Odds On Racing - Harness Racing

New York wants a bigger Piece of the Pie

December 10, 2007

While state leaders grapple over a new contract to run three of the state's thoroughbred race tracks, New York's other tracks — including Tioga Downs in Nichols — face their own problem: Some said they need a bigger slice of the profits to survive.

The plea, mainly from smaller, Upstate harness tracks, comes as the fate of the state's thoroughbred-racing franchise hangs in the balance and as the state wrestles with lower-than-expected revenue from tracks that have video lottery terminals.

State officials said that they have lowered revenue projections in the current 2007-08 budget by about $104 million — from $586 million to $482 million — because of sagging results.

Some tracks warn that they are also not faring well, blaming the slump on the state's revenue-sharing formula and competition with other gambling venues, such as full-fledged casinos in Upstate New York, Connecticut and Atlantic City, N.J.

The owner of the tracks at Tioga Downs in the Southern Tier and Vernon Downs near Utica is threatening to shutter the harness tracks — as soon as year's end —if the state doesn't revamp its revenue-sharing formula. The tracks are losing about $1 million a month, the owner said. The owners of Monticello Raceway in the Catskills, meanwhile, are contemplating layoffs and going to a seasonal schedule.

“The economics just don't work,” said Jeff Gural, chairman of American Racing, which owns Tioga and Vernon Downs. Even Yonkers Raceway, the state's largest video-lottery-terminal parlor, has failed to meet expectations, despite its proximity to New York City, analysts said.

“In some areas, especially Yonkers, the win per-day per-machine is much lower than anyone could have anticipated,” said Bennett Liebman, head of the Racing and Wagering Law Program at Albany Law School. “It's just a major disappointment.”

The best-performing facilities have been Finger Lakes Gaming and Racetrack in Ontario County and Saratoga Gaming and Raceway, about 30 miles north of Albany, according to state Lottery figures. Batavia Downs Race Track has also shown steady improvement.

NYRA and tracksThe Legislature has been focused on reaching a compromise on who will run the thoroughbred tracks at Belmont and Aqueduct, in the New York City-area, and at Saratoga Race Course, about a half-hour north of Albany. The contract of the current operator, the New York Racing Association, expires at year's end.

NYRA also has its own woes and is in bankruptcy protection. A state comptroller's audit Friday found that NYRA underpaid franchise fees to the state in 2004 and 2005 by $10.9 million, and nearly $54 million from 2000 to 2005. Officials at the eight tracks with video-lottery terminals are urging the Legislature that as they deal with NYRA, they also should boost the tracks' share of revenue.

Under current state law, 92 percent of the money put into the machines goes back to players as winnings. The remaining 8 percent is divided between the tracks and the state. The tracks get about 32 percent of that and about 8 percent for marketing. The rest — about 60 percent — goes to the state. The state Senate passed a bill this year that would make it closer to a 50-50 split between the tracks and the state.

Yet the Assembly has yet to act or agree to come back and deal with NYRA. A NYRA deal is critical to the future of video-lottery terminals in New York. The state estimates revenue to grow to $850 million in the 2010-11 fiscal year, if Aqueduct and Belmont get the machines. Democrats have been opposed to the terminals at Belmont.

Assemblyman Gary Pretlow, D-Mount Vernon, Westchester County, who heads the Assembly's racing committee, said he favors the new formula. A boost to the tracks would mean more amenities there and thus more players, which would result in bigger profits for the state, he said. Saving racingVideo-lottery terminals were considered the savior of horse racing in New York after the Legislature in 2001, following the 9/11 terrorist attacks, approved the installation of the slot-machine-like devices.

The effort has had its successes: It has increased purses for racing, added thousands of jobs, helped economic development efforts and boosted state revenue. In the fiscal year that ended in March, customers bet a record $6.5 billion at the so-called “racinos” statewide, according to the state Lottery.

But successes haven't been widespread and lag other states. Video lottery terminals in other states, according to gaming officials, have averaged around $250 per device a day in net profit — the benchmark figure that records how much money is left in each machine after payouts to players.

Since April, the revenue per machine per day in New York has averaged $168 a day, according to the state Lottery. Saratoga has averaged $234 a day per machine since April, while Finger Lakes, the state's only privately owned thoroughbred track, is at $224; Yonkers is at $209. Trailing the pack is Monticello at $121.

Track officials said it is difficult to compete with other states such as Pennsylvania, which let tracks keep a larger percentage of revenue and thus can woo gamblers with more amenities and giveaways. Needing more aidIn 2005, the state responded by increasing the tracks' share, giving them a marketing allowance and providing aid to the governments where the machines are located. Some tracks said it is still not enough.

“You can't let an entire industry go on life support,” said Charles A. Degliomini, vice president with Empire Resorts Inc., which runs Monticello. Martin Basinait, president of Western Regional Off-Track Betting, which owns Batavia Downs, said the video-lottery terminals are showing improvement.

Batavia Downs struggled when the machines opened in May 2005. Yet through increased marketing and a revamped business strategy, the track turned a profit last year for the first time in about seven years.

“We've done a much better job using our marketing money and targeting our players. That's part of the learning curve,” Basinait said. “Overall, it's been very beneficial, certainly to the state and to the racing industry.”