New York's Horse Racing Subsidy

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New York's Horse Racing Subsidy

By Patrick Battuello, In Behalf of Animals
December 2012

Racinos, horseracing tracks with Video Lottery Terminals (VLTs), are New York’s answer to stabilizing (saving) a gravely ill industry, especially at the harness level. Currently, 9 of the 11 NY tracks house VLTs: Saratoga (Harness), Finger Lakes, Buffalo, Monticello, Batavia, Tioga, Vernon, Yonkers, and Aqueduct. Each facility is entitled to a 26-32% cut of net revenue, plus 8-10% for marketing its VLTs or horseracing, plus up to 4% for “capital improvements.” All told, since the program’s inception in 2004, this translates to $1.023 billion for purses and $571 million for marketing and infrastructure, and remember, only four racinos have been open for the full eight years. But has this bounty changed racing’s core health? The state Comptroller’s office filed this report in July. It concludes:

We found that, despite the influx of VLT monies since calendar year 2004, handle at their associated racetracks has continued to decrease. In fact, total handle on live racing in New York decreased from $53 million in 2004 to $46 million in 2010, a decrease of 13 percent. Although one could say that the VLT contributions may have slowed down the rate of decline at New York’s racetracks, we are unable to determine whether the millions of dollars that pay for increased purses, rather than for education, are having their intended effect.

In response to the audit, Lottery Director Gordon Medenica:

Anecdotally, we know from all our facility operators that there is almost no overlap or synergy between the casino patrons and the horse racing patrons at the facilities. Many of the facilities lose money on their horse racing operations…but consider it simply a cost of doing business for having the VLT license and operating the gaming facility. In the past, one could characterize the facilities as horse racetracks with gaming machines, but now it is much more accurate to describe them as casinos (with a legally required track on the property). …As mentioned earlier, we share the Comptroller’s concern about the effectiveness of the horse racing subsidies generated by the Video Lottery program.

On cue, horseracing defends the VLT program as a hugely successful “partnership” (“subsidy,” to them, is a four-letter word) that has benefited both state taxpayers and private enterprise. Inconveniently for the horse people, however, it is virtually certain that VLTs would succeed in a host of other public places – bars, restaurants, truck stops, etc. – and that these venues would not require anything close to the 40% or so currently gifted to racing. Imagine how many more millions could be flowing to education. Of course, racing interests are quite content with the current arrangement. Purses are jacked and breeding is robust, but not because of full stands or busy betting windows. Indeed, it is no exaggeration to say that if not for VLTs, harness racing in NYS would be dead or dying.

Richard Aurelio of the Franchise Oversight Board says (Times Union, 8/14/12): “The racing experience is getting more and more boring. It’s confusing, it’s slow-paced, it’s seedy. … The trends are clear: We’re losing 4 or 5 percent of fans each year.”

States (and Canadian provinces) across the nation are growing weary of propping up “the sport of kings” by turning it into a collective casino “with a legally required track on the property.” Enough already. Kill the subsidy; let the market take its course.