Other States' 'Racinos' Set High Hopes
| June 28, 2009 In 1994, the Delaware Park horse-racing track was a sleepy venue catering to Delaware's dwindling population of horse enthusiasts and struggling to stay in business. Although the Delaware in this case is the East Coast state, not the Ohio city, the plight of the racetrack about 30 miles southwest of Philadelphia is familiar to Ohio equestrians. After Delaware legislators passed a law in 1994 allowing electronic slot machines at racetracks, Delaware Park added more than 1,400 employees to its staff of 75 and became a $20-million-a-month cash machine for its home state. Gov. Ted Strickland is hoping for a similar result in Ohio. After years of resisting the idea of slot machines in the Buckeye State, the governor has gotten behind a proposal that could bring 12,000 slot machines to the state's seven racetracks. Strickland aides said the machines could generate $409.9 million in annual revenue for the state, along with $455 million in one-time franchise fees. The experiences of Delaware, New York and other states with "racinos" -- racetracks that include electronic slot machines -- suggest that Strickland's proposal could hit its target. Delaware's three racinos have 8,057 slot machines. Last year, the terminals took in $586.9 million, of which $210.6 million was turned over to the state as taxes. Ohio's seven racetracks would have 5,600 to 12,200 slot machines. State officials have neither disclosed how much the wagers would be taxed nor how much would be handed out in winnings. Although racetracks with slots are not recession-proof, they have outperformed most other types of gambling. Revenue at Delaware's three facilities dropped 4.2 percent from 2007 to 2008, although most other states saw increases. Ohio's seven locations, while struggling as horse tracks, could thrive as casinos, experts said. "They would certainly change from being racetracks to being casinos that occasionally have racing at them," said Mark W. Nichols, chairman of the Department of Economics at the University of Nevada at Reno. The nation's most lucrative racino, the Yonkers Raceway in New York, was a century-old horse track with a shrinking clientele before New York lawmakers allowed slots at racetracks in 2005. In 2008, Yonkers earned more than $486 million; it now features live music, a fancy steakhouse and Wheel of Fortune slots where players can wager up to $100. "There's no doubt that without the games, Yonkers would not have survived as a racetrack," said Frank Drucker, a spokesman for the racino. Yonkers has thrived even in the recession. Figures from the New York Lottery, which oversees slots gambling in the state, show that players wagered $608 million in May, compared with $389 million in May 2007. But Ohio's seven racetracks may not have the market to themselves. A major gambling company, Penn National Gaming Inc., is forging ahead with plans for a November ballot initiative that would authorize casinos in downtown Columbus, Cleveland, Cincinnati and Toledo. Each of those cities also has at least one racetrack nearby. Bob Tenenbaum, spokesman for the four-casino initiative, said that while his group hasn't studied the potential impact of Strickland's slots proposal, there's no reason to believe that Ohio couldn't support both. Nichols agreed. "Even if you put in four downtown casinos and seven racetracks, you're still talking about 11 casinos for 11 million people," the economist said. "You're not at a saturation point." Some of the supporters of Ohio's slots-at-racetracks plan, however, said they are concerned that full-fledged casinos -- which would include roulette, card and other table games -- would wipe out the market for the slots-only horse tracks. "It closes every track in the state, except maybe one," said Jerry Knappenberger, general manager of the Ohio Harness Horsemen's Association. He said the 3 percent of the casinos' net profits that would be allocated to the Ohio horse industry "would not offset the cannibalization the casinos would do to the racetracks." Supporters of the racetracks noted that the four-casino plan would tax revenue at 33 percent, compared to 50 percent for the racetracks' proposal. The group behind the proposal for downtown casinos estimates that it would generate $651 million a year for public purposes, with the earnings distributed to counties based on population. |
