NY Legislature Ends Without Racing, VLT Bills

A measure to encourage the operation of video lottery terminals at several big racetracks in New York, including the New York Racing Association's Aqueduct track, collapsed Aug. 12 in Albany amid industry infighting, political intrigue and head-butting among powerful lobbyists.

The state Legislature ended its 2004 session Aug. 12 having failed to enact any final deals on a number of major racing bills. Those included the NYRA VLT measure, a plan to overhaul the regulation of the racing industry and a solution to a recent court decision that declared illegal the distribution of VLT revenues to purses and breeding funds.

NYRA was looking to Albany for a solution to ensure that its VLT partner, MGM Mirage, will be able to recoup its investment for building and operating 4,500 machines at Aqueduct. MGM has wanted assurances that it will still be the VLT operator at the track beyond 2007, the date that NYRA's franchise in New York could expire unless it is renewed. MGM has feared any deal it cuts with NYRA could end with a new operator unless the state ensures it will remain as the VLT manager beyond 2007.

Other tracks, led by Yonkers Raceway, were pushing to get the Legislature and Gov. George Pataki to craft a response to a recent state appeals court decision that said the state constitution bars revenues from lottery games, including VLT gambling, going to purses and breeding funds.

Yonkers' VLT investor, Merrill Lynch, sent a letter to officials this week saying it could not back the VLT expansion at the track unless a law was enacted to deal with the court decision. NYRA jumped on the Merril Lynch letter, sources said, telling officials it, too, could not proceed with the VLT construction project because of uncertainties arising out of the legal action. The case, challenging the state's VLT law, is now headed to the state's highest court, where a decision isn't expected for a year.

One solution offered by Pataki was to permit 21% of the VLT revenues to go to tracks, an increase from the current 20.25% split. Purses and breeding funds would then get money out of a new state account. But horsemen worried that the money from that pot would not be guaranteed each year. Also, tracks said the 21% level is too low, and were instead pushing to keep as much as 29% of the VLT revenues. The 2001 law struck down by the court gives 29% of VLT revenues to the racing industry, with 20.25% to tracks and the rest to purses and breeding accounts.

NYRA officials opposed the governor's 20.25% solution, saying they are able to cut side deals with the horsemen that would permit the track to keep more than that amount now.

The wrangling pushed to the back burner NYRA's request for a special bill to convince MGM to invest in Aqueduct's VLT casino.

The inaction means that VLTs will not be heading to Aqueduct any time soon, costing the state $1 million a day in revenue sharing and millions more for the cash-starved NYRA.

Also killed was Pataki's plan to change how racing is regulated. That plan would have created an umbrella commission to watch over all racing and wagering activities in the state. Pataki wanted a panel formed to oversee NYRA's operations. Officials say the panel would help devise a strategy to determine the future operation of Aqueduct, Belmont and Saratoga, such as whether NYRA's franchise should be continued after 2007 or if a whole new structure – such as a for-profit venture, like Magna Entertainment – should be allowed to run the tracks.

"Without these tracks getting VLTs we're going to be in serious financial trouble,'' said Senator William Larkin, chairman of the Senate racing committee.

The battling this week involved lobbyists and executives from every segment of the industry, including OTBs, NYRA, Magna, horsemen's groups and the state's other thoroughbred and harness tracks.