Opinions Vary on Prospects for Racino Legislation

The signs point to progress in Kentucky in terms of a bid for racetrack gaming in 2004, while in Pennsylvania, the horse industry is slowing the prospects for passage of legislation, officials said Nov. 11 during a panel discussion at Racino 2003 at Mountaineer Race Track & Gaming Resort.

During a presentation titled "Development Update: Growth Mode Continues," speakers looked at states in which racino legislation has been considered or could be introduced. Much of the talk was speculative, but there still were a few surprises.

Turfway Park president Bob Elliston, a point man for racetracks in their bid to win legislative approval for electronic gaming devices earlier this year, noted the political situation in Kentucky "changed very dramatically" when Congressman Ernie Fletcher was elected the state's first Republican governor in 32 years even though Democratic voters outnumber Republican voters by a 2.5-to-1 margin. Elliston said he sees encouraging signs for next year.

Elliston said many legislators have pledged not to raise taxes even though the state faces a $500-million budget deficit in the next fiscal year; there is growing public support for racetrack gaming but not for full-blown casinos at other locations; all factions of the racing industry are on the same page; and there is support for a referendum on a constitutional amendment.

Fletcher said he personally opposes expanded gaming but wouldn't stand in the way of the legislature should it approve a vote by the public.

"There does appear to be bipartisan cooperation as it relates to the state's needs," Elliston said. "I'm encouraged 2004 will be the year we get across the finish line in terms of alternative gaming in Kentucky."

Ironically, Elliston stood at a podium fronted by a Mountaineer placard. The West Virginia racetrack has often come up for discussion in Kentucky because it has lured horses away with purses fueled by video lottery terminal revenue.

"We effectively have near-market competition at our doorstep," Elliston said in regard to riverboat casinos in Illinois and Indiana. "But Mountaineer is a different kind of competitor because it takes our horse population. It's very significant for Turfway. For horsemen, the competition here is not quite what they'd face in Kentucky, and there almost making money up here as horsemen."

In Pennsylvania, any effort by racetracks to have exclusive rights to slot machines will fail, said Christopher Craig, chief counsel for Democrats on the Pennsylvania Senate Appropriations Committee. He said a new bill that has been crafted allows non-racetrack sites to have slots in an attempt to maximize revenue.

"There's no better than a 50-50 chance the legislature will pass a bill in 2003," Craig said. "In order to generate the revenue needed, slots must be placed at non-track venues. The bill won't pass otherwise. A new approach is needed. Since July, there has been no progress."

Several bills have been fashioned by legislators but they haven't generated widespread support. Craig said the Appropriations Committee hired a consultant to identify markets in an attempt to maximize revenue for the state, which would like a $1-billion revenue stream. There are six licensed tracks, he said, four of which currently operate.

"The (revenue) goal simply cannot be met by placing slot operations solely at horse racing tracks," Craig said. "It's not economically or politically feasible."

Craig also said there must be tight regulatory control. That issue and problems within the horse industry have stalled the process, he said.

"Part of our frustration is what we perceive is a significant amount of industry infighting," Craig said. "Instead of facilitating the issue ... they've kind of jammed it up. This has been done before. We're not reinventing the wheel. Unfortunately, we're having these debates in Pennsylvania that are fairly repetitious and have jammed up the bill."

In Maryland, where Gov. Robert Ehrlich campaigned in favor of racetrack gaming, House leadership may attempt to tie a sales or income tax hike to slots legislation, said Paul Dorsey of the state lottery. He said revenue splits are still being debated, and he could offer no firm timetable as to when action could occur.

Dorsey did say there could be five to six locations with slots, but only three or four would be tracks. He said if a track operator has two or more licenses, only one would be eligible for gaming machines.

Paul Girvan, managing director of the Innovation Group, said racino revenue could grow by 200% to 300% within five years should several key states approve legislation. In New York, where the first VLT operations are expected to open in the first quarter of 2004, annual revenue could be $1.2 billion to $1.7 billion, he said.

If Pennsylvania, Maryland, Kentucky, Michigan, Ohio, Massachusetts, and Florida are added to the mix, total revenue would be $14 billion to $16 billion, Girvan said. The number of gaming machines that could be available in those states would be 130,000 to 160,000.

Racino 2003 is offered by Global Gaming Business, a casino trade industry publication, and Jefferies & Co., a financial consultant to the gaming industry. The conference was held for the first time last year at Dover Downs, a racino and entertainment complex in Delaware.