The Republican-led Senate and Democratic-run Assembly in New York have introduced legislation to sweeten the pot for racetracks with video lottery terminals, though the measure restricts the amount of extra money that would go to Aqueduct and Yonkers Raceway compared to other tracks.
Still, the agreement if approved would provide more than enough money and provide legal protections to ensure Aqueduct and Yonkers, expected to generate the most VLT revenue in the state, would be able to start construction this year on their long-stalled VLT operations.
The measure is buried in a 2005 state budget bill legislators vowed to pass March 31. On March 28, Gov. George Pataki said his negotiators hadn't struck a final deal with the legislature on VLTs.
The legislation is intended as a "fix" to deal with an appeals court decision last year that struck down as unconstitutional a 2001 law that permitted VLT proceeds to be used for purses and breeding funds. The court said any gambling revenue from VLTs must go to education, with the exception of money for tracks that serve as vendors for the state Lottery Division, which runs the VLT program.
The new bill is silent on VLT revenue for purses and breeding funds; however, tracks are expected, as part of their licensing, to secure deals with horsemen's groups for purse sharing.
Under current law, 29% of VLT revenue, after payouts to bettors and the state, goes to tracks. A portion of that money, on a sliding scale, goes to purses and breeding funds.
Under the new deal, tracks would get 32% of the first $50 million in annual VLT revenue, 29% on the next $100 million, and 26% on anything above that amount. In addition, lawmakers added a new "marketing and promotional" payment that would provide an additional 8% on the first $100 million in VLT revenue, and 5% on everything over that figure.
For Aqueduct and Yonkers, the fund for "marketing, promotion, and associated costs" of VLT operations would be capped at 4% of all VLT revenue. The additional 4%, sources said, could be worth at least $10 million for each of the tracks.
Money for purses and breeding funds would then come out of the track's VLT proceeds, subject to separate deals between tracks, horsemen, and breeders.
Legislators said the bill would be worth about $1 billion more in revenue for the state.
For the New York Racing Association, the measure also ensures that its VLT partner, MGM Mirage, would remain as Aqueduct's VLT operator even if NYRA loses its franchise, which expires at the end of 2007. MGM has refused to move on the VLT casino unless it was guaranteed to remain as the operator beyond the end of 2007.
Questions have been raised, sources said, about the contract between NYRA and MGM and whether the process followed state contract procedures. The new legislation doesn't address the contract.
The new bill also extends the VLT law, now set to expire at the beginning of 2014, until the end of 2017.