Day At The Track

NY harness racing preservation bill

11:15 PM 17 Feb 2008 NZDT
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On Wednesday, February 13, the New York State Assembly and Senate promulgated a comprehensive piece of legislation, the primary intent of which was to ensure the continuity of the state’s world class Thoroughbred racing industry.

Part of this legislative package contained much-needed amendments to the state’s video gaming and harness racing statutes.

The result is that the entire New York harness racing and breeding industry will reap both the economic benefits and legal protections necessary to continue the state’s Standardbred racing renaissance for years to come.

Video Lottery Gaming:

In response to the various needs and concerns raised by the respective racino operators regarding their continued economic viability, the legislature for the first time chose to categorize these facilities on a somewhat individualized basis.

The state replaced the broad 32 percent-29 percent-26 percent sliding scale net win retention of the 2005 law, and now established different retention percentages based upon criteria such as a) number of VLT machines; b) population density surrounding a particular facility; c) present or prospective competition and d) special needs of an operator.

In addition, vendor’s marketing allowances were enhanced, with specific language permitting reimbursement for the promotion of pari-mutuel horse racing, in addition to the lottery games.

Moreover, a new five-year retention program for construction and improvements of parking garages, hotels, sports arenas and the like, called “vendor’s capital awards,” was established.

The impact the new law has on the seven existing harness racinos is as follows:

Batavia Downs:

With less than 1,100 VLTs, Batavia now gets 36 percent of the first $50 million of annual net win (up from 32 percent); 29 percent of the next $100 million of net win and 26 percent thereafter.

As Batavia’s annual net win has never approached $50 million, the 4 percent bump up in the first tier is highly significant.

Additionally, the marking allowance increases to 10 percent (up from eight percent) on the first $100 million of annual net win, and eight percent (up from five percent thereafter).

In effect, Batavia gets to keep 46 percent of net win.

Moreover, the facility may receive an additional four percent of vendor’s fee with an annual cap of $2.5 million in vendor’s capital awards without any requirement to co-invest.

Saratoga Raceway:

With more than 1,100 VLTs, Saratoga goes to a flat rate of 32 percent, thus eliminating the sliding scale net win retention contained in the 2005 statute.

Their marketing allowance goes to 10 percent (up from eight percent) on the first $100 million of annual net win, and eight percent (up from five percent thereafter).

In addition to this 42 percent base retention, Saratoga qualifies for four percent (capped at $2.5 million per year) vendor’s capital awards, but because its number of VLT machines exceeds 1,100, it must co-invest (match dollar for dollar) to qualify for this retained capital improvement money.

Yonkers Raceway:

With 5,500 machines, Yonkers eventually goes to a flat 32 percent vendor’s fee, with their marketing allowance increased to eight percent (up from four percent).

This 40 percent flat retention is in addition to a four percent ($2.5 million annual cap) for vendor’s capital awards, for which the track must co-invest.

Yonkers, however, receives immediate tax relief tied into their specific and current needs.

The racino will immediately receive a 34 percent flat vendor’s fee for a period of two years, or until the operator completes a successful debt restructuring, upon which restructuring the fee goes to the 32 percent level.

The fee will dip to 31 percent in two years, and remain at that level for twice the period the fee was at 34 percent.

Thereafter, the vendor’s fee will remain at 32 percent.

In plain terms, the state is advancing Yonkers revenue, and will recapture it once Yonkers is in a better position with regard to its debt service payments. It then goes to the intended 32 percent level.

Monticello Raceway:

With more than 1,100 VLT machines, but with less than one million people in a 40-mile radius, Monticello will receive 40 percent for the first $50 million in annual net win (up from 32 percent), 29 percent for the next $100 million and 26 percent thereafter.

Their marking allowance also goes to 10 percent (up from eight percent) on the first $100 million of net win, with eight percent (up from five percent) thereafter.

As Monticello’s annual net win has only slightly exceeded $50 million, the 50 percent (40 percent + 10 percent) first tier retention rate is of significance.

Moreover, Monticello qualifies for the additional four percent (capped at $2.5 million per year) in vendor’s capital awards, but because its number of VLT machines exceeds 1,100, it must co-invest (match dollar for dollar) to qualify for this retained capital improvement money.

Tioga Downs:

With less than 1,100 VLT machines and a population density of less than one million people in a 40-mile radius, Tioga will receive 40 percent for the first $50 million in annual net win (up from 32 percent), 29 percent for the next $100 million and 26 percent thereafter.

Their marking allowance also goes to 10 percent (up from eight percent) on the first $100 million of net win, with eight percent (up from five percent) thereafter.

As Tioga’s annual net win does not approach $50 million, the 50 percent (40 percent + 10 percent) first tier retention rate is of significance.

Moreover, Tioga qualifies for the additional four percent (capped at $2.5 million per year) in vendor’s capital awards, but because its number of VLT machines is less than 1,100, it does not need to co-invest to qualify for this retained capital improvement money.

Vernon Downs:

With less than 1,100 machines and within 15 miles of an existing Native American gaming facility (the Turning Stone Resort in Verona, New York), Vernon’s vendor’s fee jumps to 42 percent on the first $50 million of net win (up from 32 percent), with 29 percent for the next $100 million and 26 percent thereafter.

The marketing allowance also goes to 10 percent (up from eight percent) on the first $100 million of net win, with eight percent (up from five percent) thereafter.

As Vernon’s annual net win does not approach $50 million, the 52 percent (42 percent + 10 percent) first tier retention rate is of significance.

Moreover, Vernon qualifies for the additional four percent (capped at $2.5 million per year) in vendor’s capital awards, but because its number of VLT machines is less than 1,100, it does not need to co-invest to qualify for this retained capital improvement money.

Buffalo Raceway:

With less than 1,100 machines and within 15 miles of existing Native American gaming facilities, Buffalo’s vendor’s fee jumps to 42 percent on the first $50 million of net win (up from 32 percent), with 29 percent for the next $100 million and 26 percent thereafter.

The marketing allowance also goes to 10 percent (up from eight percent) on the first $100 million of net win, with eight percent (up from five percent) thereafter.

As Buffalo’s annual net win hovers below $50 million, the 52 percent (42 percent + 10 percent) first tier retention rate is of significance.

Moreover, Buffalo qualifies for the additional four percent (capped at $2.5 million per year) in vendor’s capital awards, but because its number of VLT machines is less than 1,100, it does not need to co-invest to qualify for this retained capital improvement money.

The Prospective Competition Language:

The new law also contemplates prospective situations where a Native American gaming facility might open within 15 miles of a racino, or a gaming facility of any nature in a “contiguous state” is established “within a midpoint of 30 miles” from a racino.

In the event of the establishment of a new Native American gaming facility with the 15-mile parameter, a racino’s vendor’s fee would go to a flat 42 percent.

The same would be true if the racino was within 30 miles of a new bingo hall, casino or racino in a contiguous state, but the enhanced fee would be capped for five years, and would end altogether if the New York racino relocated out of the target area.

This curious language would appear to potentially affect only Monticello and Tioga, as these tracks are within close proximity to the northern border of Pennsylvania.

The “relocation” language might also have specific reference to Monticello Raceway, as that racino’s operators have recently announced the potential moving of their operation 2.5 miles north of the existing facility.

Horsemen and Breeders:

The new law grants to the state’s horsemen and breeders what they have spent nearly three years trying to accomplish; the reestablishment of statutorily-defined percentages for purses and breeding fund reinvestment of the net win.

At all New York harness tracks, 8.75 percent of the VLT net win will be allocated to purses, with an additional 1.25 percent distributed to the Agriculture and New York State Horse Breeding Development Fund (Standardbred Fund).

The law specifically grants racino operators and the representative horsemen’s associations the right to agree to an increase or decrease in these percentages. Moreover, the percentages do not change the terms of existing contracts.

As many of the harness tracks presently have long-term horsemen’s agreements in place, the statutory percentages will have immediate implication at Monticello Raceway, where no contract is in place and the terms of an arbitration award expire at the end of June, and at Vernon Downs where the present horsemen’s agreement expires on August 31.

Racing Preservation:

With an eye towards keeping the “race” in “racino,” the legislature carefully crafted language to ensure that video lottery gaming does not overtake or envelop the industry it was meant to support in the first place: Harness racing.

In addition to strengthening the minimum race date language contained in existing statute, the lawmakers inserted language requiring the physical layout and construction of video gaming parlors be completed in such fashion as to, “encourage patronage of live horse racing events that are conducted at such track.”

Additionally, the new law requires any new or modified facilities to be planned and constructed in such fashion as to ensure that, “the paddock and barn areas can accommodate and serve the needs of horses and horse trainers that participate in live racing at such facility.”

Conclusion:

Rather than pass a haphazardly drawn bill meant to benefit only certain individuals from a selected segment of the state’s harness industry, the state’s legislators repeatedly encouraged the various stakeholders to agree on an all-inclusive package of video gaming and racing reform.

The result of the Albany lawmakers’ patient cajoling is nothing short of the most significant and beneficial legislative passage harness racing has seen since the original promulgation of video lottery gaming in 2001.

It is hoped that with these new mandates, guideposts and economic incentives and opportunities that harness racing will continue to flourish as not only a significant and lucrative aspect of the state’s economy, but also as an extremely important player on the international harness scene.

No stakeholder can say that we haven’t been given the tools to do it.

Standardbred Owners Association of New York

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