Kentucky Gaming Bill Introduced; Huge Purse Projections
by Tom LaMarra
Date Posted: 2/26/2002 4:24:24 PM
Last Updated: 2/28/2002 5:54:40 AM

Legislation that would authorize electronic gaming devices at eight Kentucky racetracks--and presumably generate $1.7 billion in revenue for the state over six years--was introduced in the House of Representatives Feb. 26. The 177-page document is said to have support in the House, but serious hurdles may loom in the Senate.

During a press conference in Frankfort, the state capital, Rep. Jim Callahan, the bill's sponsor who has Turfway Park in his legislative district, said Kentucky needs money to offset a budget shortfall believed to be about $500 million. He indicated tax hikes haven't been suggested.

"Who says we don't need $1.7 billion over the next six years?" Callahan said. "Who says Kentucky doesn't need this? We've identified a reliable source of new revenue for Kentucky."

The impact of that revenue could be staggering for the state's horse racing industry. The racetracks, well-represented at the press conference, produced purse projections that put Kentucky well above any other jurisdiction in North America, officials said.

With "EGDs," as they are being called in the Bluegrass State, daily average purses would go from $188,000 to $380,000 at Ellis Park; $172,000 to $464,000 at Turfway Park, which races predominantly in bad-weather months; $416,000 to $764,000 at Churchill Downs; and from $655,000 to $1.15 million at Keeneland.

Kentucky Downs, the all-turf track that races only seven days a year, apparently would have the wherewithal to put on quite a turf festival: Daily average purses would go from $257,000 to an obscene $1.92 million.

Much of that hinges on a revenue-sharing plan for the Thoroughbred tracks. The state's three Standardbred tracks would operate under the same legislated formula for revenue, but would not share funds unless they desire it is in the best interests of the harness industry.

"This project has been about 10 years in the making," Turfway president Bob Elliston said. "The most important thing is that all aspects of the industry are represented. It is about the money. One billion dollars of Kentuckian's hard-earned money is going out of the state."

Industry officials have often noted that Indiana's riverboat casinos are a strong lure for Kentucky gamblers. They suggest Kentuckians spend about $600 million in Indiana communities with gaming boats.

The revenue plan in the bill is based on a sliding scale. The state would get from 28% to 41.4% of annual gaming income depending on how much money is pumped into the machines. The 41.4% take is based on annual gaming income of $200 million.

Using a blended rate, horsemen, through purses, would get 12.7%, and the tracks, which must bear the infrastructure and labor costs, would get 52.25% on average. Those percentages may be smaller than in some other states with alternative gaming, but the pie is expected to be larger in Kentucky, officials said.

"The more money you earn, the more you pay (in taxes)," Elliston said.

Churchill president Alex Waldrop said he hopes to have EGDs on line by Jan. 1, 2003. When asked what net profits may be, he couldn't say.

"There has to be a return to the companies," Waldrop said. "But remember, we have taken on the highest tax on gaming facilities in the country."

The bill puts no limit on the number of machines permitted, or their hours of operation. Waldrop said the tracks would make those decisions based on market demand.

When asked if Turfway, located in the greater Cincinnati, Ohio, marketplace, could have thousands of EGDs, Elliston said it could, depending on the need.

Here are some details of the legislation:

--A seven-member Gaming Commission would be formed, and its members appointed by the governor. The commission would be headed by an executive director and ensure that EGD operations are being carried out according to the law.

--EGD licenses will be limited to eight, and the machines could be placed off-site on property considered part of a track. For instance, Waldrop said the company could elect to put machines, at least temporarily, at its Trackside wagering facility in Louisville while Churchill Downs is renovated to accommodate gaming.

--Live racing dates as awarded in 2001 must be maintained unless a racing association receives approval from horsemen's associations to deviate.

--About $500,000 would go to assist problem gamblers.

--A provision is included to allow for Quarter Horse simulcasts at Kentucky tracks. Currently they are not permitted because no live Quarter Horse racing is held in the state. Money would go to a Quarter Horse purse fund, presumably to support a live racing program.

--A 3% excise tax charged to Standardbred tracks would be eliminated effective July 1, 2002, should the bill pass.

--The state's Equine Drug Council would receive fifteen hundredths of 1% of the state's pari-mutuel tax to support research and other projects.

Speculation has centered on whether the bill has a chance to pass without the support of Senate president David Williams, who has been reported as saying he opposes the plan. Meanwhile, an organization called Citizens Against Gambling Expansion continues to make its case in Frankfort.

"You work on the process," said Sen. Dan Seum, who noted party affiliation would have nothing to do with the outcome. "We have another 30 days. Great and wondrous things can happen in the General Assembly."

Sen. David Karem said he has been in favor of video lottery terminals at tracks for several years.

Callahan, the bill's sponsor, said he expected a House caucus to be held this week in an effort to gauge interest and drum up support. Meanwhile, horsemen were scheduled to meet Feb. 27 at Keeneland to discuss the legislation and what it could do for racing. The meeting is scheduled for 11 a.m. in the sale pavilion.

Keeneland president Nick Nicholson said the Lexington track is working with The Red Mile, its harness racing neighbor, to devise a plan on how best to handle gaming should the bill pass. The joint endeavor is authorized in the legislation.

"The first thing we're going to do is work with The Red Mile to present a unified front," Nicholson said. "We're going to go out and look for an expert to tell us what the best site would be."

Nicholson mentioned both tracks as possibilities, even though speculation has been that Keeneland would not put gaming machines on its primary property.

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