06/08/2009 11:00PM

Governor reveals Kentucky slots plan

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The Kentucky horse racing industry would retain up to 75 percent of all revenue from slot machines at racetracks under a bill unveiled by Gov. Steve Beshear on Tuesday.

The bill, which also includes a sales-tax exemption on most racing-related purchases, is expected to provide the starting point in negotiations over the legalization of slot machines at Kentucky racetracks during a special session that is scheduled to begin on June 15. The session was called to address a billion-dollar deficit in the state's budget for the fiscal year beginning July 1.

Under the bill, the racing industry would retain 75 percent of all revenue from slot-machine gambling for the first five years that the machines were in operation, with the rate dropping to 65 percent for the next five years. Under an estimate provided by the Beshear administration of revenue produced by slot machines at seven racetracks, the racing industry in Kentucky would retain approximately $600 million annually during the first five years of operations. Of that total, $120 million annually would go to purse subsidies.

Racetracks, which would be responsible for funding the construction and operation of slot-machine facilities, would receive roughly 58 percent of the total revenue during the first five years, with that number declining to approximately 48 percent after the initial five-year period. Horsemen would receive 14.5 percent in direct purse subsidies, without any decrease in the percentage. The bill also provides for subsidies for breeders and funding for the Kentucky Horse Racing Commission.

The total distribution to the racing industry, by percent, would be the highest of any state in which slot machines have been legalized at racetracks. Jay Blanton, a spokesman for Beshear, said on Tuesday that the governor had arrived at the percentages because of his concern for the state of Kentucky racing.

"The governor has consistently said that his primary purpose for this legislation is to save an industry that is in crisis," said Blanton.

The bill would require racetracks to pay individual licensing fees for the right to operate the machines for 10 years. According to the bill, Turfway Park just south of Cincinnati would pay $100 million; Churchill Downs in Louisville would pay $75 million; Keeneland, together with the Red Mile - which are both based in Lexington and would share a license - would pay $75 million; Kentucky Downs near the Tennessee border would pay $50 million; and Ellis Park in western Kentucky, Thunder Ridge, and Bluegrass Downs would each pay $20 million. The licensing fees would be required to be paid over the first two years of operation, according to the bill.

Beshear's bill is supported by Rep. Greg Stumbo, a Democrat who is the speaker of the house. The legislation is opposed, however, by the state senate's president, David Williams, a Republican who has offered an alternate plan to provide subsidies for racing purses by taxing lottery sales.

There is also a question in Kentucky over whether the legislature can legalize slot machines without a constitutional amendment, which would require a public referendum. Kentucky's attorney general is reviewing the matter, and an anti-gambling group has vowed to challenge the legality of any legislation passed during the special session that would expand gambling.