Kentucky VLT Measure Has First Hearing

Racetrack VLT legislation in Kentucky underwent its first hearing Jan. 21.

Legislation to authorize video lottery terminals at Kentucky racetracks will be amended in several key areas, one of which is a substantial increase in the licensing fee racetracks would pay for VLT licenses.

The bill, sponsored by Democratic Rep. Greg Stumbo, the new Speaker of the House, had its first hearing Jan.21 before the House Standing Committee on Licensing and Occupations. It was met with no opposition, though legislators indicated changes would be made before the measure moves through the House.

Under the bill, the Kentucky Lottery Corp. would oversee VLTs at the tracks. No constitutional amendment would be required. According to projections, after five years of operation, the machines would generate $1.2 billion in taxable funds.

Stumbo said the impetus for the legislation was two-fold: increasing revenue for the state, and protecting horse racing and breeding in Kentucky.

Keeneland president Nick Nicholson served as spokesman for the horse industry during the hearing, which attracted a standing-room-only crowd that included representatives of large and small breeding operations in the state. Officials from racetracks and horsemen’s groups also attended.

Nicholson said the legislation would allow Kentucky to maintain its position in the breeding and racing industry in the face of growing competition from other states that have used gaming to financially support the horse industry.

“Other states have seen this is a good industry to have,” Nicholson said. “The reality is while growth has been going on in other states, we have been stagnant. Kentucky is on the verge of being overtaken by other states.”

Nicholson said projections indicate by 2010, other states in the Eastern half of the nation will have about $1.2 billion in racing- and breeding-related resources. Meanwhile, Kentucky’s resources, funded through pari-mutuel handle, are expected to decline as handle falls.

“It’s not an exaggeration to say if anyone is not fearful about the survival of Ellis Park, they are not paying attention,” Nicholson said in reference to the Kentucky track that offers roughly two months of racing in the summer.

Keeneland, which offers some of the highest purses in the country, isn’t immune. The association supports purses and other programs with income from horse sales, which in the past six months have been down more than 40%.

Democratic Rep. Larry Clark said language in the VLT legislation must be changed to ensure live racing dates are protected. He also said the proposed VLT licensing fee of $25,000 per track wouldn’t make it through the General Assembly.

“I hope you all know it won’t stay there—you can add about four more zeroes,” Clark said. “It’s a privilege to own racetracks, and it will be another privilege to have VLTs. You wouldn’t sell that license for $25,000. I think that’s an insult.”

Clark said it remains to be seen where the licensing fee ends up, but he indicated it wouldn’t be near the $250 million Indiana racetracks were charged. Stumbo and track officials said in order for tracks to get financing for VLT casinos that in total could cost more than $800 million, the licensing fee can’t be prohibitive.

As for not having a constitutional amendment, Stumbo, a former state attorney general, said he stands by his opinion. He used history to point out though the General Assembly banned lotteries—a decision later reversed via constitutional amendment—it rejected language to ban other forms of gambling.

Stumbo and Clark believe racetrack VLTs, as an extension of the state lottery, only need legislative approval.

“To me, it’s no different than if the lottery chooses to put a new game out, or if Keeneland decides to simulcast a race from a different country,” Stumbo said.

Democratic Rep. Dennis Keene, who chairs the Licensing and Occupations Committee, said there will be no action on the VLT bill until the second part of the General Assembly session begins the first week in February. Keene requested that all amendments be funneled through him so they can be coordinated.

Expected amendments include language for equine tax equity and money to fund the Kentucky Horse Racing Authority. Though there is no provision for Thoroughbred tracks to pool purse funds, there could be discussion about Kentucky Downs, which races only seven days a year but may generate the most revenue for purses given its location on the border of Tennessee, where there is no casino gambling or horse racing.