07/09/2004 12:00AM

Round and round we go again


NEW YORK - While states such as Delaware, West Virginia, and now Pennsylvania have been able to authorize slot machines at racetracks to generate substantial revenue for both government and the racing industry, the nation's three biggest racing centers have been unable to do the same. What's the problem with California, Kentucky, and New York?

In a word, politics, politics, and politics.

The situation seems the bleakest in California, where track operators had a giddy few weeks this spring thinking that Gov. Arnold Schwarzenegger was serious about helping racing as he pledged support for a November ballot initiative that would have put slots at the tracks. It turned out that this was only a club the Governator was using to pound some additional revenue out of the Native American casinos, which were giving virtually none of their mammoth profits to the state. Schwarzenegger got his deals and no longer supports the initiative.

In Kentucky, racing leaders have been saying for three years now that slots are just around the corner, and the rebuilt Churchill Downs has clearly been designed for plenty of machines, but the idea has failed at every recent legislative session. The chief complaint from lawmakers has been that racing-industry groups have been unable to agree on how racinos should be set up. The industry keeps getting sent back to its room without supper until it can learn to play nicely. Perhaps a newly formed industry alliance will get it right on the fourth or fifth try over the next year or two.

As for New York, slots are up and running at four smaller locations around the state, but the big fish remains beached: Aqueduct, which would have generated obscene profits for both government and racing with a monopoly on slots in the New York City area, sits half torn up with slots no closer to reality than they were when enabling legislation was passed nearly three years ago.

Opponents of the not-for-profit New York Racing Association have delayed the slots to serve a variety of political agendas, the biggest one being to dissolve NYRA when its franchise is up in 2007. The slots project was frozen while the State Attorney General's office embarked on a wild goose chase that netted nothing but some low-level tax evasion by employees. Prospective NYRA successors used this window of time to spread political donations and lobbying fees around the state to further their long-term bids and position themselves as eventual heroes to revive the slots project they have stalled.

The newest obstacle went up last Wednesday, when a state appeals court, responding to a bizarre multi-pronged suit launched by anti-gambling forces and academic attorneys, held that portions of the 2001 enabling legislation were unconstitutional. The court may well have been observing the letter of the law in its ruling, but the sum total of its decisions is mind-boggling in its lack of common sense.

The good news, for racing if not for clear thinking, is that the court decided the slot machines themselves are constitutional because they're not really slot machines but lottery terminals. They may walk and quack like slot machines, but they're actually just friendly corner newsstands selling lottery tickets. Very quickly. Pay no attention to the spinning reels and flashing lights.

Even though that part of it works out well for racing, the problem is that by extending this tortured reasoning, now the revenue from the slot ma . . . - I mean, lottery terminals - must be spent solely for education. Thus, dollars cannot be assigned to horsemen and breeders, even though this was the intent of the legislation and the way it is done in every other state with racinos.

"The lottery exists to fund education, not to put dollars in the pockets of horsemen and breeders," said Cornelius Murray, a constitutional lawyer who was a plaintiff in the suit.

It gets better. It's constitutionally okay for 20.25 percent of the revenue to go to the tracks, because they are "vendors," but not for 7.75 percent to be directly earmarked for horsemen and breeders, because now we're misappropriating lottery revenues meant for education.

There are probably some ways to circumvent this idiocy, such as giving the combined 28 percent to the track as a vendor and somehow requiring that the 7.75 percent be dedicated to owners and breeders. Meanwhile, the appeals-court decision now will get appealed to a higher court, with no resolution in sight until early 2005 at the soonest. So there is no ongoing construction at Aqueduct, as MGM-Mirage is understandably reluctant to proceed with its planned $150 million investment amid such a volatile political and legal climate.

So here we are, three years after slots were supposed to come to the aid of big-league New York racing, and the only slots in the vicinity of a NYRA track will be the new ones down the road from Saratoga Race Course this summer at the harness track - skimming dollars and customers from what is supposed to be the world's greatest race meeting.