New York VLT Bills Approved by Senate
by Tom Precious
Date Posted: 3/17/2005 5:01:20 PM
Last Updated: 3/18/2005 6:36:52 PM

Seeking to prod along negotiations, the New York Senate approved two bills March 17 designed to open long-stalled video lottery terminal casinos at Aqueduct and Yonkers Raceway, believed to be New York's most lucrative racetracks for gaming.

The two bills, one of which would raise racing industry VLT revenue sharing more than the other, are designed to get VLTs operational at the two tracks. Sponsors said the measures would help the state get around a 2004 appeals court decision that struck down as unconstitutional a state law that shares VLT revenues with purses and breeding funds.

"New York is losing hundreds of millions of dollars in revenues that could be going into education because VLTs are not up and running at the two biggest race tracks in the state," said Senate Majority Leader Joseph Bruno, whose district includes Saratoga. "We've been talking about this problem for almost two years since the courts ruled the previous distribution system was unconstitutional. The two bills the Senate passed (March 17) address the distribution issue in slightly different ways, but both would fix the problem and I urge the Assembly to join us in taking action."

Talks have been under way for several weeks to find a fix to the VLT matter. Tracks have long complained the current revenue split is a money-loser for them. Meanwhile, MGM Mirage has refused to go ahead with plans to install and manage VLT operations at Aqueduct unless it can be guaranteed it would hold the contract even if the New York Racing Association loses its franchise rights to operate Aqueduct, as well as Belmont Park and Saratoga, at the end of its current franchise period Dec. 31, 2007. Both bills address MGM's concerns.

Gov. George Pataki recently asked legislative leaders to jump-start the VLT talks to get a resolution before the state budget is adopted. But with action proceeding unusually fast on the budget with the state's new fiscal year set to start April 1, it appears increasingly likely any VLT deal would end up being part of an overall state budget.

Racing currently gets 29% of VLT revenue. One Senate bill would create a sliding fee arrangement designed to benefit smaller, cash-poor tracks that would drive more VLT revenue to tracks with a tougher time footing the overhead costs. Tracks would get 32% for the first $50 million in annual VLT revenue, 29% for the next $100 million a year, and 26% for any amount of money collected over $150 million. Tracks would also be eligible for an additional 8% "marketing allowance" on the first $100 million collected.

The bill leaves it up to the tracks to work out arrangements for distributing VLT revenue to purses and breeding funds, which could be channeled in some backdoor fashion from the additional VLT share they would get under the new bill as compared to the current law.

The other measure increases the track VLT share from 29% to 34%. Money for purses and breeding funds would then come from the state's general fund, instead of the Lottery Division, which administers the VLT program. The courts said the constitution requires any revenue generated by the Lottery Division be earmarked for public education and not purses and breeding funds as the 2001 law permitting VLTs is written.

To ensure purses and breeding programs are funded, the bill bans any of the money earmarked for the Lottery Division's administration of the program from being held until horsemen and breeders get their money.

"The legislation we passed creates a workable reimbursement fee for the vendors who will be running the VLTs while providing a mechanism to successfully garner additional funding for the state," said Sen. William Larkin, chairman of the Senate Racing Committee. "In addition, changing this formula will enable our racetracks to upgrade their facilities and offer a variety of cultural and recreational forms of entertainment so that they can become true tourist destinations. Ultimately, this strategy will help keep lost revenue here in New York."

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