A measure to increase the share of video lottery terminal revenue for New York racetracks, as well as jump-start the long-stalled VLT casinos at Aqueduct and Yonkers Raceway, has been given final approval by Gov. George Pataki.
Despite concerns about the bill's constitutionality, the governor, as some anticipated, didn't veto the VLT provision lawmakers included as part of a new state budget March 31. Lawmakers inserted the VLT measure in a larger tax bill, making it all but impossible for the governor to individually strike out the VLT provision.
The legislative plan provides more money to tracks than Pataki wanted. The governor also wanted money for purses and breeding funds to come out of the state's general fund; the legislative plan now enacted leaves those revenue-sharing deals to be worked out between tracks and horsemen and breeding groups.
Track officials said the measure provides more than enough money and legal protections to ensure VLTs are installed at Aqueduct and Yonkers within the next year. The tracks have refused to begin VLT casinos until existing state law was changed.
Not all industry executives cheered.
"Everybody is happy that it's finally enacted, but some of the constituencies are concerned about the lack of contractual arrangements among the horse breeders and NYRA," said Barry Ostrager, president of the New York Thoroughbred Breeders.
Ostrager said some industry groups are worried the new law, unlike the previous VLT provision, no longer mandates a set percentage be set aside for breeding funds and purses, leaving breeders, for instance, "at the mercy of the operators."
While the new law leaves little negotiating power for horse owners and breeders on the VLT revenue issue, Ostrager said the groups have influence, especially given the timing of NYRA's franchise renewal fight.
"At the end of the day, if people of good will don't act appropriately, there is any number of possible outcomes," Ostrager said. "What goes around comes around."
If NYRA doesn't negotiate VLT revenue sharing fairly, he said, NYRA will likely face opposition from owners and breeders on the franchise issue. "But we've always had cordial and constructive relations with them and we expect to continue to," he said.
NYRA president Charles Hayward, as well as representatives from the horsemen's group at NYRA tracks, weren't immediately available for comment.
The new law is intended as a "fix" to deal with an appeals court decision last year that struck down as unconstitutional a 2001 law that permitted VLT proceeds to be used for purses and breeding funds. The court said any gambling revenue from VLTs must go to education, with the exception of money for tracks that serve as vendors for the state Lottery Division, which runs the VLT program.
Tracks have been supportive of the legislative plan because it gives them more money. But horsemen's groups have raised concerns about being at the mercy of future deals with tracks.
Pataki said the new VLT provision "is not what I want.'' But he insisted it does work from a legal standpoint to meet the concerns raised by an appeals court last year over the VLT revenue sharing program for purses and breeding funds.
Pataki said he would have "preferred more (VLT) funding stay with the state and less go outside.'' His plan, rejected by lawmakers, would have driven less money to tracks and more to the state's education funding.
Under current law, 29% of VLT revenue, after payouts to bettors and the state, goes to tracks. A portion of that money, on a sliding scale, goes to purses and breeding funds.
Under the new deal, tracks would get 32% of the first $50 million in annual VLT revenue, 29% on the next $100 million, and 26% on anything above that amount. In addition, lawmakers added a new "marketing and promotional" payment that would provide an additional 8% on the first $100 million in VLT revenue, and 5% on everything over that figure.
For Aqueduct and Yonkers, the fund for "marketing, promotion, and associated costs" of VLT operations would be capped at 4% of all VLT revenue. The additional 4%, sources said, could be worth at least $10 million for each of the tracks.
Money for purses and breeding funds would then come out of the track's VLT proceeds, subject to separate deals between tracks, horsemen, and breeders. Legislators said the bill would be worth about $1 billion more in revenue for the state.
The law also ensures that MGM Mirage, the New York Racing Association's VLT partner at Aqueduct, would remain as the casino operator even if NYRA loses its franchise at the end of 2007. MGM was concerned its investment would be lost if NYRA is replaced with another franchise holder.
The new bill also extends the VLT law, now set to expire at the beginning of 2014, until the end of 2017.