Kentucky Plan: Public Vote for Racetrack Casinos

The complete version of this story appears in The Blood-Horse of Jan. 3

Though the prospects for expanding gambling in Kentucky remain clouded, the racing and breeding industry has settled on a plan for a constitutional amendment to authorize full-scale casino gambling at the state's eight racetracks.

The Kentucky General Assembly session runs from Jan. 6-March 13. As of Dec. 30, it wasn't known when the industry would officially unveil its complete proposal, though basic revenue splits have been agreed upon.

As the 2004 session approaches, money remains in short supply in state coffers. Kentucky has a new governor in Republican Ernie Fletcher. The state's signature industry is in survival mode, not thrive mode. Other racing and breeding jurisdictions continue to gain ground on the Bluegrass state, albeit slowly.

On one hand, the industry appears to be much more comfortable with its position, and in 2003, a committee of the Democrat-controlled House moved forward a bill to authorize electronic gaming devices at racetracks.

On the other hand, the leaders of the House and Senate already have said expanded gambling has almost no shot during the upcoming legislative session. Fletcher doesn't support expanded gambling, though he has said he wouldn't stand in the way should it be put before the public for vote in the form of a constitutional amendment.

"A constitutional amendment is an absolute," said Turfway president Bob Elliston, the point man for the tracks during the 2003 session. "We're going for full casino gaming, because if we're going to amend the constitution, let's amend it to give us the most competitive product mix we can have."

Elliston said the industry isn't opposed to a bill pre-filed by Rep. Tom Burch that would authorize electronic gaming devices at the tracks. The measure is similar to one that failed to pass in early 2003, but the horse industry clearly prefers to have the issue decided via constitutional amendment.

"I personally dislike casinos and think slot machines are an idiot's game," said Brereton Jones, a former Kentucky governor who owns Airdrie Stud in Central Kentucky. "If you sit there long enough, they're programmed to take all of your money. But people continue to play them, and I can't change that. The public deserves to have a properly thought out constitutional amendment to determine its fate. This should be left up to the citizens, not a political leader and not the horse industry."

The constitutional amendment proposed by the horse industry will contain only the basics: revenue splits and how the state's share of the money would be spent. Should it pass the legislature and then be approved by the public in November, enabling legislation with all the details would be written. At maturity -- three years after the first racino opens -- the measure would generate $500 million in revenue each year for the state alone, according to financial projections.

The state would get 40% of gross casino revenue; the tracks, which would bear the infrastructure costs, 47%; and purses and breed development 13%. Of the latter, 12.3% would go directly to purses, 0.65% to breeders' awards, and 0.05 to research, administration, and backstretch improvements. The combined gross revenue for eight racinos eventually would hit $1.3 billion a year, according to projections.

The $10 million to $15 million in breeders' awards would allow Kentucky to compete with other states that offer such incentives, said David Switzer, executive director of the Kentucky Thoroughbred Association. As for purses, up to 40% of the Thoroughbred share could go toward the Kentucky Thoroughbred Development Fund, and up to 20% to a new claiming fund for state-breds. Exact percentages would be hammered out later should the gaming amendment pass.

Should racinos become a reality, the tracks--five Thoroughbred and three Standardbred--would make a combined $1-billion capital investment and eventually provide 15,000 jobs, according to projections.

Jones said the most important number is the amount of revenue that would go to the state for various programs that could benefit Kentucky residents. To that end, the coalition-building process has begun.

Jones said the issue must be about how casinos can help all of Kentucky, not just horse racing and breeding. Others have said the industry must gain clout in the state capital.

"We as an industry have done a very ineffectual job of explaining what we do to contribute to the state," said John Sikura, owner of Hill 'n' Dale Farm. "We're a community seen as the leaders in the world in the Thoroughbred industry, but we have very little influence in Frankfort and get very little legislative help. We're really frozen out of the process."

David Switzer, executive director of the Kentucky Thoroughbred Association, said he sees signs of progress in terms of advocacy. He likened it to mare reproductive loss syndrome, which struck Central Kentucky in the spring of 2001. Because it was a crisis, there was no problem raising awareness or money for research.

"We're finally starting to hear from some folks," Switzer said. "They're saying, 'We want to be involved in this gaming issue.' I think it's a case where they're starting to see the competitive disadvantage that is slowly growing."

The New York Thoroughbred breeding program already has lured mares to the state, and the number figures to rise with Aqueduct and Finger Lakes poised to install VLTs. In Louisiana, all four tracks are expected to have slot machines in operation in 2004. The effort to get racetrack slots in Pennsylvania stalled at the end of 2003, but Gov. Ed Rendell said he expects it to be an issue in January. And Indiana may tackle the issue yet again in 2004.

"I think there is a little question in my mind whether we are the Thoroughbred capital of the world," Jones said. "We can't afford to be overly confident of that position if we're not willing to do the things necessary to maintain that position. (The title) hasn't been bequeathed upon us for eternity. And if you don't believe that, just ask the Standardbred industry."

Should the constitutional amendment make it to the November ballot, the lead-up campaign is expected to cost millions of dollars for advocates and opponents. One official on the racetrack side indicated it could cost $5 million, with casino companies with interests in neighboring Illinois and Indiana to expected to spend at least a similar amount.