Racinos Expect to Pay $1B for Education Next Year

The Legislative Gazette

The president of the New York Gaming Association has made his “new year’s resolution” public.

“Absent interference by the Mayans [on Dec. 21st] … the race track casino industry will support education in New York to the tune of $1 billion,” said James Featherstonhaugh, president of the New York Gaming Association, which represents racetrack casino operators across the state.

Members of the association testified before the Assembly Committee on Racing and Wagering last week to discuss how legalized gaming stimulates New York’s economy. The committee is currently analyzing the partnership between the state and the nine racetrack casinos, or “racinos,” operating inside its boundaries. The committee’s findings are expected to be included in the annual report submitted to the state budget department for consideration.

At the hearing, Featherstonhaugh and other owners and representatives of New York’s gaming and equine businesses expressed the importance of video lottery terminals – exclusive to New York’s nine harness racing casinos – to the state’s education system and budget, and more specifically, the revenue and jobs they generate by functioning.

The goal for education funding set by the organization’s president was a reiteration of an advertising campaign launched by the group in September which painted New York’s raceway casinos as a leading contributor to the state’s education revenue.

The racetrack casino industry, according to the presentation provided by gaming association officials, expects to contribute to $830.5 million in the current fiscal year.

“That supports education – and it has to be dedicated to education because it runs through the [Division of] Lottery – but all of that money serves the purpose of educating our children and keeping property taxes down. That is a number, by the way, which will continue to grow,” Featherstonhaugh said. “And speaking of supporting education and what that means for this fiscal year, the amount of money that is directed to education and affecting the budget is enough money to support the salaries of about 12,000 teachers.”

Though state government officials had originally projected racinos would generate $836 million in VLT revenue for the state, the industry does continue to grow; and the effects are benefiting not only racino owners and schools but New York’s farms and horse breeders as well, in the opinion of numerous industry insiders who testified.

“Over a decade ago we asked for help, and we got help, and the response to our needs and the protection of our business has given us over the past decade a rebuilding which we are just starting to experience, which at first seemed like it would be a Band-Aid but really it became more of a stimulus,” Rick Violette, president of the New York Thoroughbred Horsemen’s Association, said about the incorporation of the video lottery terminal program by the state and how the terminals have encouraged more people to come and support horse racing.

Violette said the state’s VLTs have facilitated the growth of the equine industry and has spurred investment. He said there has been tens of millions of dollars in stallion acquisitions and now New York has the “best performing” stallions, not just nationally but internationally. He also cited capital investment and job creation as a result of the VLT initiative. Violette said the revenue generated by the gaming machines has helped to increase the purses for jockeys and owners, and the high purses are attracting more competition.

A study conducted by the New York State Equine Industry shows that, despite the downward trend in both private sector and public sector jobs in recent years, the equine industry has grown by 75 percent since 2005. The report shows that the industry has provided the state with 33,000 full-time jobs and for every racehorse brought into the state, 80 jobs are created for New Yorkers.

The study also says for every racehorse brought into the state, the state can expect an economic impact of $92,100. At the time the study was conducted, there were 23,100 racehorses based in New York.

These gambling-friendly arcade games which resemble ATMs, began being shipped into racinos in New York state as early as 2004 at harness tracks across the state. The law allowing the state Lottery Division to oversee the operations of these machines began in late 2001.

Many industry investors expressed their satisfaction with incorporation of the video lottery terminals at horse tracks, and some said it saved their businesses.

“The industry [was] dying and without the VLTs it would have died; there would be no harness racing in the state,” said Gary Greenberg, a minority shareholder of Vernon Downs located in Oneida County.

State education law now requires racinos to make eight payments from September through March to school districts based on the same formula used to distribute the more traditional state education aid. The size of these payments is calculated by the amount of revenue collected through video lottery terminals.

The association’s members who testified pointed out New York state’s racinos pay a higher tax rate to their state than facilities in both Las Vegas and Atlantic City for their video game machines’ profits.

The hearing was supposed to focus solely around the effects of the gaming machines on the state budget; however, representatives of the race track casinos didn’t let that stop them from referencing the possible incorporation of full casino gambling in their already “casino-like” atmosphere.

Non-Native American casino gambling has been a controversial issue in New York, however in March, a bill (S.6734/A.9556) was passed by the Legislature 96-45 to give the state the ability to award up to seven casino gambling licenses statewide. The bill must now pass once again during the upcoming session and then be voted on by New Yorkers during the next general election before it can be ratified into the state Constitution.

“If table games were to be allowable, we would ask for a different rate on the table games because it’s much more labor intensive and expensive to run,” Featherstonhaugh said when he was asked by Assemblyman Edward Ra, R-Franklin Square, if the tax rate for VLTs was fair. “But we think the machine rates are fair.”

Greenberg also advocated the incorporation of “table gaming” as an additional revenue stream for racino businesses.

“And it’s an important part of the [racinos], we feel and I feel, that a younger player play the table games … it would allow, I believe, more, younger customers, professional customers, to come in, spend their money – the state would benefit and I believe harness racing would benefit because hopefully we could get them all over to the track so that would provide more revenue.”

Greenberg acknowledged the state’s self-imposed limit of seven licenses would ultimately leave the existing racino companies battling each other for the rights to table gambling.

Violette also commented on the industry’s opposition to letting outside companies bid on the licenses, something Gov. Andrew Cuomo said he would support for the taxpayers to get the “best value.”

“What if our competition cannibalized the progress we’ve already made?” Violette asked, acknowledging that having casino gambling at facilities away from the current racino facilities could hurt attendance at the racinos. “We look forward to being part of the picture.”