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Betting on act 12.


It is 8 a.m. at the Pancake Shop on Central Avenue, and the place is hopping.

At a table in the back of one of Hot Springs' most popular breakfast spots, former Mayor Jon L. Starr studies the Arkansas Gasette racing picks and greets those sitting down at surrounding tables.

In Hot Springs, when someone says "Starr," the managing editor of the Arkansas Democrat is not the first person who comes to mind.

In May 1988, Starr, the owner of the only thoroughbred sales company in Arkansas, stirred up a whirlwind of controversy when he wrote Oaklawn Park owner Charles J. Cella and blasted Cella for having reportedly said Arkansas is not a good place to own a track.

Starr said many Hot Springs residents hoped the track's decline would "force Cella off his high horse and have him realize that Oaklawn and Hot Springs must be a partnership, not a lord-and-servant arrangement."

Starr was back in the news this month with letters to newspaper editors and members of the state Racing Commission asking the commissioners not "to knuckle under to yet another Oaklawn power play."

Normally, it is not considered good for business in Hot Springs to publicly attack Cella and Oaklawn.

"I don't race horses, so I don't need stalls at the track," Starr says as the pancake eaters continue to come and go on the rainy morning. "I don't need a racing pass. I have a couple of dollars if I want to walk through the front gate. You're not going to get many people in this town to say something bad about them. But they can't do anything to me. I can say what others are thinking.

"Listen, I want Oaklawn to prosper. It helps the Arkansas thoroughbred industry and that, in turn, helps my sales. There's also the fact that we're a resort community. Oaklawn is our biggest draw. But I will not ignore things I consider to be wrong."

A couple of miles south on Central Avenue, it is two days until perhaps the biggest race in the history of their track, and Oaklawn officials are beaming.

On the next-to-last Saturday of the 1991 meeting, the finest older thoroughbreds in the country will step onto the dirt oval to run a mile and one-eighth in the $500,000 Oaklawn Handicap.

During the previous decade, the Oaklawn Handicap has attracted some of the premier names in racing - Snow Chief, Turkoman, Blushing John, Gulch and Temperence Hill.

Now, on this Thursday morning, top owners and trainers are gathered for breakfast at Oaklawn. Arkansas owner John Ed Anthony is there. So are trainers D. Wayne Lukas, Carl Nafzger and Jack Van Berg.

Seated among these famous racing figures is a smiling Cella, the millionaire St. Louis businessman who took over Oaklawn in 1968 following the unexpected death of his father, John G. Cella.

Also there - and also smiling - is Eric Jackson, a Hot Springs native who has used his Hendrix College business and economics degree to guide Oaklawn into the 1990s as the track's general manager.

The smiles are in stark contrast to the looks on the faces of Cella, Jackson and others associated with Oaklawn in the spring of 1988. The frowns were brought on not so much by Starr's letter as by the fact that the 1988 season marked the fifth consecutive year of decline for Oaklawn.

This was, mind you, a facility that at the dawn of the decade seemed destined for decades of record-breaking meets.

Park Peaks In |83

The high-water mark was 1983. It was the 22nd straight year for the average daily handle to increase - from $560,000 in 1962, to $725,000 in 1967, to $1.2 million in 1972, to $1.96 million in 1977, to $3 million in 1983.

The spring of 1983 also marked the 10th consecutive year for the average daily attendance to increase - from 15,936 in 1974, to 21,169 in 1979, to 23,272 in 1983.

Suddenly, however, the boom went bust.

The oil and real estate markets collapsed in the states from which Oaklawn drew a majority of its fans - Texas, Oklahoma and Louisiana.

At the same time, legislatures across the region were approving thoroughbred racing and the pari-mutuel wagering that inevitably accompanies the sport. Texas, Oklahoma, Tennessee, Missouri, Indiana, Iowa, Kansas, Minnesota and Wisconsin legalized racing between 1980 and 1987.

Oaklawn, which in a sense had been the only game in town, was quickly becoming one of many.

"It was like going from being the only grocery store in town to being surrounded by 7-11s," Jackson now says.

Cella began hinting that he would close the track if he did not receive legislative relief.

Starr and others said those hints were a ploy to obtain tax breaks from the state. Jackson declares that they were not idle threats.

"Three years ago, Oaklawn was on its way out of business," he says. "There was no way we could continue to operate under those circumstances."

Central among the "circumstances" was the law requiring Oaklawn to pay a pari-mutuel tax averaging 5.5 percent, much higher than in surrounding states.

Friday and Cravens

Cella enlisted the support of two of the top names in Arkansas legal and financial circles, Herschel Friday and William L. Cravens, and began a massive lobbying and public relations effort to have the tax reduced.

Friday, senior partner in the state's largest law firm, has served as Oaklawn's legal counsel since March 1972 and is secretary of the Oaklawn board.

"I consider Herschel Friday the most powerful man in Arkansas," says Starr, who received a visit from the Little Rock attorney several days after having written the 1988 letter to Cella.

Cravens, who has served on the Oaklawn board since 1977 and is the track's director of finance, was once chairman and chief executive officer of Worthen Banking Corp. and president of First Commercial Bank.

Together, Friday and Cravens began contracting legislators and selling the package Cella and his assistants had devised. The package included permission to simulcast races from other tracks across the country, permission to race on Sunday if sanctioned by Hot Springs voters and, most importantly, a tax reduction with the savings to be used for increased purses and capital improvements.

Following several intense days of arm-twisting and compromising at the Capitol, what became known as Act 12 was narrowly approved. On the first day of Oaklawn's 1989 meeting, Gov. Bill Clinton signed the measure into law.

"We were betting the farm on Act 12," Jackson says.

And what would Oaklawn have done had it failed?

"We were working so hard to see that it passed that we really didn't have time to worry about the alternative," Jackson answers. "If we had struck out in 1989, though, I don't see how we would have opened in 1991."

Although the bill reducing Oaklawn's pari-mutuel tax to 2.5 cents on the dollar went into effect early in the 1989 season, track officials had been forced to set the pursue structure based on the 5.5 percent tax.

"People wouldn't ship their horses to Arkansas," Jackson says. "We had a hard time filling our cards. At one point in 1989, a third of our stables were empty."

Oaklawn completed its second full season Saturday under Act 12. In 1990, the first complete season with the law in effect, Oaklawn experienced increases of 11.4 percent in average daily attendance (17,589) and 10.6 percent in mutuel handle ($2,066,749).

Coming into the final days of this year's meeting, Oaklawn was running slightly behind its 1990 figures because of the recession and the Persian Gulf war.

Still, things are far better than they were in 1989 when Oaklawn had an average daily attendance of 15,792 and an average daily handle of $1,868,928.

"From 1984 through 1988, we lost 35 percent of our business," says Jackson, who as a teen-ager played golf on a course on the Oaklawn infield and helped cover the racing season for a local newspaper. "Fortunately, Mr. Cella has deep pockets. Because of that, we never missed a payroll. But we were not crying wolf. The pain was real."

Possible Buyers

The pain apparently was so real that Cella received inquiries from possible buyers.

One of them was New York attorney Charles Brock of the well-known firm Carter, Ledyard & Milburn. Brock, whose firm represents the Thoroughbred Racing Association, was forming a $1-billion leveraged buyout fund and was interested in properties in the Midwest.

Despite the spiral, Cella chose not to part with a track founded in part by his grandfather and great-uncle, Charles and Louis Cella. John Cella made Oaklawn a charter member of the Thoroughbred Racing Association in 1942 and served as TRA president in 1959-60.

Charles Cella is a blue blood in the truest sense of the word. He was born to money and attended college at Washington and Lee University, a small liberal arts school in the Blue Ridge Mountains at Lexington, Va. Founded in 1749, Washington and Lee has educated prominent local businessmen such as Warren Stephens.

Cella is tall, trim and fit. He was a nationally ranked squash player for years. He's also smart. A few Arkansas, however, translate his patrician style as pure arrogance.

In parts of Hot Springs, and among some members of the Arkansas General Assembly, the $1,000 Cella suits and the imported cigars don't play well.

Cella does have his supporters, especially among racing purists who applauded his lengthy stands against exotic wagering and the use of drugs in thoroughbred horses. Even his detractors do not hesitate to admit that Cella has strongly held beliefs and is not afraid to express them.

"He's an articulate son of a bitch, I'll hand him that," says one Hot Springs businessman.

Jackson, who looks more like an accountant than a man running a thoroughbred track, is also a smooth, articulate advocate of the Oaklawn philosophy. He became Oaklawn's director of operations in 1978 and moved up to the general manager's post in 1987 following the death of W.T. Bishop.

A student of racing and business who reads every publication he can get his hands on, Jackson doesn't deny that Oaklawn is not yet out of the woods.

"This is a year-to-year proposition," he says. "No other industry has changed as much in the past 10 years as thoroughbred racing, and perhaps no other industry will change as much in the next 10 years."

The Complacent |70s

Jackson acknowledges that Oaklawn officials became complacent during the golden days of the 1970s and early |80s.

"We were reading too many of our own press releases," he says. "There were warning flags on the horizon, and we didn't see them.

"Racing was suffering terribly in the Northeast. In an attempt to stay afloat, tracks in that part of the country expanded their racing days so much that the product was diluted. We were riding the crest of a wave and didn't notice all that. Then, the wave crashed.

"Yes, we were late discovering what our problems were. Yes, we were late in seeking solutions to those problems."

Jackson says the problems included the state's tax structure, the inability to race on Sunday and the lack of simulcasting when there wasn't live racing at the track. Those concerns were addressed by Act 12.

Starr maintains the problems ran much deeper.

A lot of the problems, he says, had to do with attitude.

"You would think that you would be elated with the kind of support you received from the good people of this area," Starr wrote in his publicized 1988 letter to Cella. "But still you complain. And your latest serving of rhetoric is that all the problems with Oaklawn are linked directly to the granting of tax relief to the track. True, parity should be analyzed, but you are not addressing the major problem that faces Oaklawn. And that face is the only one that shines back at you when you, Mr. Cella, look into a mirror."

"They're still whining," Starr says between bites of pancakes on this Thursday morning almost three years later.

Starr says the decreased attendance in the mid-1980s came in part because of dissatisfaction with inadequate parking, a grandstand that "is smoke-filled with very little temperature control," an uncooperative attitude toward local motel owners in regard to reserved seating for tour groups and "the dirtiest, trashiest track in America."

"The days of opening the gates and watching Oaklawn's turnstiles spin regardless of conditions at your track are over," he wrote Cella in 1988.

Letters Of Support

Starr says he received hundreds of letters of support in the months that followed. He hands his breakfast guest copies of some of those letters.

"People with similar feelings about Mr. Cella have been forced to keep quiet in order to preserve their jobs or, in the case of trainers, obtain stall space," a Hot Springs dentist and thoroughbred owner wrote. "I have attended the races at seven major tracks in this country. Without question, this is the filthiest, most inadequate major facility in existence."

"It was time that someone with a high degree of credibility called attention to the selfishness and arrogance that has been displayed by the management of Oaklawn, especially of Mr. Cella," a Hot Springs insurance agent wrote.

There were also letters critical of Starr.

"Oaklawn is the nicest and best-kept track I have ever attended," a woman in Commerce, Okla. wrote. "Believe me, if I lived in Hot Springs, I sure would not vote for you."

"I anticipated a certain amount of controversy since the letter placed heat in a place where heat had not previously been exerted," says Starr.

Starr believes there have been improvements since the 1988 letter and the attendant statewide publicity.

"Up until I mailed that letter, Oaklawn had done virtually nothing from a civic standpoint for this city," he says. "In the years since, they have given money to the Boys Club and to the city for new Christmas decorations. They're also doing a better job of picking up the trash out there. I feel the letter has had a positive impact."

The former mayor thinks all of the money the track receives from Act 12 tax breaks should go into purse distribution. Under the law, at least 50 percent of the money must be used for purses.

"We hit 50 percent last year, and we'll hit it again this year," says Jackson, who recently dismissed Starr as no longer being "a player" in the track's business. "But there has to be a balance. Capital improvements are an important part of the mix. We wanted to complete some high-profile projects so the public could see what was being done with the money. We now need to work on our infrastructure. There are things such as elevator improvements that people don't notice, but they are problems that have to be addressed."

There will be another full summer of simulcasting at Oaklawn. Last year, Oaklawn simulcast races on the Friday and Saturday of Kentucky Derby weekend from Churchill Downs at Louisville, Ky., in addition to simulcasting races on 33 occasions from Arlington International at Chicago. The experiment ended Oct. 27 with the Breders' Cup races from Belmont Park in New York.

Betting exceeded expectations, averaging $303,035 per day. On Breeders' Cup day, $670,576 was wagered at Oaklawn.

"We take 50 percent of the money we clear and put it back into purses in the spring," Jackson says. "That came to $400,000 for this year. We hope to generate $750,000 to $1 million this summer that will go into purses next spring."

Oaklawn remains in the experimental stage when it comes to designing a program of simulcasts.

"It will take a few years to determine which product is best for our patrons," Jackson says. "But that's what Act 12 is all about - flexibility.

According to Jackson, Oaklawn's live meet and simulcasting meet no longer can be separated from a marketing standpoint.

"We're going to a 12-month schedule," he says.

63-Day Season

As far as 1992's live meet is concerned, Oaklawn will be open for 63 days.

On April 6, the Racing Commission ironed out a compromise between Oaklawn's management, which asked for a 60-day meeting, and Hot Springs tourism officials, who wanted 65 days of racing.

"In 1988 and 1989, we saw what happens when you go for a quantity of racing days and let your purse distribution slide," says Jackson. "We had 68 days scheduled in 1988, and that diluted our purses enough that we lost horses to Florida and Louisiana. In 1989, there were 70 days scheduled, and our averages fell again. The reason people ship horses to a track is because of its daily average purse distribution."

Starr says Oaklawn's refusal to race at least 65 days is yet another manifestation of Cella's ego.

"When Act 12 was passed, Oaklawn had people at the Capitol telling legislators the track would race 68 days," Starr says. "The bottom line is that Oaklawn Park is an ego trip for Charles Cella. The less days the horses run, the more his average daily handle and attendance go up. And the higher his averages are, the more he is able to brag when he goes to industry meetings in New York.

"What Mr. Cella needs to understand is that the people of Hot Springs are not interested in his averages. We're interested in totals. Everybody in the hospitality business was requesting 65 days, and he ignored them. He never lives up to his agreements. That's the reason I began writing letters again this spring."

In his April 1 letter, Starr wrote, "I noticed they conveniently waited until after the legislative session to make their latest pitch. Wonder if some of those legislators influenced by the breeders, horsemen and merchants might just have a good memory?

Jackson says there is "no logical place" on the calendar to put extra racing days.

"Non-racing people say we should race six days a week," Jackson says. "What they don't realize is that there are not enough good horses to do that. Back when we were racing six days a week, we were the only track in the area. We could have run seven days a week back then had it been legal. It takes so many horses to fill a race, so many races to fill a day and so many days to fill a week. Racing five days per week gives us fuller fields and better races.

"With the competition we have, we can't get by with five races for maiden claimers per day. We must have a better product to entice people to drive past other tracks on their way to Hot Springs."

Jackson says he can understand how those in the hospitality industry feel.

"If I had a hotel or restaurant in Little Rock, I would want the Razorbacks to play 52 football games per year at War Memorial Stadium," he says. "I want to assure those people that we're trying to maximize returns for everyone associated with Oaklawn."

Oaklawn's management and Starr agree on two things. First, there have been improvements since 1988. Second, Oaklawn still has a ways to go before returning to the days of racing milk and honey.

"Act 12 has worked, but I still say it would work even better if all the money they derive from Act 12 were put into purses," Starr says. "The money for capital improvements should come from Charles Cella's pocket."

Jackson says everything promised the legislators has come true.

"Our integrity was on the line," he says. "I think people will soon see that because of the flexibility Act 12 gave us, we're producing another success story over here. Arkansans like success stories. They like to read about Tyson. They like to read about WalMart.

"We have to keep working hard, though. We're a small track in a small resort community in the middle of Arkansas. To succeed, we must be on the cutting edge of the racing industry."

 Average Daily Average Daily
1990 $2,066,749 17,589
1989 1,868,928 15,792
1988 2,207,171 17,831
1987 2,546,200 20,774
1986 2,740,467 22,410
1985 2,663,283 22,054
1984 2,899,586 22,897
1983 3,103,231 23,272
1982 2,842,784 23,154
1981 2,806,592 23,108

PHOTO : THE BLUE BLOOD: Charles J. Cella has supporters, especially among racing pursuits who applauded his lengthy stands against exotic wagering and the use of drugs in thoroughbred horses. Even detractors admit that Cella has strongly held beliefs and is not afraid to express them. Some Arkansas, however, translate his patrician style as arrogance.

PHOTO : THE OTHER STARR: In Hot Springs, when someone says "Starr," the managing editor of the Arkansas Democrats is not the first person who comes to mind. Former Major Jon L. Starr received statewide publicity in May 1988 when he wrote Oaklawn Park owner Charles J. Cella and blasted Cella for running "the dirtiest, trashiest track in America." Starr was back in the news earlier this month he wrote member of the state Racing Commission and urged them not "to knuckle under to yet another Oaklawn power play."

PHOTO : THE GENERAL MANAGER: Hot Springs native Eric Jackson became general manager of Oaklawn Park in 1987. Jackson is attempting to pull Oaklawn out of the downturn it experienced in the late 1980s.
COPYRIGHT 1991 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
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Title Annotation:Oaklawn Park's efforts to reverse downward spiral of the late 1980's
Author:Nelson, Rex
Publication:Arkansas Business
Article Type:Cover Story
Date:Apr 22, 1991
Previous Article:Legal warfare.
Next Article:Murphy's romance.

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