VLT Revenue Splits Remain Issue in Ohio

Administration may have to seek middle ground to determine satisfactory figure.

Racetracks and horsemen’s groups in Ohio continue to wrestle over how much purses and breed development programs will receive from track-based video lottery terminals, which were legalized earlier this year.

The talks have been ongoing for months with a broad range of percentages offered by various groups, officials said.

Racetrack VLTs were approved as part of a broader deal on revenue from four full-scale casinos that will be built or are being built in Cincinnati, Cleveland, Columbus, and Toledo. The VLTs, which fall under the Ohio Lottery Corp., will be taxed at 33.5%, the same rate as the casinos, which were approved by referendum.

Because the state tax rate is much lower than rates in other states, there is more room to work out a deal on revenue splits for racing.

Horsemen’s groups are united in their belief the industry, mainly in the form of purse money, should get no less than 10% of gross revenue and ideally 12%, according to sources. The seven racetracks, however, aren’t on the same page, with offers running from 4% to 10%.

The revenue splits weren’t included in the legislation, so the administration of Republican Gov. John Kasich told the racing industry to work out a deal. The administration can—but would rather not—mandate a figure.

“We just received proposals from the tracks and horsemen,” Kasich spokesman Rob Nichols said Sept. 2. “We are reviewing data now, and decisions are forthcoming.”

Penn National Gaming Inc., which is building casinos in Columbus and Toledo and also owns two Ohio racetracks, is said to have offered the highest figure—10% of gross revenue—for purses and breed development. The legislated splits in other racetrack gaming states generally run from 10%-15%, though in some states the percentages have been reduced because of legislative changes.

“We’re still in negotiations,” said Dave Basler, executive director of the Ohio Horsemen’s Benevolent and Protective Association.

The Ohio racing industry also will receive roughly 1% of gross revenue from the four full-scale casinos under the constitutional amendment passed in 2009. If the casinos combined generate $2 billion in revenue, for instance, that would be $20 million a year for purses and other programs.

Also on the table is relocation of at least two racetracks to capitalize on underserved markets in Ohio. PNGI has said it wants to move Beulah Park near Columbus to Dayton, and Raceway Park, a harness track in Toledo, to the Youngstown area.

The Ohio State Racing Commission won’t consider relocation applications until mid-October. The state generally supports relocation of a few racetracks because VLT parlors in non-gambling parts of the state would generate more revenue for government programs.

PNGI has said it would spend roughly $200 million to build new racetrack gaming facilities. By law, Ohio tracks must spend at least $150 million on upgrades, though $25 million is reimbursed.

Each track must pay the state a $50 million VLT licensing fee as well.

Sources also said Delaware North, which owns Finger Lakes Gaming & Racetrack in New York and Wheeling Island Casino in West Virginia, may be poised to buy out the owners of Lebanon Raceway, an Ohio harness track that plans to relocate to the Dayton area.

Currently five of the seven tracks in the state—Beulah Park, River Downs, Thistledown, Raceway Park, and Scioto Downs—are owned by casino companies. The other track not owned by a gaming company is Northfield Park, a Cleveland-area harness track.

The Ohio Roundtable, a conservative anti-gambling group, said it will challenge the gaming law that takes effect in mid-October. The group successfully challenged a move by former Democratic Gov. Ted Strickland to install VLTs at tracks under a directive.

The Ohio Supreme Court in that case ruled gaming devices must be approved by a constitutional amendment, though the Kasich administration believes that because the Ohio Lottery was authorized by constitutional amendment, it has the right to expand its offerings to include video gaming.

John Kady contributed to this story