Updated on 12/19/2016 12:04PM

New York purses could take big hit as result of slots deal with Nassau County OTB

Email

NEW YORK – New York’s Thoroughbred racing industry could take a multimillion-dollar hit as the result of a state-approved deal between Genting, the operator of the Resorts World video slots casino at Aqueduct, and financially strapped Nassau County Off-Track Betting Corp.

Under the deal, which was included in the state budget passed last spring, Genting can designate up to 1,000 of its current 5,540 VLTs as belonging to Nassau County OTB. Nassau OTB will receive $18 million from Genting over two years and up to $25 million in the ensuing years, and it will use some of that money to pay down part of its $12 million debt.

Meanwhile, racing would only get revenue from those machines if revenue from the other machines falls below 2013 levels. Racing industry officials are estimating the impact could be $16 million to $18 million, with purses taking as much as a $12 million hit.

“It’s potentially devastating,” said trainer Rick Violette, president of the New York Thoroughbred Horsemen’s Association and a member of the New York Racing Association Reorganization Board, which met Wednesday in Manhattan. “It certainly will hurt the industry. It will absolutely stop in its tracks any growth, any progress, any long-term planning by entities thinking of doing business in New York’s racing industry. There’s nothing good about it for racing.”

Further, Violette said the deal is a slap to an industry that generates $4 billion in economic activity and accounts for 33,000 full-time jobs.

Violette said the deal doesn’t put racing on the back burner, “it turns up the flames on us to see how crispy they can make us.”

Chris Kay, NYRA’s president and chief executive, said he is seeking more clarity on the deal and its potential financial impact on NYRA. Early indications are that it could cost NYRA at least $3.2 million in revenue for operations and capital expenditures. It also figures to cost the breeding industry around $2 million annually.

“We don’t know exactly what that effect will be,” Kay said following the board meeting. “We have repeatedly asked for greater clarity. There are a bunch of questions we need to look at with them as to how much is going to be taken out and when.”

The deal that allows Genting to designate up to 1,000 VLTs to Nassau OTB came about after Nassau was unable to find a location in Nassau County for a parlor with 1,000 slot machines. Local residents blocked attempts to put those machines at a vacant Fortunoff store in Westbury on Long Island, and then at Belmont Park.

Racing officials thought Genting would be adding 1,000 machines. Instead, beginning Oct. 15, Genting designated 460 of its highest-revenue machines as belonging to Nassau OTB. In November, the daily win per machine on those VLTs was $861. Conversely, the win per machine on the other 5,060 machines was $358.

It is unclear if and when Genting will designate the other 540 machines for Nassau OTB. The impetus for Genting to designate more machines for Nassau OTB is that Genting gets to keep 30 percent of the revenue from those machines as opposed to 22 percent of revenue generated by the other machines.

As part of the budget deal, Genting has agreed to a $300 million expansion of Resorts World that includes a hotel. It also likely includes more machines and/or electronic table games, but there is no timetable for the construction of the project.

Robert Williams, executive director of the New York State Gaming Commission, which did sign off on the deal, believes the racing industry will realize a long-term gain from Genting’s expansion.

“There may be some short-term concerns that are realized as they get to that construction period, but ultimately Resorts World is banking on being able to raise money,” Williams said. “They’re not doing this out of charity; they’re doing this because they think they can increase the value that’s going into the machines. If the value of these machines increases, then the horsemen’s and NYRA’s value that they get out of those machines also will increase.”

It remains to be seen what the impact of this deal will be on NYRA’s 2017 budget, which the Reorganization Board passed at Wednesday’s meeting.

Projections for 2017 include a $2.1 million surplus exclusive of VLT revenue. Kay said NYRA did revise its budget forecast to take into account what it guessed would be the impact of the deal on the company.

“We are very concerned about this,” Kay said. “We revised our budget after we saw this coming out in late October. We tried to make a very conservative budget; again, we need a little more clarity.”

At the same time that NYRA is seeking clarity on this deal, it is also seeking a resolution to reprivatization. Michael Del Giudice, the board chair, said he expects a bill regarding reprivatization to be part of New York’s 2017 budget and hopes the framework of the bill will be completed in the next three to four weeks. It remains to be seen what impact the Genting-Nassau OTB deal will have on reprivatization considering that Gov. Andrew Cuomo was seeking to redirect $12 million in slots revenue that went to the racing industry.

Talking about slot revenue, Del Giudice said, “We had negotiated an agreement and taking numbers below that agreement is not a good thing.”

Meanwhile, NYRA is projecting income from racing operations for 2016 at $4.5 million, which it attributed to a strong Saratoga meet and continued growth in its advance-deposit wagering platform.

The launch of NYRA Bets in the summer helped NYRA expand its ADW reach to, as of Wednesday, 28 states, while the increased television exposure during the summer helped to increase wagering, particularly at Saratoga.

Tony Allevato, president of NYRA Bets and executive producer of NYRA TV, said NYRA Bets customers outside of New York are betting nearly double the amount on NYRA’s races as compared with other ADWs. No exact figures were provided.

◗ Total handle on NYRA’s races in the third quarter was $985.2 million, down $10.1 million, or 1 percent, from 2015, according to Kay.

◗ All-sources handle at Aqueduct from Nov. 4 through Dec. 11 was $188,838,023. Daily average handle was up 9.8 percent for that period from 2015, Kay said.

A previous version  of this article incorrectly stated the the total handle on NYRA races through September was $985.2 million. That figure reflects total wagering on NYRA races in the third quarter of 2016.