Tom Noonan

The original post was published immediately after Governor Andrew Cuomo’s State of the State address on January 9.  The revisions reflect the actual statutory distribution of net revenues from the operation of the Aqueduct racino.

In his State of the State address, Governor Andrew Cuomo may have taken the first step in eliminating the VLT revenues that have been so crucial to the financial solvency of New York’s horse racing. In a lengthy speech that brought back memories of his father’s rhetorical flourishes, Cuomo only made two references affecting racing, but they were ones that could have the racing industry losing some sleep.

In discussing his proposal to bring non-Indian gaming to New York, he described “Phase I” as building three casinos in upstate New York, with no casino yet for the New York City area. The reason for this is the somewhat dubious rationale that New Yorkers would visit a casino and then start hiking the Adirondacks or bringing along their white water rafts. The troubling part of his idea, however, is the proposed split of casino revenues: 90 per cent would go to education, and the remaining 10 per cent to local governments.  Under the current law governing the racino at Aqueduct, the education fund receives 44 per cent of net revenues, the Lottery gets 10 per cent for its administration, 8 per cent goes to marketing, the VLT operator gets 22.75 percent and the remaining 15,25 goes to “racing support payments.”

If the constitutional amendment allowing up to seven new casinos – expected to be on the November ballot – is still a priority of the Governor, his “Phase I” proposal is one that may appeal to upstate voters because of the relief on municipal budgets and the job creation that would accompany the building and staffing of casinos. And since his proposal would not interfere with the increasingly lucrative revenues being generated by the Aqueduct casino that are so essential to the New York Racing Association, one may be lulled into a sense of complacency.

But there was another line in his speech that should also give the racing industry pause. The Governor said the state ‘may not get the right revenues” from the current racinos. Since the Governor has in the past questioned whether racing should get any revenues from gambling revenues as well as criticizing the differing percentages of net revenues from the racinos around the state, his State of the State may be the first foray at eliminating the revenue that now supports the racing industry.  In fairness, it should be noted that the “racing support payments” under the current law are taken from the vendor fee that goes to the Aqueduct VLT operator, and the Governor did not address the matter of how casino operators would be compensated.

So given that we have a Governor who has acknowledged knowing little about the racing industry, who has appointed a Chair of the NYRA Board with a similar acknowledged lack of familiarity, and who has only had negative views of the gambling revenues that go to the racing industry, I would say the industry has serious reasons to be concerned. This is not to say that the role of casino revenues and their impact on horse racing should not be a serious discussion, but the Governor may have again telegraphed his punches.