By Matt Hagerty
The New York Senate late on Thursday passed a bill that gives casino owners a larger share of the revenues from slot machines at the expense of horsemen and the state’s education fund.
The bill, which was supported by the state’s racetracks and their casino vendors, cuts the horsemen’s share of slot-machine proceeds from an effective rate of 9.25 percent to 8.5 percent. It increases the casino owners’ share of slot-machine revenues by as much as 10 percentage points in some locations, with an additional increase of 2 percentage points for use as marketing expenses and another 4 percentage point carve-out for capital improvements.
The bill was sent to the Assembly after passage, but the Assembly has not been called back into session. The bill will likely play a critical role in the ongoing negotiations over the franchise currently held by the New York Racing Association, by making a planned casino at Aqueduct more attractive to potential casino operators.
Revenues from slot machines at New York’s racetrack-casinos have fallen well short of pre-opening estimates. The owners of one racetrack, Vernon Downs, have persistently threatened to close the racetrack and casino this year unless legislation was passed that increased the track’s share of the casino revenues.
The New York legislature authorized slot machines at racetracks in the state in 2001, ostensibly to raise money for education. The machines were legalized at all of the state’s tracks with the exceptions of Belmont Park and Saratoga Race Course.
The legislation passed Thursday night includes several carve-outs designed to specifically benefit one track or casino. For example, the bill increases from 32 percent to 42 percent the share of casino revenues for any track located within 15 miles of an existing Native American casino. The only racetrack that fits that definition is Vernon Downs, which reopened six miles away from the Oneida Tribe’s Turning Stone Casino several years after the machines were legalized.
Casino owners had previously been granted a higher share of the revenues through legislation that created a "marketing allowance" of 8 percentage points on the first $100 million dollars of revenue and 5 percent on revenue above that figure. That allowance was increased to 10 percent and 8 percent in the bill passed Thursday. The language in the bill says that the marketing money can be used for horse racing operations "as long as any such costs associated with pari-mutuel horse racing operations simultaneously encourages increased attendance at a vendor’s lottery gaming facilities."
The Standardbred Owners Association of New York had lobbied against the act, contending that horsemen’s purses deserved to be protected. Most harness purses have doubled in the state since slot machines began operating at racetracks, but harness-track owners have said that the parimutuel operations continue to lose millions of dollars because of meager handle figures on harness races.
The bill is expected to influence the negotiations over the NYRA franchise, which expires at the end of this year, because of contentions by many legislators that the casino at Aqueduct would fail to attract major casino operators. An agreement at the center of current negotiations would extend NYRA’s franchise for the next 30 years in exchange for the state taking title to NYRA’s three tracks, and under that deal, the state would build the casino and award a contract to an operating company that could take advantage of the new revenue splits.