The Press of Atlantic City analyzed the key issues related to New Jersey racetrack subsidies and the proposal of placing slot machines at the tracks. Here are some of the facts and discussion points that are part of the debate.
What’s being proposed with slots at racetracks?
- Racing officials want casino-style slot machines or state lottery-run video gaming terminals, which operate like slots, at the tracks. The slots revenue would subsidize purses, the money paid to winning horse owners.
- Casinos oppose racetrack slots, saying in-state competition would hurt them.
- Some in racing contend video lottery terminals, or VLTs, would not require the constitutional approval that traditional slot machines would. But opponents likely would challenge the lack of a public referendum in court.
- Horse-racing industry officials claim racetrack slot machines would raise $1 billion in revenue, based on Pennsylvania tracks’ experience.
- A 2007 Christansen Capital Advisers report estimated VLTs would raise $433.5 million.
- Racing officials propose splitting racetrack slot revenue equally among state government, the casinos, track operators and horse owners, breeders and trainers. In Atlantic City, casinos keep about
91 percent of winnings after paying an 8 percent tax and a 1.25 percent reinvestment obligation.
What do the casino-racetrack purse-subsidy agreements provide?
- Two agreements commit the casino industry to $176 million in direct payments and reinvestment credits over seven years to subsidize race purses. In return, the state and racetracks agree not to pursue slot machines through 2011.
- The first deal, which ran from 2004 to 2008, provided $52 million in reinvestment credits and $34 million in cash. The second, three-year agreement directly provides $90 million.
- Atlantic City Race Course, which offers hardly any live racing, was not included in the subsidy agreements.
- The casinos were provided a tax break on free-play credits provided on slot machines in Atlantic City. The 8 percent casino revenue tax is charged on only the first $90 million in slot credits provided industrywide each year.
What are the arguments for and against subsidizing racetracks?
- Subsidy supporters say farms and horse breeders depend on racing and might have to sell their farms to developers if racing declines further.
- Opponents say higher purses do not attract more horse bettors, that people prefer other forms of gambling.
- Supporters say the casinos hurt racetrack business and should take care of the tracks.
n Opponents say that’s how the free market works and one industry should not have to subsidize another.
What is racing’s impact on New Jersey’s horse industry?
- A 2007 Rutgers University Equine Science Center report estimated the entire horse industry, including individuals who own a single horse for riding pleasure, generates $1.1 billion per year in direct and indirect economic activity, including federal taxes paid. Racing accounts for $764 million of that money.
- The report said the horse industry generates nearly 13,000 direct and indirect jobs. Racetracks provide 2,048 direct jobs and 1,772 indirectly.
- New Jersey Labor Department data identify only about 1,500 jobs statewide in the racetrack and horse industries, with an unknown number scattered in industries that include amusement parks and stage performances.
- Racing facilities make up a minority of the equine industry’s land and operations, the Rutgers report showed. Racing accounts for 22 percent of horse operation income, 19 percent of land dedicated to horses and 4 percent of all New Jersey farmland. Also, racing is the primary function of only 22 percent of horse operations.
What kind of political influence do the horse and casino industries have?
- Casinos are supported by state legislators in southern New Jersey, where the industry has a significant economic impact. Horse owners and racetracks have support in northern New Jersey, where the New Jersey Sports and Exposition Authority runs the Meadowlands complex, and in agricultural/racetrack areas of Monmouth County and central New Jersey. Racing has a strong backer in state Senate President Richard J. Codey, D-Essex.
- Horse industry and racing interests have contributed $1.1 million in campaign funding to state legislators in the past decade, according to Press analysis. Casinos are prohibited from making state and local political contributions.
- Casinos, like the racing and horse industries, have lobbyists working in the Statehouse.