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Wednesday, June 06, 2007

Bailing Out The Bailing-Outers

- A bill has been introduced in New York to again reduce the effective tax rates on racinos in the state; I've posted about the problems that the current rates, the highest in the country, are causing for some tracks here and here.

The tracks are contending that, despite an 8% marketing allowance, they do not have enough money left over to market their casinos through advertising, entertainment, and comps; and therefore cannot compete with Indian casinos and racinos in surrounding states.

[Tioga Downs President] Bob Farinella says, “If you look at the gaming industry across the US, casinos generally invest from 13% to 20% in marketing, so at 8%, we're really low on the totem pole. So we've recommended that be increased to 10%. [WSYR-TV, Syracuse]
The New York Times reported yesterday that the bill has support in the Senate; but that backing is not unanimous, and the article states that critics of the proposal say the state should not have to keep bailing out failing racinos, which will face ever growing competition as more casinos open.

It's more than just a bit jarring to read about bailing out racinos so early in the game still, with much more competition on the way. I thought that the racinos were supposed to be the bail-outers, not the bail-outees. Jeff Gural, the owner of Tioga and Vernon Downs, claims to be losing $12 million a year, and says he will have to close the tracks without a lower rate. (Though if that's the case, why is Vernon Downs raising their purses by 15%???) Joe Faraldo of the Standardbred Owners Association, opposes the bill because it doesn't specify the horsemens' share.
Mr. Faraldo, who has clashed with Mr. Gural, says it was a “bad business decision” to open the Vernon and Batavia racinos so close to Indian casinos. He added that the state should not have to bail them out.
But the most interesting part of the Times article are the details provided as to the current win per machine figures at various racinos.
In April, Tioga’s average daily “win” per machine was only $159, far below the $262 average of the nine states on the East Coast that have machines and well behind Yonkers’s $192 and Saratoga’s $258, according to the Gaming Industry Observer, a consulting company. The “win” is the 8 percent of the money gambled at each machine after 92 percent is paid out in prizes.
In one sign of the industry’s health, New York racinos average the lowest daily win per machine — $177 a day — of the nine states on the East Coast that permit slot machine gambling, according to the April survey by Gaming Industry Observer.

The machines at the Delaware racetracks generated an average of $240 a day, compared with $264 at Atlantic City casinos and $352 at Foxwoods and Mohegan Sun in Connecticut.
All of the bidders for the New York franchise are projecting win per machine rates at Aqueduct far in excess of the current average for New York; indeed, at $400 or more, higher even than the top figures at Foxwoods. I wonder how realistic those numbers are, given the fact that Yonkers is only averaging $192 with no other competition in the city as of yet. And, as we've pointed out many times, the onslaught from Pennsylvania has only just begun, with two standalone slots parlors to come in Philadelphia, to name just two.

And speaking of Pennsylvania, with table games in West Virginia still to be decided - (the first two referendums, affecting Wheeling Island and Charles Town - will take place this weekend), already there's a bill being introduced to permit table games there. While it's not expected to go anywhere now, before even the VLT parlors have all been opened, it's a first shot in an effort that we all know will continue, and accelerate if and when the games are approved in West Virginia. It's just a matter of time.

1 Comment:

Anonymous said...

Alan, thanks for keeping these critical NY racing money issues front and center on LATG. The new franchise agreement needs to: (1) lower tax rates at the racinos; (2)Bring the OTB's into the franchise fold; and (3)Eliminate or at least lower pari-mutuel taxes at the track to induce greater on track attendance. Would also love to hear an imaginative solution to the premature retirement of the best 3 YO's which prevents racing from developing a more loyal following.We need our "stars" racing for 3, 4, and more seasons to develop a fan base! /S/ Green Mtn Punter