Account Wagering, Tax Reduction Bill Introduced in Arkansas

From Oaklawn Park
"Recognizing Oaklawn's significant contributions to tourism and retirement in Arkansas and an increased challenge to compete with race tracks in surrounding states," state senator Terry Smith (D-Hot Springs) filed a two-pronged pari-mutuel bill Thursday in an effort to protect Oaklawn's economic contributions to Arkansas.

If passed, Senate Bill 602 would amend the state privilege tax rate on pari-mutuel wagering on horse racing, while also authorizing Oaklawn Park in Hot Springs and Southland Greyhound Park in West Memphis to conduct account wagering.

Oaklawn presently pays a special privilege tax of 2.5 percent of every dollar wagered --- one cent higher than the national average and two-and-one-half times higher than the state of Texas. The special tax would be lowered to one percent under the proposed new guidelines, while the additional funds created would be placed in the state's purse and construction fund. Expenditure of these funds must be pre-approved by the Arkansas State Racing Commission and is audited by the Department of Finance and Administration.

"Oaklawn Park, which has been a major economic contributor to Hot Springs, Garland County and the state of Arkansas for several decades, is facing more and more competition as each year progresses," Smith said. "It is time, once again, to level the playing field right here in Arkansas."

Oaklawn last received a reduction in the special taxes it pays in 1989, when the tax rate went from six percent to the present 2.5 percent.

"Since then, Oaklawn has been hit hard by competition from casinos and other race tracks in surrounding states," Smith continued. "The way things stand now, Oaklawn is paying a special tax rate that is 50 percent higher than the national average and two and a half times higher than Texas. This tax makes it difficult for Oaklawn to pay higher purses, which means horse owners and jockeys are choosing to race in neighboring states where the winning purse value is higher. Arkansas needs Oaklawn to remain competitive and this bill will help do that."

The Arkansas legislature last lowered the pari-mutuel tax rate Oaklawn pays on the heels of Oklahoma approving pari-mutuel racing and the opening of Remington Park in Oklahoma City. Since then, the pari-mutuel racing industry was rejuvenated in Texas with major new race tracks in the Dallas/Fort Worth area, Houston and San Antonio, each of which pay a lower pari-mutuel tax rate than Oaklawn.

The bill would also allow Oaklawn and Southland Greyhound Park to conduct account wagering, the practice of allowing customers to establish accounts to wager on races through a telephone wagering system, the Internet, or a closed-loop, secure Intranet web site. Account wagering, Smith said, represents the fastest growing segment of the pari-mutuel wagering industry in the United States. Approximately 10 states now have account wagering and predictions call for five more states to authorize the practice during 2001. The Fair Grounds in New Orleans, which competes directly with Oaklawn for horses and horsemen, recently launched its own account wagering service.

"We have strong indicators that thousands of Arkansans have open accounts and wager in other states," Smith said. "This deprives Arkansas of any tax revenue benefits "tax dollars that should stay right here in our state."

Economic Research Associates conducted an economic impact study on Oaklawn Park and the Arkansas racing industry in 1999. According to the study, Oaklawn is a significant Arkansas business that has contributed to the state and Hot Springs economy for almost 100 years. The approximate economic impact of Oaklawn includes 2,100 jobs, $138 million of total spending annually, $7 million in state tax revenues per year and $2 million in local tax revenues per year.

The study was conducted during the 1999 Live Season and also found that 28 percent of Oaklawn's visitors stay overnight in the central Arkansas area, which results in approximately $55 million in total economic impact.

"Oaklawn Park has had an annual decline of 40 percent since casinos opened along the Arkansas border in 1992," the ERA study reported. "ERA's research reveals no reason that these current negative trends at Oaklawn Park will not continue unless significant steps are under taken to protect this recognized tourism asset, including the creation of a realistic tax environment. As important as retaining the nearly $4 million in annual direct state general tax revenues is the over $80 million that out of state Oaklawn Park visitors generate in Arkansas spending annually. Protecting this key component of the Arkansas tourism industry and the additional related taxes generated appears to be a logical investment for the state"