Speculation Abounds Over Ohio Racetrack VLTs

Speculation abounds in Ohio, where casino companies are examining racetracks for possible purchase and a deal on revenue from video lottery terminals for purses hasn’t been hammered out.

Gaming entities including Harrah’s Entertainment and Penn National Gaming Inc. have visited Ohio tracks since Democratic Gov. Ted Strickland issued a directive in early July authorizing the Ohio Lottery to install VLTs at the state’s seven racetracks. Legal challenges will be expedited through the Ohio Supreme Court.

Observers said it’s likely no tracks will change hands before the court ruling and a November statewide referendum on full casino gambling in Ohio’s four largest cities: Cincinnati, Cleveland, Columbus, and Toledo, all of which have at least one racetrack.

PNGI owns Raceway Park, a Toledo harness track; and Hollywood Casino, a Lawrenceburg, Ind., facility that draws heavily from southwest Ohio and Kentucky. PNGI also is a primary backer of the November casino referendum.

Harrah’s owns half of Turfway Park, the Kentucky track located near the Lawrenceburg casino and River Downs. Harrah’s officials have visited River Downs recently, and PNGI, which is said to have an option on Beulah Park, also has contacted River Downs.

The situation is typical—casino companies seeking to protect existing interests while capitalizing on new revenue opportunities.

Bankrupt Magna Entertainment Corp. plans to sell Thistledown near Cleveland, and that track’s value increases with VLTs. The identity of bidders for MEC properties probably won’t be known until mid-August.

Strickland’s directive said 50% of gross revenue from 17,500 VLTs—2,500 at each track—will go to the state. Racetracks, considered lottery agents, get the other 50%.

Each track must pay a $65-million license fee in installments, but the Ohio Lottery will purchase all the gaming machines.

In an e-mail sent to The Blood-Horse, Dr. Albert Gabel, professor emeritus at Ohio State University and an amateur harness driver, said the license fee and tax rate in the Ohio VLT proposal are fair.

Gabel’s analysis noted the tracks must each pay $80 million in “improvements”—building VLT casinos—on top of the license fees. Under the plan in the November referendum, each casino would pay a $5o-million license fee and pay a state tax of 33%. The gaming industry fashioned the splits.

Gabel also noted the Ohio racetrack VLT license fee is higher than the $50 million charged in Pennsylvania, but much lower than the $250 million mandated in Indiana.

The directive and enabling legislation make no mention of funds for purses and breed development, which leaves the split up to negotiations between horsemen and tracks. The Ohio Horsemen’s Benevolent and Protective Association believes 10% is a ballpark figure; track officials are looking at 4%, the lowest in the country. Harness horsemen are said to be waiting to see how the Thoroughbred negotiations go.

The less money horsemen get, the more attractive tracks become to potential buyers.

Talks continued the week of Aug. 3, but details weren’t made public. Another meeting is scheduled for late August.

Unlike other states, the horse racing industry wasn’t the impetus for racetrack gaming in Ohio. Strickland, when he announced the plan in mid-June, said balancing the state budget was the priority.

When asked Aug. 4 whether Strickland is involved in urging horsemen and tracks to strike a deal, his press secretary, Amanda Wurst, said: “We are hopeful the parties will come together to reach an agreement that is beneficial to all those involved, as they have in the past.”

The Ohio State Racing Commission, which introduced a racetrack VLT plan in March, could end up involved in setting purse levels should tracks and horsemen fail to strike a deal.

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