New York Tracks Worry About Costs of VLT Program

Other tracks in New York have joined the New York Racing Association in condemning aspects of the state's new law that authorizes video lottery terminals. They claim state government is forcing them to pick up too many of the costs of the program.

The tracks say the state Lottery Division, which will operate the VLT program when it begins operating next November, is trying to force too many expenses onto the financially ailing racing community.

Lottery officials recently told industry representatives in a closed-door meeting they expect racetracks to pay for all the construction, security, and operating costs of the VLT program. The lottery, meanwhile, will pick up the expenses of leasing the VLTs, and thereby treat the tracks like any other lottery vendor that sells scratch-off and daily numbers tickets.

"Nothing is ever as grand as you first thought," said Martin Basinait, chairman of Western Regional Off-Track Betting Corp., which owns Batavia Downs in western New York. Western OTB is poised to become the first OTB corporation to operate a racetrack when it reopens the Standardbred track next summer pending final state approval.

The VLT law requires 90% of wagers to be returned to gamblers in the form of winnings. Of the remainder, at least 60% must go to the state budget for education, and 15% to the lottery agency for administrative costs. Tracks then get between 12% to 25%, much of which will be earmarked for purses.

The tracks say each machine will require -- when all the room is added in -- about 25 square feet per machine, and construction costs will run between $100 to $400 per square foot. Add in day-to-day operating costs, as well as sweeping security measures being demanded by the state, and the tracks say they don't foresee significant revenue coming from the program even if they get the maximum 25% share.

"I don't believe even if it's 25% that it's big enough to offset all the expenses that are going to be incurred," NYRA chairman Barry Schwartz said earlier in December. Since he made those comments, officials from other tracks, including Buffalo Raceway, Finger Lakes, and Yonkers Raceway, have voiced similar concerns.

Lottery Division spokeswoman Caroline Hapeman said she would not comment on those concerns while her agency is developing the VLT program. "Our goal is to work with them, obviously," she said.

Track operators say a whole series of questions remain to be answered, despite demands by lottery officials that they must submit business plans by January for how they will operate the VLTs. They claim, for instance, that borrowing money to construct the space for VLTs will be enormous because the program, by law, is considered experimental and will sunset in three years. Though a successful VLT program will likely be extended in the future, tracks say they will have to find creative borrowing schemes to deal with the three-year window.

Meanwhile, off-track betting corporations are trying to line up support to get financial concessions because they were left out of the VLT legislation. At a minimum, they want the state to let them back out of revenue-sharing deals they now must enter into with racetracks, and they want to permission to offer Thoroughbred simulcasting in the evening.

One OTB corporation headquartered in Albany even proposed in mid-December that it, too, be permitted to install VLTs at one of its main betting parlors. Government officials say that will not happen.