New York Racing Industry Upset With VLT Plan

Gov. George Pataki has rocked the New York racing industry with a plan to dramatically alter the revenue-sharing arrangement for the state's long-stalled video lottery program and also impose a higher tax on pari-mutuel handle.

The Pataki plan, contained in his 2003 budget proposal, would give the tracks what they have been asking for: more of a share of the VLT revenue. But the plan takes money otherwise intended for purses and breed funds. In the first two years of the program, purses and breed funds would get no money.

"This would destroy most of our racing," said Richard Bomze, president of the New York Thoroughbred Horsemen's Association.

The only positive to the plan, he said, is that "it's so preposterous that some good will come out of it. If it were just a little preposterous, nothing would come. But this is so bizarre that everyone is in an uproar."

The pro-track language of the VLT measure also would let facilities operate the machines 126 hours a week compared to 12 hours a day, or 84 hours per week, under current law, with a brief blackout period Sunday mornings. Additionally, the VLT law would be made permanent and not, as current law demands, expire in 2007.

Beyond the VLT plan, Pataki also wants to impose a 0.5% additional tax on handle to raise $16 million. That money would take the state Racing and Wagering Board out of the state's general fund and make the industry foot the bill for its annual operations.

For off-track betting facilities, their quest to simulcast Thoroughbred racing at any time--including evenings over the objections of Standardbred tracks--would be granted. Additionally, tracks would be permitted to set their own takeout rates, within a range not yet disclosed, though the higher tax may make that impractical. Finally, regulatory burdens would be eased and minimums on telephone wagering accounts would be ended.

The legislation would clearly give Thoroughbred tracks a financial windfall, but at the expense of horsemen and breeders.

"Clearly, this does nothing for racing for a very long time," NYRA chairman Barry Schwartz said. "Our main purpose is to run a racetrack, not a casino."

The plan is aimed at prodding tracks to begin the VLT program, which was approved more than a year ago. After winnings to bettors are paid, the state would get 75% of the VLT revenues and the racing industry 25%. Under the new plan, tracks would keep the full 25% during the first two years even though they have said they only need 18% to 20% to make the venture profitable.

The share to purses and breeding funds would be zero in the first two years. The breeders' share, which is lower than the purse share, is not affected as much on a percentage basis. It would take 10 years before purses would get 20% of the industry's 25% share; current law would give them 45% after the third year.

"It's giving to NYRA and taking away from the horsemen," Schwartz said.

Schwartz said he recently wrote Pataki and urged him to reduce the lottery division's 15% share to 12%, and not, as Pataki proposed, take it out of purse and breeding accounts. Schwartz insisted horsemen are prepared to give up something to get the VLTs running.

"I think they're willing to take a hit, but zero is too big a hit," he said. "I just don't think that's fair."

Racing observers such as Bennett Liebman, program coordinator at the racing law program at Albany Law School, said the current law would not prohibit NYRA and the other tracks from giving more to purses from its VLT revenue pot.

But horsemen aren't comfortable with that. "I like some guys at NYRA, but I don't want to trust them to hand us out money," Bomze said. "I want it written in law."

Bomze said he was shocked Pataki, who he believes doesn't know the details of the plan, would offer such a proposal. He said the state clearly wasn't going to take from its VLT share.

"So the governor took the easy way out and took it from the horsemen," Bomze said. "It really surprised me because we're pretty close to him."

Officials with the state's breeders' association couldn't be reached for comment.

One industry source said the plan would not work because it makes track owners rich at the expenses of horsemen and breeders. Sen. William Larkin, head of the Senate racing committee, is working on a bill that would lower the amount of winnings for bettors in order to provide more for the state and industry to share.

Liebman said if Aqueduct is open for VLT wagering 364 days a year and has 3,000 machines, revenue would be $327 million. In year 10, he said, horsemen would get $16.3 million more in purses; under current law, they would get $36.85 million.

"Nobody is sneezing at a $16.3 million purse increase, but in practical terms, this amounts to a 15% purse increase in 2014, and not the bonanza that horsemen had in mind when they sought passage of the VLT legislation," Liebman said.