04/11/2002 11:00PM

Takeout idea can take a hike


Earlier this year, a proposal to raise the takeout in California to fund a useless series of statebred races justifiably died amid outrage and ridicule. Now the raise-the-takeout crowd is back again with a proposal for an increase because owners and trainers are facing higher workmen's compensation rates from insurance carriers.

This latest idea has generated far more support, and from people who should know better, but should be quashed just as quickly. It is time for the industry to stop thinking about picking its customers' pockets every time a new financial challenge comes along and to stop trying to pass it off as a routine consumer price increase.

California horsemen supporting the increase have resorted to that argument, saying that the retail price of everything else goes up over time, so why not takeout? This bogus analogy confuses the structure of a wagering system with routine inflation.

All forms of organized gambling have an underlying structure where the house pays back a fixed percentage of what the customers bet. If you bet sports with a bookmaker, he pays out $20 for every $21 he takes in, holding 4.54 percent. Slot machines are set to retain between 5 and 10 percent of what is put into them. State lotteries keep around 40 percent of the handle.

The costs of operating those businesses go up every year, but they don't change the odds to make up the difference. No casino has decided that your 21 no longer beats a dealer's 20 at the blackjack table because its insurance costs are rising. You cover constantly increasing costs by increasing handle and taxing it at the same rates, not by raising the odds against the customer.

Racing alone fails to understand this. While the odds on other games stay the same, racing has doubled takeout from roughly 10 to 20 percent over the last 50 years. Applying the logic of the raise-the-takeout brigade, that's exactly as it should be and it won't be unfair if the vigorish doubles twice more in the next century and the house gets to keep 80 percent of the handle. Every winner will pay $2.40 but the insurance bills will get paid.

California already takes a much bigger share of handle than most state governments carve out for themselves, and this unwarranted slice should be the first target if the industry truly needs emergency relief. Of course, it takes a lot more work to convince legislators that the antiquated system of taxing handle rather than profits should be reformed than it does to propose gouging a faceless mass of under-represented citizens. The most disturbing thing about these routine calls to raise the takeout is the offensive idea that it's relatively painless for the customers, because horseplayers are supposed to be too stupid to figure out that they're being robbed of millions if you just take a few pennies at a time.

Illinois tracks differ in approach

Enlightened tracks in jurisdictions such as New York and Kentucky are working to reduce rather than raise takeout, and rate reductions have spurred handle as they always do. An interesting and unintentional laboratory experiment of sorts is taking place in Illinois, where two tracks have taken different approaches to giving back more to their customers.

Hawthorne Park in Stickney, Ill., took the traditional approach to the issue, reducing the hold on straight bets by 2 percent.

Sportsman's Park, literally across the street but technically in Cicero, Ill., is instead giving cash or merchandise directly back to bettors through a rewards program that is effectively a rebate on their handle.

It's a classic case of consumer perception and pricing, similar to when an auto dealer offers $600 cash back instead of dropping the price of the car by $1,000. The takeout reduction actually "refunds" more money to the customers as a whole, but the customers at Sportsman's seem to think they're getting something extra. Sportsman's has a large and appealing redemption center just inside its entrance where accumulated wagering point can be traded in for everything from T-shirts to DVD players or cold cash.

"I know I'm doing better in the long run with better prices on the reduced take at Hawthorne," one Chicagoland regular said at the Illinois Derby last weekend, "but I just got my second $200 voucher of the meeting at Sportsman's, and it feels like free money."

At least both programs are headed in the right direction. If California offered a choice, it would probably be between paying higher takeout over time or charging all the customers a one-time assessment to cover those workmen's compensation costs.