New York budget boosts slot revenue to tracks

The New York legislature passed a budget on Thursday that includes provisions to increase revenues to racetracks from slot machines and to provide guarantees to the New York Racing Association's business partner in a long-stalled casino project at Aqueduct.

Under the budget, tracks that operate slot machines will get 32 percent of the first $50 million in annual revenue, 29 percent of the next $100 million, and 26 percent of any revenue above $150 million. In addition, the budget gives most tracks, with the exception of Yonkers and Aqueduct, additional money for marketing and advertising expenses - 8 percent of the first $100 million in slots revenue and 5 percent of the revenue above $100 million.

Yonkers and Aqueduct, which have not opened slot-machine casinos yet, would receive 4 percent of all revenue for advertising and marketing. The casinos at those tracks, which are in the New York City metropolitan area, are expected to be the highest slots revenue generators in the state. Aqueduct is one of three tracks operated by NYRA.

The budget includes a guarantee that the contract held by NYRA's business partner, MGM Grand, to develop a slot-machine casino at Aqueduct will not be threatened if NYRA loses its franchise to operate Aqueduct, Belmont Park, and Saratoga. NYRA's franchise expires on Dec. 31, 2007, and the political contest surrounding the renewal effort is expected to be bitterly contested by racing and gambling companies intent on getting a share of the slot-machine revenue.

Slot machines were legalized at eight New York tracks in 2001, but since then only four have opened slot casinos: three harness tracks - Fairgrounds Gaming and Racing in Buffalo, Saratoga Harness Raceway, and Monticello Raceway - and one Thoroughbred track, Finger Lakes. Two other harness tracks, Batavia Downs and Vernon Downs, have not opened casinos.

Combined revenues from the four track casinos have been below projections, and casino operators have blamed a lack of funds to market and advertise the facilities in the face of competition from nearby Native American casinos. Under the original law, a flat 29 percent of slots revenue was earmarked for the racing industry, including money to cover advertising and marketing expenses.

Charles Hayward, the president and chief executive officer of NYRA, said Friday that he expected the budget to go through several revisions before being signed by Gov. George Pataki, who has indicated that he opposes several elements of the slot-machine provisions. But Hayward said he was confident the budget would survive in a form that would allow Aqueduct to begin construction on its casino.

"I think that the entire industry - the Thoroughbred tracks, the harness tracks, the horsemen, the owners, the breeders - are in agreement that this is a good bill," Hayward said. "We think there will be some changes, but we still think that a good bill will eventually pass."

Hayward said that Aqueduct would likely have a casino open by the summer of 2006 if the bill is passed in a satisfactory form. Gov. Pataki has until April 12 to approve the budget, but he is expected to press for some changes.

Under the budget, subsidies for purses will be provided through agreements between the racetracks and horsemen's associations. Under the original law, horsemen were guaranteed a portion of the 29 percent of slot-machine revenue retained by racetracks, but that provision was ruled unconstitutional last year by the New York Supreme Court, which held that slot-machine proceeds could not be used to provide subsidies for racing. The budget does not specify that horsemen will get a percentage of slots revenue. But Hayward said that NYRA and its horsemen are working on a contract that would spell out the contributions horsemen would receive, likely to be about 8 percent of total slots revenue.