in the pari-mutuel pool are displayed as the winning slot machine outcomes.

“For all intents and purposes, an HHR is a video slot machine,” the ECONorthwest study states. “Gamblers insert money, select an amount to bet, press a button and watch a brief animated display. Once the display stops, the gambler learns if they won or lost their bet.”

The machines were originally introduced into Oregon at Portland Meadows Racetrack, which closed in 2019 and was subsequently demolished. The machines did not have a significant impact, according to the C3 study, because of the limited library of game titles, lackluster facility where they were housed and general decline in interest in horse racing.

However, historic racing machines have undergone “significant” improvements in design, technology and marketing appeal, C3 states, and points to their introduction into gaming markets in the Midwest to bolster its contention that they will negatively affect Tribal casino and Oregon Lottery revenues.

For instance, when the new historic racing machines were installed at Derby City Gaming in Louisville, Ky., in 2018, the nearby Caesars Southern Indiana casino saw a 12 percent decline in annual net slot revenue.

When 902 of the machines were installed at Red Mile Gaming & Racing in Lexington, Ky., the Belterra Casino Resort 90 minutes away saw a 7 percent decrease in net slot revenue over a 10-month period.

In addition to Kentucky, the newest generation of historic racing machines can be found in Wyoming and Virginia and are about to enter the gaming market in New Hampshire.

“Given the number of racetracks and OTB facilities in Oregon, the introduction of these new HHR machines will alter the competitive landscape, and they are expected to cannibalize gaming revenue from the Oregon Lottery and Oregon Tribal casinos,” the C3 study states. “What policy makers must ask is do they want an expansion of gaming in the state and, if so, how will this increase in supply impact existing (Oregon Lottery) operations and Tribal casinos.”

Boersma offered a study that estimates Grants Pass Downs and the Flying Lark would generate more than $10.7 billion in spending in southern Oregon over 30 years of operation.

The threat of historic racing machines to Tribal casino revenues convinced the Seminole Tribe in Florida to support a number of recent referendums in the state that gave voters and not legislators the right to decide on expansion of gaming. In addition, when the Tribe renegotiated its compact with the state of Florida, it was able to introduce language that essentially prohibits any historic racing machine manufactured over the past 15 years.

“Clearly, the Seminole Tribe of Florida recognized that modern HHR machines offer an electronic gaming experience that is very similar to the Class III machines that the Tribe offers,” the C3 study states. “To prevent any possible erosion of market share, it insisted on language that all but eliminated the gaming entertainment experience of modern HHR machines.”

Ultimately, the ECONorthwest study concludes, if Grants Pass Downs and the Flying Lark are unable to increase the number of gamblers and the amount Oregonians gamble, the money it earns from historic racing machines will come at the expense of the Oregon Lottery and Tribes.

“All of a sudden it’s like, has the state’s prohibition on casinos been waived,” Grand Ronde Tribal lobbyist Justin Martin was quoted as saying in The Oregonian. “We played under one set of rules. We invested in our facilities in rural Oregon on those rules. And now it looks like the rules are changing.”

Other Tribal leaders who signed both letters were Coos, Lower Umpqua and Siuslaw Chairwoman Debbie Bossley, Siletz Chairwoman Delores Pigsley, Klamath Chairman Donald Gentry, Cow Creek Band of Umpqua Indians Chairman Dan Courtney and Umatilla Chairwoman Kathryn Brigham.

In addition to Brown, the letter was sent to Oregon Senate President Peter Courtney and Speaker of the House Tina Kotek.