07/11/2011 1:46PM

Illinois court favors tracks in fee dispute

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CHICAGO – A federal appeals court ruling Friday has brought the Illinois racing industry closer to receiving millions of dollars in impact-fee funds collected from several casinos since 2006.

The 7th circuit court of appeals voted 5-3 against the casinos, which have sought to block the disbursement of money to racetracks and purse accounts. The casinos filed litigation in 2010 contending two impact-fee laws (from 2006 and 2008) diverting 3 percent of adjusted gross revenue from the state’s four highest-grossing casinos should be struck down because of an alleged quid pro quo between former Gov. Rod Blagojevich and harness track owner John Johnston. A federal judge ruled against the casinos, which appealed and won a 2-1 victory from a three-judge appeals court panel. The racetracks then requested a rehearing from the full eight-member court, which issued its decision Friday.

The casinos have 30 days to appeal to the U.S. Supreme Court, and further legal action is anticipated. Through various legal maneuvering – all eventually ending in defeat – the casinos have managed to delay the release of the fees for five years.

About $142 million in impact fees has been collected and is waiting in escrow. For a time, the money was held in the Illinois Horse Racing Fund, during which interest was garnished by the state. Interest earned in escrow accounts will be added to the fee payments. Payments to purses and track owners would begin as soon as legal holds on the money expired.

The impact-fee legislation could end as early as July 19, when Illinois’ 10th riverboat casino is expected to commence operations. An earlier law required 15 percent of annual revenue from the 10th casino – expected to be about $41.25 million – be paid to the racing industry, but that money must first be appropriated by the state and then shifted to racing. The state’s working fiscal-year budget contains no such appropriation.

A group of Illinois owners has contended that that the impact fees should be paid retroactively. The Illinois Racing Board, which administers the money, intends to pay the money only going forward. Also, both Hawthorne and Arlington have sued the racing board over the track-to-track breakdown of impact fees. The suits involve whether licensed bet-taking organizations without a racing venue should be eligible for money. Hawthorne has taken its complaint into the legal system and is seeking a stay of the entire $142 million while it tries to change the fee splits.

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