Racetrack VLT Bill Clears Kentucky Panel

Revised legislation to authorize video lottery terminals at Kentucky racetracks unanimously passed out of a House of Representatives committee Feb. 12, but its sponsor is unsure the measure will be voted on by the full House during the current General Assembly session.

“I doubt the bill has enough support to pass this chamber, but that may change,” Democratic House Speaker Greg Stumbo said. “We’re still in session and have a month-and-a-half to go, but I think it’s worthy that the bill goes through process.

Anything can happen as long as the legislature is in session, but I think a bill like this has to be vetted thoroughly, and as committee members find out what the bill does, and how it affects their district, then they’ll make their own choices.”

The bill passed the House Committee on Licensing and Occupations with one abstention. A few legislators said they don’t support expanded gambling, but voted for the bill because of the economic ramifications. The state is simply plugging holes in its budget and will need more revenue.

The bill was amended to greatly increase VLT licensing fees. Turfway Park would pay the highest fee at $125 million, but all the tracks would pay the fee over a five-year period. The original bill called for license fees of $25,000 per track.

The highest licensing fee was given to Turfway because it has the most racing dates of all Kentucky tracks. Keeneland and The Red Mile will jointly pay $100 million; Churchill Downs, $100 million; Kentucky Downs, $75 million; Ellis Park, $50 million; Players Bluegrass Downs, $35 million; and Thunder Ridge Raceway, $25 million.

After five years, it is estimated the racetracks would generate more than double each year the amount they paid in licensing fees.

While the tracks are paying their licensing fees during the first five years of operation, the state would receive 20% of their revenue. After those five years, tracks earning less than $100 million would pay 28% to the state, while those earning more than $100 million would pay 38%.

The revised legislation would remove the state’s property tax on motor vehicles, horse and cattle feed, and farming equipment; and would aid county jails, the tourist industry, and veterans.

Democratic Rep. Larry Clark said VLT permits would allow for the machines to be housed in temporary facilities if the legislation passes so racetracks can get them up and running as soon as possible to start generating revenue.

The previous casino bill, which failed to pass last year, included expanded gaming at the state’s eight racetracks, as well as free-standing facilities.

The bill now goes to the House Committee on Appropriations and Revenue, where its fate isn’t known. Though Stumbo, who sponsored the bill, was doubtful the bill would make it to the full House this session, other horse industry officials stopped short of agreeing with him.

After the hearing, Keeneland president Nick Nicholson, who serves as spokesman on the issue for the racing industry, said it’s too soon to comment on the bill’s chances. He said it’s a positive sign legislators passed the bill and recognize its ramifications for the state and horse industry.

Nicholson also said he’s concerned about the future of Ellis Park and Turfway, two tracks that account for more than half of Kentucky’s year-round racing schedule if the bill fails to pass. Horsemen have told The Blood-Horse that the situation—declining purses and incentives in Kentucky along with strong programs in other states—is at the critical point.

“There were people that voted for this today that have never voted for this before, so I think there’s some momentum for it,” he said.

Nicholson said if the legislation passed, Keeneland would co-manage and operate a VLT parlor with The Red Mile. The facility would most likely be located on or next to one of the racetracks.

“I never thought I’d see a day where this bill received such a broad basis of support,” Nicholson said. “There has always been some controversy, but I think what we’re seeing is the growing reality of the economic problems in Kentucky and the across-the-board acceptance of the intense pressure that Kentucky’s horse industry is under, and a recognition that we have to take action."

Nicholson said he’s glad the bill is going to the Appropriations and Revenue Committee, where it will gain a financial focus to see if all its elements make sense.

“I agree with the fact that this (bill) is a privilege," Nicholson said. "The main reason we’re doing this is to provide state revenue…at the same time, we’re also trying to come up with a plan to save racing, so it’s a balancing act. We’re approaching this from the point of view of trying to make it work.”

“The way this fee structure is now set up in the bill, I believe it brings in about $100 million every year on top of what would also be generated from revenue from the operations themselves,” Stumbo said. “So, if you combine those two, for this period of time in the future…we would have $250 million in new revenue over the next five years, which may or may not meet our needs, but it’s certainly a pretty good cushion if you look at the overall picture.”

When a vote was taken, several committee members explained their votes.

“There’s a whole lot that I believe is bad about this,” Republican Rep. David Floyd said. “I don’t like slots at all, and I don’t like them at our beautiful racetracks, but nobody is being forced to do that, and it’s their decision. I don’t believe the projective revenue is going to be there (to support this bill), but I’m going to vote yes.

"The horse racing industry is so important, and things have changed, and we need to help them in some way. If this is what they want to do, and it doesn’t use any of our tax money, then I can support it. It’s not the best way, but it’s the way it is right now.”

Democratic Rep. Susan Westrom, who has worked in past years to develop a forum to educate other legislators on industry-related issues, voted to pass the bill.

“In the last 10 years, I’ve watched our horse industry go on life support,” she said. "It’s wonderful to know that this conversation will be shared with the General Assembly so they truly know what the situation is in this industry. I heard Indiana is passing a $1-billion stimulus package, and I’m wondering how many millions of that have come from Kentucky.

"I’m deeply disturbed that we’ve been paving roads and building schools in other states while we’ve been ignoring the needs of our own state. After 10 years, I’m also gratified to have a venue to address the (horse feed) tax-equity situation.

“I’m hopeful that this will have a fair discussion in the Appropriations and Revenue Committee, and I hope every legislator will recognize the importance of this $4-billion industry and the impact it has on their community.”