Pataki Proposes $250 Million Franchise Fee for New York Tracks
by Tom Precious
Date Posted: 1/18/2005 11:36:59 AM
Last Updated: 1/18/2005 7:30:27 PM

New York Gov. George Pataki.
Photo: Associated Press
The new holder of New York's Thoroughbred franchise would pay the state a one-time fee of $250 million, under a plan proposed Tuesday by Gov. George Pataki.

The governor called for the creation of a Non-Profit Racing Association Oversight Board to make recommendations regarding the franchise now held by the New York Racing Association. NYRA's franchise to run Aqueduct, Belmont and Saratoga tracks expires Dec. 31, 2007. The lengthy bidding process could begin as early as this year.

According to preliminary details of the governor's proposed 2005 state budget, the holder of the new franchise would be required to pay annual fees to the state and a single franchise fee up-front that is expected to total about $250 million.

Todd Alhart, a Pataki spokesman said the $250 million figure is an estimate of what the franchise fee could be worth. "It could be higher,'' he said. The exact amount, he said, would be determined by the oversight board.

NYRA is struggling to hold onto the franchise, but it faces an uphill battle given its many legal and financial problems in recent years. Not far in the background are a number of potential competitors for the lucrative franchise.

The governor would also establish a new State Gaming Commission, with broader powers than now held by the state Racing and Wagering Board. The governor last year tried a similar approach, but was rebuffed by the legislature. The new regulatory board would oversee all aspects of gambling in the state, including pari-mutuel, Indian casino and video lottery terminal gambling.

In addition, the governor is again trying to expand VLT operations, which horse industry officials have said would be a direct new form of competition for their fledgling VLT operations. State law already allows VLT operations at eight tracks; only four have begun to offer VLT wagering.

The governor on Tuesday proposed a new education funding plan that would permit an additional eight VLT parlors located across the state; no more than five could be located in New York City. It is not certain how many devices could be placed in each facility.

The governor's budget would also seek to comply with an appeals court that last summer ruled the portion of the state's VLT law that shares revenues with purses and breeding funds as unconstitutional. But the governor's budget does not, as tracks had been demanding, increase the VLT revenue sharing; tracks say they need a larger share of the VLT revenues in order to make the program work.

The VLT law now has 29% of VLT revenues going to the horse industry. The VLT program is run by the state Lottery Division, and the constitution requires that lottery proceeds be directed only to education. To deal with the court decision, Pataki is proposing increasing the VLT revenue share that goes to the education from the present 61% to 90%; the remaining 10% would go to the lottery agency for administrative costs.

The state lottery division would then enter into contracts with tracks, a move that merely shifts the VLT money going to the racing industry onto the state's general fund – thereby, the governor believes, complying with the court order. But the existing revenue splits for tracks would remain – presently at 20.25% for tracks, 1.25% for breeding funds and 7.5% for purses.

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