10/25/2001 11:00PM

Slots law could draw legal fire

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NEW YORK - A gambling measure allowing some New York racetracks to operate video-lottery terminals will likely be challenged on a host of legal grounds, industry officials said Friday, putting in jeopardy potentially millions of dollars in new revenues to racetracks and horsemen.

The gambling measure, which passed by a wide margin on Wednesday night as part of a broad budget agreement, has come under fire from many groups who contend that the operation of VLT's at racetracks and slot machines at six new Native American casinos would violate the New York State Constitution. Although the constitution does not explicitly prohibit slot machines, it prohibits all forms of gambling except state-run lotteries, parimutuel wagering, and limited charitable gaming.

Among Thoroughbred tracks, Aqueduct racetrack in New York City and Finger Lakes Race Track in upstate New York were tabbed by the legislature for VLT's. Belmont Park on Long Island and Saratoga Racecourse in Saratoga Springs were denied the devices, however.

The measure intentionally does not define what constitutes a video lottery machine, leaving the definition up to the New York Department of the Lottery. The department's definition will likely be targeted by anti-gambling groups because the distinction between Las Vegas-style slot machines and video-lottery terminals has been blurred over the past decade, officials for gambling-device manufacturers said.

"To be honest, the term 'video lottery machine' is more of an art form than anything else," said Robert Vincent, the vice president of corporation communications for major gaming supplier GTech. "It's not very precise."

A spokeswoman for the lottery, Carolyn Hapeman, said Friday that the department was "on a very steep learning curve." Hapeman said the lottery will not determine what will constitute a VLT until consulting with manufacturers and operators in other states.

The gambling measure gives the lottery department the authority to determine how many machines each racetrack will be allowed to operate. The department will negotiate with the racetracks about how much of the net win from the machines the tracks will be allowed to retain, in a range of 12 percent to 25 percent.

New York racing officials said Friday that they did not know what shape or form the VLT operations would take.

"There's no real definition in the law, which was written to create a very open framework," said Christian Riegle, the president of Finger Lakes. "I don't know what they mean. I guess it's going to be what they feel comfortable with."

Regulators in other states have taken widely disparate positions on the definition of a video lottery terminal, according to officials at tracks and manufacturing companies. In Delaware, practically any gambling device is defined as a video-lottery terminal as long as it is linked to a central system, whereas in Louisiana, the term has in the past been restricted to video poker machines.

In West Virginia, where only video-lottery terminals are legal, the devices run the gamut, from video poker and blackjack machines to the "Double Diamond" device, a spinning reel game that is also popular in Delaware. But despite the variety of machines, West Virginia gaming officials said all the devices fall under the video-lottery definition, even if they look, feel, sound, and play like slot machines.

"Basically, all the machines are linked to the state lottery system," said David Hughes, the chief financial officer of Charles Town Races in West Virginia. "The way it works is that the state looks at everything, and if they approve it, it goes on the floor, and they take their cut right off the top."

The definition of a VLT can mean the difference of hundreds of millions of dollars in revenue each year, according to operators of the devices. Slot machines are by far the workhorses on any casino floor, with margins per square foot far exceeding any other game.

At Lousiana Downs in Bossier City, officials recently won approval to trade out low-margin video poker machines for slot machines, promising that purses at the track would increase nearly 70 percent with the change. The 1,726 slot machines that have been approved are expected to be installed by next July, said Ray Tromba, the track's general manager, on Friday. "It's going to be a big boost to our whole operation," Tromba said.

Vincent of GTech said that traditional VLT machines did not take coins or tokens, but instead paid out with vouchers that had to be validated by lottery officials. The traditional VLT also did not have spinning reels, he said, "but those distinctions, which were once very clear, are not clear at all today."

In Toronto, average daily overnight purse distribution at Woodbine racecourse has shot up over the past two years from $280,000 to $440,000 with the help of 1,700 slot machines. Each machine in the building produces $700 in net revenue a day, according to figures compiled by gambling companies, tops in North America.

Legislators in Toronto originally legalized traditional-style VLT's, but local regulators amended the plan so that Woodbine could operate Las Vegas-style slots.

"The traditional VLT's, the ones that don't drop coins but take vouchers, people just don't warm up to those like they do slots," said David Willmot, the chairman of the Ontario Jockey Club, which owns Woodbine. "People like to hear that sound in the tray, ka-chink, ka-chink."