Vol. 5, No. 5, May 2008
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Let Horse Industry Run Its Own Race
Casino subsidies are not a long-term solution for the racetracks
Atlantic City’s casino industry recently agreed to give $90 million over three years to sustain New Jersey’s horse racing industry. In exchange, slot machines will not be installed at New Jersey’s racetracks through 2011.
Why did our industry agree to this subsidy? Because it beats the alternative. Slot machines at racetracks would have had a devastating impact on Atlantic City’s casino operators and threatened the significant growth planned for our industry.
Why were we “asked” to do this? That answer isn’t so easy, particularly when you consider the benefits derived from New Jersey’s casinos. The casino industry already employs more than 42,000 people who hold good-paying jobs with solid benefits. We generate more than $1.1 billion annually in taxes and fees, not to mention more than $2 billion spent every year on goods and services from businesses all across New Jersey (which generates another 20,000 jobs).
These economic benefits will increase significantly with the billions in capital investment planned in new and existing casinos. These investments will create thousands of construction jobs and permanent jobs for New Jersey residents.
By contrast, New Jersey’s horse racing industry—like its counterparts all across the nation—suffers from longstanding declines in its fan base. Is it good public policy to ask an industry that continues to be an economic engine for the state, with tremendous growth potential, to donate millions to prop up a dying industry that has done little to help itself? We’ve been told that the subsidy is justified because the introduction of casino gaming started the decline of horse racing.
We dispute this, and ask another question in response: Even if it’s true, why should any industry be penalized because it has proven public appeal? Capitalism is based on the principle that industries offering better products that attract more customers should reap the benefits. Ford and GM put a lot more horses out to pasture than casinos ever did, yet we’re handed a bill simply because we offer what customers want.
When the new agreement expires in 2011, the casinos will have spent $176 million on subsidies to the horse racing industry, yet in the race to become self-sustaining, horse racing is still stuck in the gate. In 2001, New Jersey changed the law to allow the tracks to build 15 off-track wagering facilities. The first opened last year and there are still only two. Nationwide, more than 88 percent of the wagers on thoroughbred races occur at OTWs; the success of the first two in-state OTWs clearly indicates a demand for these types of facilities.
Similar delays occurred in establishing account wagering, another potential revenue source. Wouldn’t sound public policy demand that the horse racing industry be held accountable for using the resources available before it receives another handout?
Horse racing proponents argue that the solution is slots at the tracks, but that flies in the face of what’s happening around the country. Live wagering on horse races and on-track attendance has been declining for decades. Even in states with slot machines at racetracks, attendance and live wagering have continued their downward spiral.
“There’s no correlation” between slots and the number of people attracted to horseracing, says George Sidiropolis, member of the West Virginia Racing Commission. “It’s inverse, in fact.” Massachusetts Governor Deval Patrick says he will not support slots at the racetracks because of the lack of economic impact (he does support full-scale casinos). The Kentucky legislature amended casino legislation to specifically remove provisions requiring casinos at racetracks. And live betting on horse races in Delaware has dropped 40 percent since slots came online in 1996.
More and more states around the country are realizing that slot machines at racetracks don’t produce the economic benefits of casinos and don’t increase attendance at horse races. They are merely providing a public subsidy to a dying industry at a time when there are many other higher priorities in need of funding.
That $176 million could have been invested in Atlantic City, creating new jobs in a growing, thriving industry. Isn’t it time for horse racing to find ways to grow its customer base, or adjust itself to the customer base it has?
Don’t ask a thriving industry to choose between two dismal options—either to subsidize a failing industry or face the threat of severe state-sponsored competition. It’s time for the horse racing industry to run its own race.
