Mixed Bag for New York Racing Proposals

The New York Assembly has rejected proposals by Gov. George Pataki to create an oversight board to monitor the New York Racing Association, form a super-agency to oversee all aspects of gambling, and create eight additional video lottery terminal casinos.

But the Assembly, in its own budget plans, has accepted the governor's proposal to raise the regulatory fee imposed on all horse racing wagers. It would take $2.8 million from racetracks and earmark the money for state regulatory activities.

Meanwhile, talks are advancing to amend the state's VLT law. A provision of the law was struck down last year by a mid-level appeals court that ruled the VLT share for purses and breeding funds violates the state constitution.

A new plan would dedicate money from the general fund as a way to abide by the court ruling. To calm fears of the racing industry that such a plan would make payment to purses more risky by having it come from the general fund, negotiators are looking at creating a "trap." Under such a plan, purse and breeding funds would have to be paid before the state Lottery Division, which administers the VLT program, gets its revenue to fund its operations.

Pataki recently said he wants negotiators to quicken the pace to get a VLT deal to ensure the state's two biggest future VLT operators--Aqueduct and Yonkers Raceway--get up and running in the current fiscal year. Senate Republicans have estimated the state is losing $1 billion a year in VLT revenue because those tracks, for different reasons, haven't begun VLT programs.

Currently, four tracks in the state, including Finger Lakes Gaming & Racetrack, have VLTs.

The state Assembly's budget plan was proposed March 11. Both houses are presenting their own budget ideas as alternatives to Pataki's fiscal roadmap. Though not binding, they are useful to see what positions the sides are staking out in the ongoing budget talks.

The Assembly last year rejected Pataki's plan for a new state gaming agency to oversee everything from the VLT program to racetracks and charitable games. The Assembly has been concerned, among other things, that the governor would control the new agency's board. The Assembly last year also rejected Pataki's plan to add eight additional VLT parlors around the state, with as many as five in New York City.

The Assembly's backing of the higher regulatory fee on pari-mutuel wagers makes it almost certain a final state budget would include the hike. The governor has proposed raising the fee from .39% to .50% on all bets to defray the costs of running the New York State Racing and Wagering Board.

The Assembly said there would be a hike in the takeout rate on NYRA wagers. The takeout on win, place, and show bets would go from 14% to 15.5%, while the rate on exotics would rise from 17.5% to 19% on NYRA races.

The Assembly also rejected Pataki's plan to place administration of Thoroughbred breeding funds into the state's Agriculture and Markets agency.

The Republican-led state Senate, meanwhile, has joined with the Assembly in rejecting Pataki's bid to locate eight more VLT parlors around the state. A Senate budget bill also accepts the governor's hike in regulatory fees paid by the tracks and OTBs to fund the state's costs for overseeing the industry. Unlike the Assembly, the Senate embraces the governor's plan for a new agency to regulate all aspects of gambling in the state, as well as a independent board to monitor NYRA.

The Senate is also poised to pass, according to sources, two different measures to spur VLT programs at racetracks. Besides the measure that would pay purses and breeding funds out of the state's general fund, industry officials are pressing for passage of a competing bill that would increase VLT shares to racetracks to about 40 percent, from which tracks would then be responsible for cutting deals with horsemen for a share of the VLT revenues for purses. Observers believe the sides are close to a VLT deal and that the Senate's passage of the two bills could prod talks along further. One source said a lobbyist on Tuesday during a conference call said he had assurances from the Assembly that its leadership is possibly willing to back the Senate bill that pushes the VLT splits for tracks to 40 percent. Both pending Senate bills would give assurances to MGM Mirage, NYRA's VLT partner, that it would be permitted to remain at Aqueduct as the VLT operator even if NYRA loses its franchise at the end of its current term on December 31, 2007; MGM has been unwilling to invest more than $100 million for the VLT plan unless it can be assured it remains as the Aqueduct operator no matter who holds the franchise beginning in 2008.