Travis Boersma on Grants Pass horse racing viability

Dutch Bros founder Travis Boersma has dreamed of making horse racing viable in Grants Pass and now he has a plan. His proposal involves creating The Flying Lark, a luxury dining and drinking facility with betting machines that would help pay for the race winners’ prizes. Oregon’s indigenous tribes say the state should deny approval of the “Historical Horse Racing” gambling terminals The Flying Lark would use. The HHR terminals are similar to slot machines that allow participants to bet on old horse races. We talk to Boersma about whether his plan will pencil out without the HHR terminals, and what he envisions for horse racing in Oregon.

The following transcript was created by a computer and edited by a volunteer.

Dave Miller: This is Think Out Loud on OPB. I’m Dave Miller. Travis Boersma has a plan to make Grants Pass Downs, a racetrack he went to as a kid, the epicenter of horse racing in the state. Boersma is one of the founders of Dutch Bros, which recently went public. He’s also the owner of Grants Pass Downs and the Flying Lark, the attached entertainment complex. But there’s a problem. His plan is contingent on the state’s approval of 225 betting terminals known as “Historical Horse Racing” or HHR terminals. And the approval for those games is being delayed right now while state officials consider complaints brought by some of Oregon’s tribal governments. Those tribes say that the games would illegally cut into their casino revenue. On Tuesday we’ll talk about this with tribal representatives, but today I’m joined by Travis Boersma. Welcome to Think Out Loud.

Travis Boersma: Thanks for having me.

Miller: Before we get to the questions about the gaming terminals, I was wondering if you could give us a sense for your overall vision. What do you want Flying Lark and more broadly, Grants Pass Downs to be?

Boersma: Well, going back many, many years ago and attending the race meet here locally, I’ve got some of my most fond memories of being at the horse races: the sport itself and the community that would come out and attend, the horsemen and women, all of the historic pieces – the nostalgic pieces – that are part of our fairgrounds in Grants Pass here. So, when I learned of Portland Meadows being sold to developers and the commercial race meet going away, that meant horse racing going away for the state, which meant Grants Pass Downs, that meant Tillamook, the Crooked River Roundup over in Prineville, Burns, even Union. So, I was troubled by it, pretty big time, and I started to look into and investigate how, if at all, horse racing could be saved. So that’s kind of how I got my foot in the door.

Miller: It seems like you’ve done that. The New York Times had a glowing review, or article I should say, about your racetrack over the summer. It called Grants Pass Downs “a circuit short on money, but overflowing with camaraderie and compassion.” And they noted that you have been able to increase betting and purses over the last a couple of years. Why isn’t that enough?

Boersma: Well the reality is, at some point it could be enough. But historic racing machines, the reason why they are here, the reason why they were developed, is to help horse racing and the industry. So, if you look at the United States overall, states like Kentucky and Florida and Indiana, different states out there that have historic racing machines, it’s to help support and grow purses for the horsemen and women to, not just compete and have a way of life, but to grow the sport and really do some magnificent things – on the breeding side, on the equestrian side, on the agricultural side – to revitalize some of the smaller tracks or the areas where it’s not just the Kentucky Derby or Gulfstream Park or Santa Anita. So that’s the purpose of historic racing machines. In my due diligence, looking into what was at Portland Meadows and the efforts that were made there, [I learned that] they had historic racing machines on the floor; they had 150 of them from 2013, 14 to 2019. So it was something that was put through legislation in 2013, again kind of fine-tuned in 2014, supported by tribes and the state of Oregon. I thought, well, gosh, what we’ll do is we’ll build a facility that has a restaurant that makes it a really great place, fun place, not just for historic racing machines but a restaurant for families that could be tied to this thing and position it on the Josephine County Fairgrounds that’s in dire need of support and revitalization itself. So, it complemented what I had already done with $8 million of turf fields developed inside of the racetrack so that kids can have a great resource, a park if you will, to go down to and play ball. It’s been a great crusade all the way up until the 11th hour. Now we’re in a holding pattern and [have] been told by the Oregon Racing Commission that they have been asked to stand down, and advisers to the governor have asked them to stand down. The Department of Justice is now being asked for a formal opinion on what we’re doing as if it’s, I guess, different than what took place up in Portland.

Miller: So let’s dig into this issue because obviously this is the heart of it. First of all, for people who have never played or seen a historical horse racing game, can you describe what they are and how they work?

Boersma: Well, today they’re very much like a slot machine. The difference between a slot machine and a historic racing machine is not your experience as a consumer. It’s still like Wheel of Fortune, Pirates of the Caribbean, Pac-Man or some of those popular games. The back end is what’s different. It’s pari-mutuel wagering, and it’s not a random number generator like a traditional slot machine would be. It’s based off of data from races that have happened throughout history. Somebody way smarter than me developed these games and that’s what’s used to really stay in our lane of horse racing. It’s based off of horse races and it’s pari-mutuel wagering.

Miller: The way I understand it is this– and I was helped in my understanding from a report put out by ECONorthwest that was actually asked for, paid for, by Oregon tribes; they asked ECONorthwest to write a report about the history and current operation of these games. [Their report] said that the games have changed a lot over the last 20 years and have become basically less tied to horse races themselves and more like slot machines because the earlier versions weren’t as popular as slot machines. But the way they described it is that, at least one company now, they take horses from multiple races that were run in the past. They sort of chop up the results of that. And then use the final rankings of how horses ended up in each of those different races and sort of slop it all together and that, at the same time, people and different machines are betting on the sort of chopped up results from all these different races. In other words, as you noted, it really is not any more tied to the specific results from horse races in a meaningful way. So, practically speaking, how is this different from a slot machine?

Boersma: Well, again, I’m gonna be repetitive probably here, but it’s pari-mutuel wagering, so there’s no house like you would have at a casino. When you go to a casino and you wager on slot machines, the house has a cut that they take and the winnings are … it’s the players versus the house. With pari-mutuel, it’s the players against the players. With historic racing, there’s a fee that’s taken for sure, but it is pari-mutuel, and there’s a distinction between pari-mutuel and what you would find in a typical casino.

Miller: My understanding is that the way pari-mutuel started in the beginning, it describes, say, if there are, I don’t know, 10 horses in a race, and people are betting on those different horses, then all the money from those bets gets put into one big pool. And then people who chose the first or second or third horses, they get a percentage of the winnings and then a percentage of the overall pool goes to the house. In this sense though…

Boersma: Right.

Miller: So that’s the original idea. And it was applied to these games as a way to bring more revenue into horse racing establishments that didn’t run afoul of various state laws about how you could do slot machines or gambling. But now, if the machines act really differently, you’re not, it seems, betting against each other in the sense that there’s a single race, it’s all based on some computer algorithm that, to be honest, I don’t understand even having read this report. But it does seem at base like technology was used to get around various state laws in a very successful way. As you’ve noted, these existed in Portland until recently. Now there are challenges. But, from your perspective, you do recognize that betting in these games is very different from actual horse race betting, right?

Boersma: Well, what I can tell you is these are exactly the same databases and platforms that were used at Portland Meadows. And, much like our iPhones, with the technology, our features have improved. The graphics have improved, the gaming side of it, with the animation, is improved and the gamesmanship themselves to the consumer. An iPhone 13 is much more attractive than the original iPhone. So, while it serves the same purpose, it may do it much better or be more appealing or attractive to the end user.

Miller: I want to play you and our audience an excerpt from testimony from an Oregon Racing Commission meeting back in October. We’re going to hear Alicia McAuley, the executive director at Cow Creek Gaming and Regulatory Commission. Let’s have a listen.

“The tribes have been asking the state to study gambling and the regulatory framework in Oregon because of the advancements in technology. The state last studied this issue over 25 years ago. The evolution of HHR machines is one example of why such a review is critical. Due to the lack of action this past year on the part of the state, we commissioned, ourselves, two independent studies. The two studies, by C3 Gaming and ECONorthwest, show clearly that HHR machines today are nothing more than a slot machine. The studies also show that the market in Oregon is already saturated, that the Flying Lark will not attract new gamblers. It will take from the lottery retailers and patrons of tribal casinos. Any jobs created will come at the expense of other jobs and ultimately other local businesses, and they won’t be new. The revenues won’t be a net benefit for the state but a net loss and only a benefit for the operator and owner of the Flying Lark. Furthermore, there’s nothing that provides for, or takes into account, the general welfare of the public – things such as responsible gaming or problem gambling funding, research and programs – as the lottery and the tribes currently do, both individually and collectively. These state studies tell us that Oregon needs a time-out. We need to pause and evaluate the role of gambling in our state for the tribes, state government and also our local economies. This isn’t just an issue of tribal sovereignty but one of public policy, too.”

Miller: Travis Boersma, what’s your response to what we just heard?

Boersma: Well, my response is, [there are] a lot of inaccuracies, and 25 years ago I don’t doubt that there was a study done. But in 2013, which is just, how many years ago.. eight, nine?

Miller: Yeah, nine years ago.

Boersma: And 2014 again, this was something that was put through legislation by the state, supported by tribes. And today that part of the pie if you will, if that’s market share, we’re doing nothing different than what was on the floor of Portland Meadows. Today we are 0.8%… 0.8% of the total amount of games, with the lottery and the tribes included, in the state. That’s very–

Miller: This is really, this is an important point that you made and I just want to be clear about it. So you’re saying that the games you would be putting in are no different from the ones that were in Portland just two years ago.

Boersma: Well, I think that the games that we’re putting in operate by the same platform, they’re pari-mutuel wager and they’re historic racing machines. The only difference is, it’s [like comparing] the iPhone 13 to the iPhone 5 or the iPhone 6 or 8.

Miller: You’re saying there are stylistic differences as opposed to meaningful differences?

Boersma: Correct.

Miller: Let’s turn to the announcement you made recently, that you were going to have to lay off 226 people at the Flying Lark. What was the reason for that announcement?

Boersma: Well, I just want to make sure people understand cause and effect here. There’s been a $50 million dollar investment made into the racetrack, horse racing, the build out of this facility that is going to be housing the 225 games. With that, we’ve hired for and put forth our best effort to bring jobs to Josephine County. So we’ve got cause and effect here: If our application is denied or if we can’t – for some unknown reason that has still not been shared with me why we can’t – do what Portland Meadows did, then I’m scratching my head. And layoffs would occur at the end of February. I felt that it was appropriate to share that with all the people that we have on our team. They need to know first – cause and effect. That would be the last thing that I would ever want to do, and it’s heartbreaking. A lot of these people are second-chance people, veterans, people that are very diverse. We have the second largest unemployment rate in Josephine County. And the impact of the Josephine County fairgrounds is immense economically. We had an economic impact study done on how this could be a positive; it could create up to 2000 jobs outside of what we do and up to $10 billion in revenue brought to Josephine County. So, it’s one of those things that you start to look at, with a ripple effect in rural Oregon. And you start to go, well, what is going on here?

Miller: Is your announcement, is another way to look at it to say that, without these HHR terminals, the entire business model for this entertainment complex, and maybe even for the track itself, evaporates? In other words, you can’t have this business right now and you can’t run a major horse racing operation without this related betting industry.

Boersma: That’s correct. As it sits today, that’s where we sit. And unfortunately Portland Meadows had deteriorated to the point where it needed historic racing. Certainly–

Miller: But I mean it seems like they’re not alone. Right? You were saying this earlier; it’s not just about Portland Meadows. This is about horse racing nationwide, maybe except for a couple of special places: Churchill Downs or a couple name brand places. Besides that, is it fair to say that in the States right now you can’t really have horse racing if people aren’t doing slots as well – slots pays for horse racing?

Boersma: I don’t think it’s that way everywhere, and I don’t think it’s as big as what maybe you’re suggesting. I think it serves its purpose in a way that’s meaningful for smaller tracks, and it serves its purpose in a way that’s meaningful for tracks that need support or help in rebuilding or revitalizing. And so, you know they were designed for that purpose. Certainly there are places that are flourishing because they have historic racing machines that really have brought purses from say $10,000 a race to $30 or $40,000 a race. And that is really what all the horsemen and women, the veterinarian folks, all the agricultural side – that’s their livelihoods and what they depend on. You have to have some money to bring in to pay those bills and pay your help. So this is about… it could kill racing here in Oregon for sure, if we don’t have these slot machines if you will or historic racing machines if you will. In the eye of the consumer, they’re very similar if not the same. But the back end and the purpose, that’s what it’s really about: pari-mutuel and making sure that we stay in our lane and we’re doing the right thing legally, dotting i’s crossing t’s. That’s what we’ve done the whole way here. And we’re not asking for anything new to be approved. All we’re asking for is permission to do what Portland Meadows did.

Miller: Just finally and briefly you are now, with the Dutch Bros IPO, a billionaire. That’s what has been reported. You’re going to be okay financially whether or not this facility succeeds. What’s driving you?

Boersma: Well, I’ll tell you something right now. This has never been about money. If it was about a profit center for me, I would go down several different paths. This is about impact for community. I think tribes actually can benefit by this. I think there could be a deal to be had where they could own, invest, be a part of it. This is something that actually could give them more market share. I have been forthcoming with that from the very beginning and willing to have conversations with tribes and how this could be a difference maker. I’m doing this to be a bridge builder for the state, to be a bridge builder for tribes and to really be a force for good. I mean, out of my heart of hearts, it was about saving horse racing, making an impact economically in our community and providing jobs, and making sure that we have something that we can all be proud of as we look at a brighter future in Oregon.

Miller: What is the bridge you’re talking about with Native tribes in Oregon, Grants Pass Downs and in particular?

Boersma: Well, I think that, as tribes go about their way and they have their methodology in their sovereign nation, and I have such respect for tribes. I think about how some of them are at odds with one another and how there’s this battle with the state in the lottery and this turf war for market share. I think there’s a way for this to really be something that everybody should come to the table with and try to figure out a way to work together. I think that’s the bridge building that could be a big difference maker.

Miller: Travis Boersma, thanks for your time today. I appreciate it.

Boersma: Thank you.

Miller: Travis Boersma is the owner of Flying Lark and Grants Pass Downs. He is also one of the founders of Dutch Bros.

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