NY Official: Racetracks Hurt Racinos' Profit

New York official says racetracks reduce profitability of racinos

New York’s lottery director caused a bit of a stir this week when he suggested to state lawmakers that racetracks are a drag on the profitability of their racino operations – leading to less money going to the state’s education budget.

In an appearance before a Senate racing committee, Gordon Medenica told lawmakers there is little crossover gambling activity from the casino to the racing side of the operations and that any real money that is to be made from any gambling is from the racinos and not the tracks, according to lawmakers at the session.

“I reminded the (director) that the racinos would never exist if it wasn’t for the horse racing industry,” said Sen. Michael Nozzolio, a Republican whose upstate district includes Finger Lakes racetrack.

The state lottery agency runs New York’s racino program at eight tracks. It recently reported racino net-wins (total bets less prizes) were up 10.3% in 2008, but profits were off 9%. The drop in profit was due mostly to legislative changes that gave more of the revenue sharing from the racinos to the racetracks.

In an interview, Medenica said that out of the net-win for the program – which totaled $965 million last year – about $100 million went to the tracks, all but one of which are harness facilities. Finger Lakes is the only Thoroughbred track with a casino; Aqueduct is in line for one, but efforts to develop such a facility have been stalled for eight years.

“My perspective is very focused on our mission of aid to education,” Medenica said of the revenues that flow from the racinos to the lottery agency and then on to the state’s education budget. “And on that, I pointed out that of the net-win, about $100 million went into a subsidy to the horse racing industry.

“My point was policymakers make those decisions, but they should be aware of the order of the magnitude of what the money is that goes to support issues other than the one we are there to support, which is education,” he added.

When the racinos were approved in 2001, legislators then talked of a connection that would draw bettors back and forth from the casino facilities to the connected racetracks. That has not happened, track operators say.

“The casino business is completely independent of the horse racing,” the lottery chief said. He added, “We all know the history of the legislation and why casinos are located there, but there is no synergy.”

Asked if the casinos should be located possibly beyond racetrack operations, Medenica said that is a decision for policymakers. He noted that Maryland’s recent backing of casinos does not link them to racetracks.

“I think the casinos are doing well,” he said of the New York facilities. “I think they’re doing a good job independent of whatever the economics of horseracing is.”

But he said New York is facing increasing competition from other states for gambling dollars. “New York needs to stay competitive,” he said.

The lottery agency recently reported net-wins rose at all the New York casinos except Monticello Casino and Raceway, which the lottery director said is facing competition from nearby Pennsylvania. Empire City at Yonkers harness track saw the largest net-win total at $499 million.

Nozzolio said the lottery director is focused on how to raise revenues for the state’s education budget. “His preference would be to have casinos at every corner,” the lawmaker said.

But, he said, the racino program was created, in part, to be of assistance to the horse industry. “It is an industry and it is a good one in this state,” Nozzolio said.