Reaction Mixed to Pataki Plan on VLTs at Tracks

A day after New York Governor George Pataki proposed sweeping changes to the state's racing laws, the head of the New York Racing Association said the plan would end up hurting the industry.

"Clearly, this does nothing for racing for a very long time,'' said NYRA Chairman Barry Schwartz.

The governor, looking to entice racetracks into beginning the long-stalled video lottery terminal program for the state, on Wednesday offered a plan that shifts more money from the VLT revenues to racetracks. But it does so by eliminating any revenue sharing with purses or breeding for the first two years of the program, gradually phasing in a share over the next decade. But the plan also calls for a sharp tax hike on bets made at racetracks.

To further prod the tracks into starting up the VLTs, which state officials say would fill the government with hundreds of millions of dollars in sorely needed revenues, Pataki also proposed letting the tracks operate the VLTs for 126 hours each week during any time period they want, so long as the devices are off for 10 hours on Sunday mornings. The current law permit the machines to be on 12 hours per day. The VLT law would be made permanent, Pataki proposed, eliminating its 2007 sunset provision.

Tracks had insisted that the current split – 60 percent for the state's education budget, 15 percent for the state Lottery Division to administer the program and 25 percent for the tracks, purses and breeding funds – made the VLT program a money-loser for them.

Beyond the VLTs, the governor also wants to let OTBs simulcast out-of-state thoroughbred signals at night and relaxes current restrictions on telephone account wagering through tracks and OTBs. But the plan also calls for $16 million to be raised by imposing an additional .5 percent tax on the amount of handle retained by the tracks; the money would relieve the state from having to pay for the operations of the state Racing and Wagering Board.

The Pataki plan would slowly phase in VLT revenues for purses and breeding programs, but they would get nothing in the first two years.

"It's giving to NYRA and taking away from the horsemen,'' Schwartz said. He said he recently wrote Pataki and urged him to reduce the lottery division's 15 percent share down to 12 percent, and not, as Pataki proposed, take it out of purse and breeding accounts.

Officials with the state's thoroughbred breeders association did not return calls for comment and representatives of horsemens' groups were unavailable for immediate comment.

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. I just don't think that's fair,'' he said.

Schwartz said NYRA doesn't need the full 25 percent split to make the VLTs happen. He said he proposed between 18.5 percent to 20 percent – up from 12.5 percent – as a VLT split for the tracks. Despite his objections, Schwartz said he is encouraged Albany is at least offering ideas to solve the VLT dispute. "All I want to do is make this thing work to be able to fund the building of a first class casino. After that, the revenue should go to the horsemen,'' Schwartz said.

Bennett Liebman, coordinator of the Racing and Wagering Law Program and Albany Law School, said there is nothing in state law keeping NYRA from giving more than the zero percent split. If NYRA makes enough to cover its VLT expenses, NYRA and the other tracks could, Liebman said, legally increase purse accounts out of their VLT share.

Schwartz said NYRA lawyers would research such a possibility.

Liebman, a former state racing and wagering board commissioner, said the governor's racing plan both gives and takes from tracks. While NYRA has opposed expanded simulcasting for OTBs over the years, he said NYRA will be happy to get more options for its telephone account customers. But, the .5 percent tax on handle will, based on NYRA's on-track handle of about $500 million last year, would translate to a tax hike on NYRA of about $2.5 million. The current tax on handle is 1.6 percent, meaning tracks would face a 30 percent hike under the Pataki plan, he said.

It remains to be seen who will end up paying for the higher tax, but if tracks are able to pass it on to bettors that "would clearly be bad for racing,'' Liebman said. While the Pataki plan also calls for loosening restrictions that make it harder for tracks to lower takeouts, the higher tax, Liebman added, could also make it too expensive for NYRA and the others to lower takeouts.

The Pataki plan, while having a number of plusses, does pose some problems, Liebman said. For starters, horsemen and breeders will surely push to get some of the VLT share immediately, which could lead to the usual annual turf battles among the competing forces in the industry. But, in what Liebman called the "most troubling'' aspect, Pataki does not envision any money coming from VLTs over the next year. He does so at a time when state lawyers are defending the VLT program against a pending lawsuit in state court by arguing, in part, that the law should be upheld because the state's defict-ridden budget needs the VLT revenues.

"That argument has been lost if no revenue is coming in until at least the second quarter of 2004,'' Liebman said.

For the Standardbred industry, Liebman said, tracks will be happy to get more of the VLT revenues. "At the same time, it's placing a fairly heavy tax on them for their wagers and the expansion of nighttime (thoroughbred) simulcasting really hurts them,'' he said.