Ohio Panel Unveils Racetrack VLT Plan

Ohio Panel Unveils Racetrack VLT Plan
Photo: Christine A. Wittmer
River Downs

Saying five of the state’s seven racetracks will close without assistance from the legislature, the Ohio State Racing Commission March 19 released a draft plan for 14,000 video lottery terminals that would be located at tracks.

The plan comes as a consortium seeks to place on the November 2009 ballot a plan for casinos in the state’s largest cities. That proposal would give roughly $20 million a year to the horse racing industry; under the commission proposal, 50% of gross proceeds from gaming would go to tracks, horsemen, breeders, and other horse interests.The state would purchase the machines.

“Five of seven racetracks will close in the next several years if no action is taken by the legislature to save the industry,” said OSRC member Tom Zaino, a former Ohio tax commission under a Republican administration who serves as a consultant to Democratic Gov. Ted Strickland. “The racing commission recognizes Ohio is facing economic challenges, but VLTs are not a panacea. (The plan) may save the horse racing industry, but it will not save Ohio.”

The plan, which Zaino said contains reasonable projections—“We have been very careful not to over-promise results”—says VLTs would produce about $1 billion in gross proceeds in 2010; by 2013, the amount would be about $1.3 billion. Zaino said it’s projected that about $1.6 billion will be wagered by Ohio residents at gaming facilities in neighboring states in 2010.

At full operation, 48% of the $1.3 billion would go to the “Gaming Profits Education Fund,” and 2% to fund a state agency—the OSRC, Ohio Lottery, or some other agency—that will oversee VLTs. The racing industry would get 50%, the bulk of it going to racetracks.

The OSRC plan states each track—the licensed agents—would pay a licensing fee of $50 million payable over two years. Each track must spend about $80 million to upgrade its facility to accommodate gaming machines.

The draft proposal contains no percentages for purses or breed development. When asked for details after the March 19 meeting, OSRC members said those percentages would be part of administrative rules and come from the 50% awarded to the racing industry.

Zaino and OSRC chairman Willie Koester wouldn’t speculate on the percentages, though Koester indicated adequate funds would be provided for purses, breed development, and numerous county fairs that host harness racing in Ohio.

“If you tell everyone they’re going to get a Cadillac, someone will complain about the color,” Koester said of the reason the splits aren’t included in the draft proposal.

Officials wouldn’t comment on the proposal’s chances in the state legislature. Strickland, through spokespersons, has said he doesn’t favor an expansion of gambling to spur economic development, though he hasn’t said he would reject such a plan if the legislature approved it.

It’s noteworthy the plan is coming from a state agency made up of Strickland appointees.

The OSRC plan, which will be delivered to the legislature soon, states the horse industry in Ohio is responsible for an economic impact of $2.185 billion a year, 37.5% of which comes from the racing Thoroughbred and Standardbred racing and breeding industries. The commission estimates the racing industry accounts for about 12,300 full-time equivalent jobs.

Ohio racetracks, through pari-mutuel handle, support the OSRC budget, breed development programs, harness racing fairs, and PASSPORT, a senior citizens fund. In 2000, PASSPORT received $5.3 million, but in 2008, the figure was $2.7 million, the draft proposal states.

Handle in Ohio continues to decline at a rate of about 12% per year.

River Downs general manager Jack Hanessian said the OSRC plan is worth pursuing. River Downs came close to not offering a Thoroughbred meet this year, and Hanessian has said the Cincinnati-area track is willing to give it one more year.

“It’s a step in the right direction,” Hanessian said of the OSRC proposal. “They recognize the serious condition of the (racing) industry.”

Zaino noted pari-mutuel horse racing was legalized in Ohio in 1933 to “raise revenue and create jobs during the Depression.” His analysis claims the General Assembly is within its right to authorize racetracks VLTs; only lotteries are prohibited by the state constitution unless they are operated by a state agency.

“The General Assembly seems to have authority to statutorily permit the operation of slot machines and table games in Ohio without amending the Ohio constitution,” an analysis in the OSRC proposal states.

The OSRC draft plan also notes three previous attempts to pass gaming via a constitutional amendment have failed.

Ohio has three Thoroughbred tracks--Beulah Park, River Downs, and Thistledown--and four harness tracks: Lebanon Raceway, Northfield Park, Raceway Park, and Scioto Downs.

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