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Horse track operators and breeders are concerned the good times might be trotting to a close as some states move to rein in a lucrative subsidy that has helped prop up their long suffering-industry.
Twenty states, including Ohio, divert a slice of casino and slots parlors revenue to help boost horse racing prize money, according to the American Gaming Association.
Bigger purses, the thinking goes, will draw the top level horses and generate more track bets, helping revive the once-popular industry.
But facing budget deficits and out-of-state casino competition, some lawmakers are reassessing.
“Every local track and every local horsemen’s group is always worried about that,” says Christopher Scherf, executive vice president of the Maryland-based Thoroughbred Racing Associations. “Politicians see someone has money, and they figure they can use it. That’s what they do.”
Generally, the racing subsidies call for diverting a percentage of table game and slot machine revenues to a state fund with strict guidelines for how the money is spent.
And although there has not been any talk of removing the racing subsidies in Ohio, Hollywood Gaming at Mahoning Valley Race Course in Austintown is among the gaming facilities that contribute revenue to the horse racing industry.
“All Ohio casinos subsidize the horse-racing industry. Horse racing benefits from the state’s four full-service casinos, as well as the seven racinos. A percentage of the industry’s funds flows from Video Lottery Terminals,” Ohio State Racing Commission member Mark Munroe said.
Bob Tenenbaum, spokesman for Penn National Gaming Inc., which owns and operates the Austintown racino, said the state requires each racino to have a contract with either the Ohio Horseman’s Benevolent and Protective Association, which covers thoroughbred racing, or the Ohio Harness Horseman’s Association, which covers harness racing.
Tenenbaum said each racino has a separate contract with the appropriate horseman’s association. He said Hollywood Gaming at Mahoning Valley Race Course contributes between 9 and 11 percent of its VLT revenues to the OHBPA, but the actual number has not been released publicly. He said not all of Penn National Gaming’s racinos have finalized their contracts, noting Hollywood Gaming at Dayton Raceway is still negotiating its contract with the OHHA.
He said the constitutional amendment passed in November 2009 that allowed for four full-service casinos to be built in Ohio contains a provision that a percentage of the casinos’ gross gaming revenue be used to subsidize the horse racing industry.
Penn National Gaming owns and operates Hollywood Gaming in Toledo and Hollywood Gaming Columbus. The other two casinos are the Horseshoe in Cleveland and the Horseshoe in Cincinnati.
Tenenbaum said the casinos pay a 33 percent tax on their gross gaming revenue, which he said involves a complicated formula, but in simple terms, is the difference between a casino’s bet total and its payout. Of that 33 percent, 3 percent goes to the Ohio State Racing Commission, which decides how to use those funds.
But in other states, the subsidy is much higher.
Massachusetts, for example, gives 75 percent of the money to the thoroughbred racing industry and the rest to harness racing. The two industries must then dedicate 80 percent to racing purses, 16 percent toward races reserved for Massachusetts-bred horses and 4 percent to health and retirement benefits for industry workers.
Such subsidies are a critical lifeline for racing, which has seen steady declines across a number of industry metrics, including the number of races and racing horse births and overall betting activity, according to data from the Jockey Club, a leading industry group.
Few tracks even keep attendance numbers anymore because the numbers of spectators has dropped off so dramatically, experts say.
Nevertheless, there was over $1.1 billion in prize money available in 2014, thanks in large part to the racing subsidies, which generated over $400 million toward purses that year, according to the Thoroughbred Racing Associations.
Louis Raffetto, a longtime racing executive, says the subsidy is a small price to pay to preserve thousands of jobs at tracks and farms.
“It’s minuscule, in the grand scheme of things. The economic benefit is well worth those short dollars,” says Raffetto, who is helping coordinate three “festival” thoroughbred race days at Boston’s Suffolk Downs.
The move to curtail the subsidies is playing out in some of the earliest states to offer them.
In New Jersey in 2011, for example, Gov. Chris Christie ended a direct, $30 million subsidy to the racing industry from the Atlantic City casinos. Lawmakers in neighboring West Virginia also have pared back the percentage of slot machine revenues diverted to the industry in recent years, leaving owners and breeders there anxious.
“We just don’t know what they’re going to do,” says Karen Painter, who owns Blue Spruce Farm in Kearneysville with her husband. “We’re dealing with people that don’t always understand the contribution the equine industry as a whole has on the economy.”
The debate has played out in Iowa, Indiana, Delaware and elsewhere too.
In Pennsylvania last year, state Rep. Todd Stephens proposed redirecting $250 million from the state’s horse racing fund to public schools, noting that a Saudi prince and other wealthy foreign horse owners were among the beneficiaries of the inflated prize money.
“It’s not government’s job to pick winners and losers,” Stephens said this week. “I generally oppose crony capitalism and corporate welfare-types of programs.”
Animal welfare activists also dislike the subsidies, suggesting they encourage owners chasing high purses to keep running horses that are vulnerable to injury, a claim dismissed by the industry.
Sal Sinatra, president of the Maryland Jockey Club, which oversees Baltimore’s Pimlico Race Course, home of the Preakness Stakes, says the industry risks losing the subsidies unless they can show lawmakers they’re committed to investing in and growing the industry. “Otherwise, it just looks like you’re throwing good money at bad,” he said.
In Massachusetts, the subsidies have come to the fore because the owners of Suffolk Downs, New England’s last thoroughbred track, want to redevelop the property, leaving the industry without a home.
Horse owners and breeders hope lawmakers allow them to use proceeds from the racing fund to build their vision of a new equestrian center and racetrack.
“Massachusetts is an extreme case. You’ve got all this money coming in and really nowhere for it to go,” says Kathy Guillermo, of People for the Ethical Treatment of Animals. “It begs the question: Why are we continuing to sink millions of dollars in an industry that’s shrinking?”