A quiet alarm is being set off in all corners of the California horse racing industry. Slowly but surely, it is alerting race track operators, horse owners, breeders and trainers to a phenomenon that could make the competitive impact of the state lottery look like a flea bite.
The challenge is coming from legalized sports betting, and it's coming quickly.
Assemblyman Richard E. Floyd (D-Carson) has filed an initiative with the office of the state attorney general that would put the sports-betting issue to a vote on the general election ballot in November of 1990. Supporters of the initiative are likely to begin collecting the needed 595,485 signatures in January.
Floyd, whose district contains a large number of legal card parlors, has proposed a measure that would create a Nevada-style atmosphere of state-controlled gambling on all manner of sports, including collegiate events.
Sports betting, as envisioned by Floyd, would be conducted primarily by established card parlors and race tracks. But the wording of the initiative allows for anyone with a clean record and a $100,000 license fee to set up a sports book in a community where local laws permit.
In addition, the initiative permits betting by telephone, similar to Nevada practice, wherein persons with an established account may simply call in bets to their local sports book, then sit back and watch the game on television.
Such sports books would be taxed between 3% and 6% of gross revenues after paying off winning bets. The higher the revenues, the higher the tax bite. The state's share of the tax revenue would be earmarked for services to senior citizens, according to the initiative.
There is even something called the "Anti-Pete Rose Provision" that makes athletes and coaches who bet on their own sports subject to felony prosecution and up to three years in jail.
Jeffrey Ruch, a spokesman for Floyd, explained why the initiative process was chosen for sports betting, rather than running it through the legislature.
"There's almost a puritanical reaction in the legislature when any kind of gaming proposal is introduced," Ruch said from his Sacramento office.
"The lottery failed for 20 years in the legislature," Ruch went on. "Then, the first time it was put to the people, it was enacted right off the bat. Dick (Floyd) has introduced a sports-betting proposal for four years in a row and not been able to get another single legislator to vote for it."
The initial reaction within the horse racing community has been one of wary opposition. With few exceptions, racing leaders see sports betting as direct competition to pari-mutuel betting. Were sports betting to become a reality in the form of the Floyd initiative, they predict dramatic decreases in race track handles and, as a result, purse money for owners, trainers, breeders, jockeys and stable personnel who are on some sort of profit-sharing plan.
Of course, to the man or woman in the street, there is little ethical difference between betting on horses and betting on basketball. A bet is a bet.
John Harris, president of the California Thoroughbred Breeders Assn., is aware that the racing lobby could come off as blatantly self-serving in opposing sports betting.
"We've got to be careful in our arguments that we don't sound hypocritical," Harris said. "At the same time, we can't get away from the bottom line. Sports betting could damage the horse racing industry."
The realists among racing's leaders are looking back on the lessons learned in their losing campaign against the state lottery in 1984. If sports betting is inevitable, they are hoping to shape the legislation to their advantage, rather than merely wringing their hands and pleading for relief when business begins to plummet.
Not surprisingly, the race track least alarmed by the prospect of sports betting is Golden Gate Fields in Albany, south of Oakland. Golden Gate is owned by Ladbroke, the British bookmaking firm that operates about 2,000 betting shops in England and western Europe.
Pete Tunney, Golden Gate vice president and general manager, conceded the obvious.
"I would think Ladbroke would be very interested in looking at sports betting in some form, whether on the race track or off, because that's the business they're in," Tunney said.
"We have not, however, had a chance to really study what has been proposed. We know what we read. Now we need to know exactly what Floyd has in mind."
A PIECE OF THE ACTION
Golden Gate was criticized when it became the only track to withhold funds from the racing industry's battle against the California lottery. As it turned out, the track saved money. The lottery passed by an overwhelming margin.
"That's our concern," Tunney said. "If sports betting is going to become a reality, I think we'd like to be a part of it and have it properly structured."
At Del Mar, the philosophy is similar, according to Joe Harper, executive vice president and general manager.
"Certainly, the initiative would have to be changed considerably to work for racing, rather than just rearrange the same disposable income," Harper said.
"The only way I can see it working is to have the tracks operate some or most of the sporting books, or something that wouldn't compete with the other books, and have those revenues going toward the racing associations. The only other way is to run it in such a way that you're not competing in the same market area, and I can't see that happening. The market areas are L.A., San Diego, San Francisco for everybody."
Del Mar is in a position to partially gauge the impact of sports betting on race track business. The sports book at Caliente race track just across the border in Tijuana has been in operation since mid-September and does a reported $750,000 in action each week, whereas Del Mar's inter-track betting on Los Angeles area racing handles roughly $2.5 million weekly.
"It's too early to measure its impact yet," Harper said. "But you talk to the people at Caliente and in Las Vegas and they'll tell you the horseplayers and sports book patrons don't really mix."
Fistfights between the two groups forced Caliente management to move sports bettors to another building. Seems the noise level of those cheering for football teams disturbed the more sedate handicappers.
No formal meetings have been held between Floyd and the various racing interests over sports betting. Floyd's staff, however, is optimistic. Ruch hinted that there was already support from some tracks.
Hollywood Park, which bucks the football season, is opposing the sports-betting initiative as written. At the same time, the track has introduced eight sports viewing centers throughout its vast racing plant in an attempt to lure people back to the track and away from their weekend easy chairs. Marje Everett, Hollywood Park's chief operating officer, insisted that sports centers are not a precursor to actual sports books.
"When we were talking about the sports centers, we wanted to be careful not to identify them in a way they could be interpreted as a sports betting set-up," Everett said.
"We do not feel sports betting is something we should support. It's an unhealthy thing for sports. You're legitimatizing bookmaking, something that could cause a scandal somewhere down the road. We've all seen it happen. And it would be very difficult to regulate and supervise properly."
A CAUTIOUS APPROACH
Still, the racing industry's position is perhaps best reflected in the cautious approach taken by Santa Anita.
"Obviously, we're concerned," said Santa Anita president Cliff Goodrich. "Sports betting just means an added element of competition. Dick (Floyd) has tried to help the industry in allowing race tracks to be potential sports book licensees. But there are many other potential licensees surrounding us."
Goodrich is seeking more data on public sentiment toward sports betting before committing to any sort of political strategy.
"In the case of the lottery, we probably never had a chance," Goodrich pointed out. "Though we tried to beat it, there was a tremendous groundswell of support.
"Sports betting, on the other hand, is perceived more like true gambling. Our inclination is that the public as a whole would not be as prone to favor it as they did the lottery. If it's a close call, we might take one position. If it's inevitable, we might take another."
Del Mar's Harper worries that recent developments might have encouraged a climate in which sports betting could be accepted by the electorate.
"Between inter-track betting and the lottery, the taboos of gambling have already been removed to a certain extent," Harper said. "We do have betting everywhere now--if that's what you want to call the lottery--and sports betting may be the next step. But I think it's much bigger step than people realize. I think there will be some lines drawn on this issue that were not drawn on the lottery."
Sports betting is certainly not an isolated California issue. In Oregon, the lottery is hooked up to the point spreads of NFL games. In Kentucky, a sports betting-lottery connection was beaten back by a powerful horse industry lobby, which includes Lt. Gov. Brereton Jones, a noted breeder. And in Louisiana, where sports betting is right around the corner, the Fair Grounds Race Course in New Orleans is welcoming it with open arms.
Race tracks, as potential sports book outlets, have a built-in reason to compromise on the issue. Breeders, owners and trainers, however, are on the outside looking in. They would need specific modifications in the language of the initiative--or special legislation--to get a piece of the sports-betting pie.
Trainer Eddie Gregson is the head of a committee appointed by the California Horsemen's Benevolent and Protective Assn. that will seek to stop the sports-betting drive, or at least bend the initiative to its advantage.
Joining Gregson on the committee are trainers Charlie Whittingham and Richard Mandella, horse owners Ed Friendly and Mace Siegel, CHBPA attorney Don Johnson and Nat Wess, general manager of the breeders' association.
Gregson and his committee plan to meet with Gov. George Deukmejian as well as the two men who figure to meet in next year's gubernatorial election, Sen. Pete Wilson and Attorney General John Van de Kamp.
"I think Floyd is a cinch to get this on the ballot," said Gregson, a native Californian. "And if sports betting went on the ballot next month, it would pass in a landslide. Hopefully, the governor and the two candidates for the governorship will be against it."
Gregson said the first thing his committee will do is meet with lobbyists in Sacramento "to try to understand the opposition."
"We're not interested in a move against Floyd politically," Gregson said. "We're trying to understand the enemy."
Even though he claims to be a big fan of horse racing, Floyd is not the most popular legislator with some segments of the industry.
Last March, Floyd introduced what he called the "Drug-Free Horse Racing Act" in the Assembly, which called for an end to California's controlled medication program for race horses.
Floyd made the proposal during a controversy over the California Horse Racing Board's handling of what were initially identified as cocaine positives in horses trained by several well known conditioners. The board later dropped all charges on the advice of the state attorney general's office.
And whereas Floyd cites a desire to recapture the gambling money flowing to Las Vegas and illegal bookmakers as the reason for his initiative, Gregson sees the sports betting movement as simply another indirect tax.
"People are so opposed to raising taxes that politicians are desperate to find alternative ways to raise revenues for welfare programs," Gregson said.
"I really believe this will kill our business," he added. "As far as I'm concerned, those universities are not going to benefit enough by what we're betting on their football teams to make any difference. And sports betting is not going to employ anybody--it's going to be a relief for taxation, if indeed the money does get to senior citizens.
"The racing industry, on the other hand, generates so many jobs, so many careers, that to destroy all that for something that's manufactured on a television camera . . . to me the comparison is odious.
"I would hope," Gregson said, "that we're a little bit better than just a gambling sport."