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updated: 7/8/2011 5:37 PM

Appellate court says yes, casinos must pay tracks

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A federal appellate court ruled Friday that a law forcing suburban casinos to pay 3 percent of their revenues to Illinois horse tracks can stand, setting up a possible Supreme Court appeal.

The law was created to try to level the playing field between the most lucrative casinos in Illinois and the flagging horse-racing industry.

But in the years since the state law has been in effect, the tracks have gotten no money from the casinos. All the cash is sitting in an escrow account because the issue has been tied up in court since its inception.

"The ruling is consistent with what other judges (in lower courts) have said. So the consistency is good to see," said Arlington Park spokesman Thom Serafin. "But the adversaries are still unwilling to stop pursuing other legal remedies. As we've been saying for a long time, the law is what it is."

In the meantime, Serafin noted, "all those resources are on the sidelines and not being shared with the racetracks," Serafin said. "And that's too bad. The industry suffers while the law is challenged."

That will continue for now, as the court said the money has to remain in escrow for 30 days as the casinos consider asking the U.S. Supreme Court to take the case.

A case brought by the casinos over the same law failed on the state level.

Karen Bailey, director of Penn National Gaming, said the company is still considering whether to appeal the decision higher.

Penn owns the Hollywood casinos in Aurora and Joliet.

In the suit, the casino industry argued the law should be struck down because of former Gov. Rod Blagojevich's alleged attempt to trade campaign contributions for his support of it, one of the 17 charges a federal jury convicted Blagojevich of in court last week.

In the end, though, the panel sided with the tracks.

"Illinois' casino tax is not an isolated example of taxing one industry for the benefit of another," the opinion reads.

In the meantime, when the Rivers Casino opens in Des Plaines later this month, the 3-percent rule is eliminated. Instead, the new casino is supposed to send 10 percent of its revenues to the horse tracks.

But Bailey said the lawsuit is still important to the casinos because they'd like to have the several years worth of money sitting in escrow back.

The decision comes as the horse racing industry is awaiting Gov. Pat Quinn's decision on their top priority -- slot machines. Lawmakers approved 1,200 slot machines at Arlington Park, but Quinn has expressed skepticism and continues to mull the plan. The legislation also has local casinos on edge because those slot machines, as well as new casinos in Lake County, Chicago and the south suburbs, would pose direct competition to their revenues, which are already falling in the recession.