Did Running Aces violate state law?
Columbus track maintains Mystic Lake agreement nullified payments to Canterbury Park
If there is such a thing as kissing cousins, Running Aces Harness Park and Canterbury Park might well be considered battling brothers. There is little loved being shared by the two these days.
It’s been that way since the Columbus harness park took shape a decade ago and the thoroughbred racing track in Shakopee balked over the existence of a second horse track in the metro area. The two tracks have coexisted since 2008 when Running Aces opened and agreed to a purse agreement and revenue sharing from its card room to protect race purses at Canterbury.
But that goodwill dissolved last June when Canterbury Park and the Minnesota Horsemen’s Benevolent & Protective Association signed a 10-year marketing agreement with the Shakopee Mdewakanton Sioux Community, the operators of Mystic Lake Casino. In all the agreement nets the Shakopee track nearly $83 million.
Now the two tracks have landed in district court and before the Minnesota Racing Commission. The horsemen’s association filed a complaint in January asking the MRC to revoke Running Aces’ Class A license, alleging that Running Aces violated state statutes by failing to perform requirements made in its license application.
The MRC complaint comes as the two tracks battle in Hennepin County District Court in Minneapolis where Running Aces filed suit contending the horsemen’s association voided the purse fund agreement with Canterbury Park by entering the agreement with the Sioux Community.
The lawsuit was filed last September and follows a decision by the Running Aces board in August to terminate the 3 percent revenue sharing payment. Through the end of February, the late payments have reached $347,000.
In a related move last month, Running Aces began negotiations with Canterbury Park for a new simulcast agreement. For the past five years, Running Aces has paid Canterbury $150,000 a year. The fee is in addition to fees Running Aces must pay to tracks where the simulcast originates.
Running Aces has said the fee paid to Canterbury is not connected to supporting purses and wants it terminated. As of Feb. 19, the two parks now simulcast only events involving breeds that race at the respective tracks: standardbred horses at Running Aces and thoroughbreds at Canterbury Park.
While the court matter in Minneapolis awaits a ruling on a request by the horsemen’s association to send the dispute to an arbitrator, the MRC has commenced its deliberations to determine if Running Aces has violated state law and impacted its license standing. The judge also may hear the case or dismiss the lawsuit.
The commission during a near three-hour work session on Thursday, March 7 at Columbus City Hall took testimony from Running Aces regarding the license revocation request and collected comments from the public.
Thomas A. Keller III, attorney for Running Aces, told the MRC that the purse agreements clearly spelled out that the agreement would be null and void in the event racino legislation is approved by the state allowing video gaming and slot machines at race tracks in Minnesota. Under the Shakopee tribal agreement, the horsemen’s association and Canterbury Park agreed to oppose and lobby against any proposed legislation that would establish racino, he said.
Such an agreement constitutes a breach of contract, Keller said. By agreeing to oppose racino over the 10-year period of the tribal agreement, terms of the purse agreement were violated, Keller said.
“For 10 years that agreement has been broken,” Keller said.
Keller also questioned why the MRC was being drawn into the dispute when the matter was in district court. “What’s going on here?” Keller asked.
Up until the tribal agreement, both tracks have pushed for racino legislation, Keller said.
Jesse Overton, MRC chair, was the target of barbs during testimony.
John Derus, a Running Aces board member, asked for a fair hearing from the entire commission, hinting that the board’s leadership had not been fair. Calling the hearing “frivolous,” Derus asked why there was so little commission vetting of the Mystic Lake agreement last summer.
“We didn’t need an undertaker,” Derus said. “We need an undertaking.”
Overton explained that the MRC was not taking sides in the dispute and was responding as required to a complaint filed by the horsemen’s association. It would be the commission’s task, based on evidence and testimony, to render a decision, he said.
“You see it as opposition when you don’t get the answers you want,” Overton said.
James Lane, MRC vice chair, reviewed details of the decision in 2005 to grant the license to Running Aces. That decision followed a 2004 license denial that was reversed only after Running Aces agreed to promises to enter a purse agreement with Canterbury Park.
“They just don’t evaporate,” Lane said of the license stipulations tied to the initial approval of the Running Aces license.
Left unanswered is the question of perpetuity of the purse agreement.
Keller, responding to Lane, said the formal purse agreement with Canterbury and the horsemen’s association came after the license was approved and contained the language tied to racino. “It proves my point,” Keller said.
A number of Columbus residents and track advocates testified to the commission last week, including former Mayor Mel Mettler, the man at the city helm during the Running Aces planning. Mettler said the track has proved to be “viable” after overcoming many hurdles and obstacles.
Several residents pointed to the track’s economic impact with 550 year-round employees and an additional 100 seasonal workers in the summer. Its workforce is second only in numbers to that of the Forest Lake School District, track officials said.
The track had net card room revenue of $22.1 million last year compared to $18.5 million in 2009, the first full year of operation. Total business revenue at Running Aces reached $29.1 million in 2012, compared to total revenues of $24.8 million in 2009.
In 2012, Running Aces reported $19.1 million in in total employee payroll and more than $7 million in total taxes.
Can the two sides resolve the issue and halt the license revocation process?
Columbus resident Jody Krebs, a planning commission member and former school board member, questioned if the license challenge would go away if Running Aces resumed making purse agreement payments while the court matter is pending.
Overton said he could not speak for the Canterbury Park interests but suspected the dispute could be softened. Overton said he has encouraged the two parties to resolve their differences.
Lane questioned the logic of the continued dispute over the purse agreement. With $347,000 outstanding as of the end of February, he said the amount would only continue to grow.
Commissioner David Roe also called for a resolution to the dispute, saying that many of the issues being argued today mirrored the arguments waged in the legislature from 1971-1983 when horse racing was debated and finally approved.
The next meeting of the commission is slated for 4 p.m., Thursday, March 21 at the Leatherdale Equine Center on the St. Paul campus of the University of Minnesota.
The Running Aces license may be an agenda item but it is not clear if the commission will take action at the meeting. Another work session may be called to discuss the question, said Mary Manney, executive deputy director of the racing commission.
If the license ends up being revoked, the MRC ruling would likely be sent to an administrative law judge as part of the standard appeal process, Manney said.