Chips Are Falling - By Tom LaMarra

(Originally published in the February 25, 2012 issue of The Blood-Horse magazine. Feel free to share your own thoughts and opinions at the bottom of the column.

By Tom LaMarra - @JerseyTom on Twitter

By Tom LaMarra What has horse racing learned from 20 years of racetrack-based casino gambling?

A review of the landscape indicates the answer to that question is: not much.

Tens of billions of dollars, primarily from slot machines and video lottery terminals, have been generated for racetracks, purses, breeders, and state governments. Troubled racetracks have avoided shutdowns, jobs have been created, horsemen have an opportunity to get a nice return on their investments, and, perhaps most importantly, the economic impact has been broad and varied.

Racetrack casinos and horsemen have done a good job touting economic benefits through various state-by-state studies, primarily out of the necessity of keeping legislators from redirecting revenue or increasing taxes. But the continuing disconnect—in some cases animosity—between racetrack casino operators and horsemen’s groups has stymied progress.

It’s easy to blame politicians for developments in West Virginia and Delaware, and more recently Pennsylvania and Ontario, Canada, where lawmakers have taken away revenue—almost all of it from purses and breed development—to pay for other programs such as workers’ compensation or supporting the general fund. It’s also easy to blame horse racing for not preparing for the inevitable.

The Ontario situation is particularly surprising. A key government report suggests using some of the $345 million racing gets from slot machines to help offset a $16 billion shortfall in the provincial budget. Most of that money, however, goes to Woodbine Entertainment Group, a non-profit entity that funnels its 10% from slots revenue directly to racing and capital improvements. Shifting revenue may help the budget short-term, but it could hurt Ontario’s economy. Also Woodbine’s commitment to horse racing shows, though obviously more can be done.

Many of the other Ontario tracks, mainly Standardbred, are privately owned or controlled by casino companies that regularly battle with horsemen over reductions in racing dates. Such counterproductive behavior has no doubt played a role in the potential action by the provincial government.

Though racetrack gaming in Pennsylvania has been held up as a model, the flaws have become apparent. The state is back again looking for revenue from the horsemen’s side, which collected roughly $1 billion from slots over a four-year period.

The economic benefits for the state are easy to tout. But in Pennsylvania, where all six racetracks are wholly owned by casino interests, horse racing in most cases has failed miserably to promote itself outside of purse increases, which are lost on the general public.

To their credit, horsemen have stepped up with funding for weekly televised racing programs and even live cable coverage, mostly on the harness racing side. But with the exception of a Department of Agriculture fan website, there has been no cohesive effort to use even a small percentage of slots revenue to promote horse racing across the state.

The same can be said for Delaware, West Virginia, New York, and other racetrack gaming states. The goodwill that could come from funneling percentages of gaming revenue to things such as marketing campaigns, racehorse aftercare programs, backstretch workers, equine research, fan development, and compensation for reductions in pari-mutuel takeout rates was passed over for what could be characterized as a quick and perhaps unjustified grab for cash.

Any educated lawmaker would ask whether a $5,000 claimer needs to run for a $25,000 purse in Pennsylvania, or whether a $7,500 claimer should be competing for $29,000 in New York.

And while many racing companies with gaming basically refuse to spend more than the minimum on marketing of racing, horsemen haven’t come to terms with the new reality. At a time when the foal crop is getting smaller and gaming revenue is being taken away, racing dates must be examined.

In a perfect world, average daily purses would increase with fewer racing days, and horse racing may have an easier time selling itself to the public with a more event-driven schedule. But it’s hard to criticize horsemen for protecting live racing dates from companies they believe want as little racing as possible—if any.

The true test of racetrack gaming could be Kentucky, should the General Assembly approve a constitutional amendment on expanded gambling for the November ballot. If it were to be approved, the enabling legislation will tell the tale on the state’s commitment to the horse industry, as well as the industry’s commitment to itself.

Every Thoroughbred track in Kentucky is wholly or partly owned by racing interests, which is very unusual today. These people own horses, breed horses, and actually like betting on horses.

The public in the Bluegrass State embraces horse racing and is far more knowledgeable about its nuances. The racehorse is much more part of the culture there than anywhere else in the United States.

It would be nice if one jurisdiction could get it right.

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