06/05/2007 11:00PM

Slots no bonanza for N.Y. tracks

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Revenue from slot machines at most New York racetracks have failed to approach the projections of the companies that operate the casinos, according to the tracks themselves and figures compiled by the administrator of the machines, the New York Lottery. The pattern has led the tracks to begin to seek a larger share of casino revenue from the state.

Casino officials blame the state's tax structure for the smaller-than-anticipated revenue, contending that the state's 60 percent take of net casino revenue provides few incentives to invest heavily in facilities that can offer the same amenities as nearby Indian casinos and casinos in neighboring states, which are taxed at a lower rate. The failure of the casinos to hit their projections, however, may also indicate that the market in the Northeast for slot-machine-type gambling has evolved to the point where casinos are no longer a surefire path to instant riches, both for the states that authorize the machines and the casinos themselves.

According to the figures, through the first five months of 2007, only two racetrack casinos, Finger Lakes Gaming and Raceway in Farmington, N.Y., and Saratoga Gaming and Raceway in Saratoga Springs, are posting an average daily win per machine that nears the projections of the operators, according to a simple calculation of dividing the casino's net revenue figures - which are posted on the New York Lottery's website - by the days in the year and the number of machines. (Win is the net revenue produced by a single machine.)

Elsewhere, the per-day figures are languishing well below projections. By far the biggest surprise is Empire City at Yonkers Raceway, where the per-machine figure through the first five months of the year is approximately $172 for 5,500 machines, in contrast to projections that the casino would likely post $400 per-day figures because of its proximity to New York City. In addition, the casino at Vernon Downs in upstate New York is reaping approximately $101 a day from each machine, a figure that has led the operator of the track to threaten to close unless the facility is granted tax relief.

Because of the casinos' poor performances, the operators have begun to lobby for an additional allowance to provide for marketing expenses and capital improvements, which would in effect cut into the share retained by the state.

Under legislation that was amended in 2004, racetrack-casinos are allowed to keep 32 percent of the net revenue from slot machines, although about 30 percent of that total is typically distributed as a subsidy to horse owners and breeders. With the exception of Yonkers and a yet-to-be-built casino at Aqueduct, operators are also allowed an additional allowance of 8 percent of the total net revenue on the first $100 million of revenue to pay for marketing programs. The allowance drops to 5 percent of any revenue above $100 million. Because Yonkers and Aqueduct are so close to the New York metropolitan area, legislators allowed those two facilities to retain only a 4 percent marketing allowance.

Ron Sultemeier, the president of Delaware North Gaming and Entertainment, which owns the casino at Finger Lakes and operates the casinos at Saratoga and Fairgrounds in Buffalo, said that three factors were contributing to the poor performance of New York's eight racetrack-casinos: local competition, the limited investment made by many racetracks in their casinos, and the inability of casinos to operate true slot machines. Under the current law, casinos offer so-called video-lottery terminals, which are electronic versions of lottery games that look and play much like slot machines.

"The build-out was limited in almost all the cases," Sultemeier said. "There wasn't much built in the way of amenities. They're all decent facilities, but nothing to knock your socks off."

Charles Degliomini, a vice president of Empire Resorts at Monticello, said the legislature needs to revisit the tax structure so that casinos can retain a higher marketing allowance and fund capital improvements through earmarked percentages. He argues that the state and casino would both benefit from higher revenue if the casinos were allowed to retain more of the revenue.

"The more money we can plow into the business, the more we can offer to our customers, and the more we can produce for education," Degliomini.

Rep. Gary Pretlow, a Democrat who represents Westchester County, where Yonkers is located, said that legislators will likely have little sympathy for the casinos.

"Where was it written that this was a risk-free business?" Pretlow said. "When you tell me that Vernon Downs is threatening to close, my answer is that [the operators] knew what they were getting into. They agreed to this legislation. And where is this money supposed to come from? Education? I don't think anyone wants to vote for that."

New York Sen. Bill Larkin, the chairman of the Senate's gaming and racing committee, is leading the effort to develop a bill that would help the tracks, but the legislation is only in draft form and has not yet been introduced. New York's legislature is scheduled to adjourn on June 21.

"I think we've got a shot if they understand that we'll all be better off if we get a bigger share and they force us to spend it," Sultemeier said. "We're hoping that that will sell."