Updated on 06/15/2011 4:46PM

Ohio racetracks can apply for slot-machine licenses under new deal

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The owners of Ohio’s seven racetracks will be allowed to apply for licenses to operate slot machines under a plan offered by Gov. John Kasich on Wednesday.

Under the plan, Ohio’s three Thoroughbred tracks – which have all been purchased by casino companies over the past 18 months – would receive 10-year slot-machine licenses after paying the state a total of $50 million in licensing fees over three years. If all the licenses are awarded, Ohio could have a total of 11 casinos, just two years after voters approved four free-standing casinos following decades of voter opposition to expanded-gambling measures.

The plan, which was part of a deal brokered by Kasich with Caesars Entertainment to address the company’s concern over a bill recently passed by the Ohio legislature, also could dramatically reshape the geography of the racing landscape in Ohio. Under the deal, the state has promised to consider plans by Penn National Gaming Inc., the casino company that owns Beulah Park and Raceway Park, to relocate its two racetracks to markets that would not compete with casinos it has been authorized to build by the 2009 referendum.

In addition, the prospect of nearly a dozen casinos in Ohio is expected to put enormous pressure on Kentucky lawmakers to pass bills legalizing casinos. Legislation addressing casinos in Kentucky is not expected to be introduced until 2012, after gubernatorial elections in the state later this year.

The Ohio plan caps the amount of money the racetrack casinos could retain from slot-machine revenues at 66 percent. The owners of the tracks would need to reach an agreement with their horsemen before they could begin taking slot-machine bets, though a press release from Kasich said that “the state reserves the right to set the details of an agreement if one is not reached by the time [slot-machine] sales are set to begin.”

Representatives of the state’s Thoroughbred horsemen did not return phone calls Wednesday.

Racetrack owners would need to apply for a license by June 30, 2012, according to the plan. The owners will be required to invest $150 million in the casinos – though the plan also gives an allowance of $25 million for “value of existing land and facilities” – and the facilities would have to be up and running within three years of license approval.

Casino companies snapped up Ohio’s three Thoroughbred racetracks shortly after the 2009 referendum was passed, in the hopes of convincing the government to expand casino grants to racetracks. Penn National purchased Beulah Park, while Thistledown near Cleveland was bought by Harrah’s Entertainment, which changed its name to Caesars Entertainment late last year. Pinnacle Entertainment, which operates casinos in the Midwest, bought River Downs in Cincinnati.

Since purchasing Beulah and Raceway Park, a standardbred facility in Toledo, Penn National has lobbied the state to allow it to move Beulah to Dayton and Raceway to Youngstown. In the 2009 referendum, Penn received the exclusive right to operate casinos in Columbus and Toledo, and if its request to move the tracks is successful, the company would operate casinos in four markets, rather than two casinos in each of the cities.

The deal was reached after Rock Ohio Caesars, a partnership of Caesars and Dan Gilbert, the majority owner of the Cleveland Cavaliers, stopped construction earlier this year on its planned casinos in Cleveland and Cincinnati, citing dissatisfaction with a measure passed by the Ohio legislature that would have applied state taxes to gross gambling receipts, rather than net gambling revenues.

Under the deal, Caesars will pay a higher annual fee to the state to operate the casinos, but the measure passed by the legislature will be scrapped, according to Kasich’s office. In addition, Caesars will receive the right to apply for a casino license for Thistledown. Elements of the deal would have to be approved by the state legislature.

The state continues to negotiate with Penn National over a deal for its existing casinos. Like Caesars, the company has said it will not open its free-standing casinos under the terms contained in the bill passed by the legislature earlier this year, and it is seeking concessions from the state.