Churchill Downs Inc. and the New York Racing Association, the two largest contributors to the Horseracing Integrity and Safety Authority, are currently in arrears to HISA for a total of $5.8 million, according to documents posted on HISA’s website on Friday.
The amount of the arrears, which reflects non-payment of disputed fees covering Churchill Downs, Ellis Park, and two of three tracks operated by NYRA in 2024, is a significant source of HISA’s budget, which is primarily funded by assessments on racing constituents. Individually, Churchill Downs owes HISA, under HISA’s calculation, $1.9 million, while NYRA owes $3.9 million in 2024 payments from assessed dues at Aqueduct and Saratoga.
In addition, a lawsuit filed on Wednesday night by the racetrack companies disputing their assessments has the potential to put a significant strain on HISA’s budget in the future, especially if the adjudication of the lawsuit drags on. Altogether, the assessments for the four Churchill tracks under HISA’s jurisdiction – Churchill Downs, Ellis Park, Turfway Park, and Presque Isle Downs -- and those operated by NYRA account for approximately 20 percent of HISA’s 2025 budget (when not including credits).
In a response to emailed questions, HISA said that it is currently $3 million under budget for 2024, mitigating somewhat the arrears, but the company said track assessments, like those paid by Churchill and NYRA, are “critical to ensuring HISA is adequately funded.”
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In the lawsuit filed by CDI and NYRA, the two companies alleged that HISA was failing to comply with a statute that requires the authority to use only the number of starts at each racetrack to determine the track’s share of dues. HISA is currently using a weighted formula of starts and purse distribution to calculate the dues, which has led to enormous discrepancies in the per-start amount paid by first-tier tracks and tracks further down the scale.
For example, the per-start amount calculated for Saratoga’s 2024 assessment comes out to $779. At Churchill Downs, the number is $712. Those are the largest per-start numbers for any tracks in the U.S. except for Kentucky Downs, where the track’s outsized purse distribution generates a $1,096 figure.
In states that run a lot of race days but don’t give out a lot of purses, the numbers are far lower. Tracks in New Mexico have per-start numbers hovering around $300. In Pennsylvania, the numbers range from $225 to $371; the figures are similar in Ohio and Louisiana (which is not under HISA’s jurisdiction due to a court-ordered injunction).
HISA adopted the weighted formula in large part to shift the burden of costs from small tracks to large tracks, in the same way that a progressive tax system works. The tracks that make the most pay the most. But this system has come under pressure lately.
In California, a dispute erupted this year over the costs borne by tracks in the state over the share of money the tracks pay each year to fund the California Horse Racing Board. In brief, large tracks argued that the costs of regulating a race are the same whether it happens at Santa Anita or a Northern California fair. A compromise was worked out that narrowed the gap but did not come close to eliminating it.
NYRA has pointed out that the difference between the present formula and a formula that used only starts would amount to a drastic reduction in its assessment. For 2024, NYRA said, its total assessment would drop from $8.33 million to $4.69 million. For 2025, the difference would be even greater: a reduction from $10.42 million to $4.87 million.
HISA’s proposed budget for 2025 is $81.58 million. The biggest expense is the administration of the Anti-Doping Medication and Control Program, which, including drug-testing expenses, takes up at least $58 million of the amount.
To make the budget, HISA is planning to assess racing constituents $80.1 million, though that total is expected to be reduced by $21.6 million because of “credits” that can be earned through work performed by constituents on behalf of HISA, such as operating test barns and paying for their personnel.
In the response to questions, HISA said that it “has been managing its finances responsibly and will continue to do so.” When asked whether the authority is facing a current cash deficit, HISA said that “our vendors have graciously allowed us to extend the terms of our accounts payable.”
If the litigation were to drag out well into next year, however, that cash deficit could become more significant. The rulings made available on HISA’s website on Friday indicate that racing constituents pay their assessments on a monthly basis. By the end of the first quarter of 2025, HISA could be facing an additional $4 million shortfall if CDI and NYRA continue to withhold their payments while seeking the court resolution.
The CDI/NYRA suit is seeking a ruling that HISA cannot go forward with collecting the fees without complying with the statute allegedly mandating a per-start calculation or without seeking its own resolution to the matter in civil court. Not coincidentally, CDI and NYRA filed the suit one day prior to hearings in which HISA was prepared to ask its board to demand the companies make their payments or be “prohibited from conducting any covered horse race until payment is made in full.” That language refers to the ability of a track to send its racing signal out-of-state for wagering purposes, which is HISA’s main enforcement power for non-compliance with its rules.
CDI and NYRA argue in their suit that the hearings that were scheduled for Thursday were an illegal use of HISA’s power, saying that the authority cannot consider non-payment of assessments a violation “subject to the authority’s disciplinary process.” By filing the suit prior to the hearing, they were putting HISA and the courts on notice that they did not consider the hearings or any resolutions arising out of them to be valid.
Because the loss of simulcast revenue would be crippling to nearly any racetrack’s operation, that will strengthen the companies' efforts to seek an injunction preventing HISA from blocking the export of their simulcast signals while the suit is being litigated.
The CDI/NYRA lawsuit and HISA’s Friday hearing notices both indicate that the dispute over the calculation of the fees has been going on for the better part of the year, even if it was conducted quietly and out of the public eye. But the existence of the dispute was telegraphed months earlier, when HISA submitted a new rule to the FTC in September that would eliminate the consideration of purses from the formula.
The new formula would equalize the per-start fee at every racetrack, just as CDI and NYRA are seeking in their lawsuit. But it would not go into effect until Jan. 1, 2026, and HISA said in its prepared responses that it has no intention of back-dating the obligations.
“The 2025 budget has already been approved,” HISA said.
In the meantime, it’s likely the two sides will conduct settlement talks that could attempt to bridge the gap between the amounts owed under the current formula and the formula that could go into effect in 2026. HISA will not be able to fulfill its vast mandate without significant cuts if CDI and NYRA continue to withhold their assessments throughout the year, and CDI and NYRA are also expected to face significant pressure given the companies’ ongoing support for HISA’s work.
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