Decoupling: ‘Subsidies’ Is A Dirty Word For Some, The Perfect One To Others

The way someone talks about decoupling in horse racing will almost instantly tell the listener whether that person is for or against it. A panel at the Racing and Gaming Conference At Saratoga Aug. 16 struggled to agree even on how to refer to the money given to racetracks by casino companies – are they subsidies, or aren’t they? And should they continue?

There was a time when casino companies and racetracks were competitors, but about 40 years ago when casinos began expanding, casinos made a deal with the racetrack ownership in the state where they wanted to build – allow us to coexist, and you can have a share of our revenue. Most of the time, that money goes into purse accounts and may sometimes be transferred to offset the use of a racetrack’s physical plant, in the case of tracks that are host to casino games.

Marc Dunbar, a Florida-based shareholder of Dean, Mead and Dunbar, said he has worked for racetracks and casino companies alike and watched decoupling contribute to the end of greyhound racing in Florida. The shift was small at first, Dunbar said – at first, poker rooms were authorized to operate but only on live racing days, then on dark days. The same thing happened with simulcast – at first harness tracks had to race year-round in order to import signals year-round but over time they were able to cut back live racing by about two-thirds.

“Lawyers like me and others came up with alternative ways to race horses and still meet the statutory minimum,” Dunbar acknowledged. “Decoupling is here to stay.”

Once casinos no longer have to give a portion of revenue to purse accounts and their licenses are no longer dependent on the existence of live racing, they’re able to shed live racing from their business plan. That’s a good thing for many of them, because live racing isn’t all that profitable. It was ultimately a partnership between animal rights activists and casinos that made Greyhound racing in Florida illegal, according to Dunbar, and he believes that partnership could happen again to eliminate live horse racing.

While those looking from the outside in call those payments from casinos to racetracks “subsidies,” that’s not a comfortable term for those inside the racing industry who want to preserve that cash flow. Thinking about those legally-required payments as subsidies isn’t a good look for the racing industry, according to Sharon Ward, policy and communications consultant and former director of Pennsylvania’s Budget Office.

“Pennsylvania is not like New York,” said Ward. “There is no glamor, no parades, and no people in fancy dress. There are very few people taking their kids on a Sunday outing to the racetrack. It has a very different market. The allure that surrounds horse racing and has for a long time doesn’t exist, certainly, in Pennsylvania. By every measure, it’s declining.”

From the perspective of a taxpayer, said Ward, it’s hard to justify allowing horse racing to continue getting subsidies from casinos, because they could rightly view that as money that would otherwise be paid to the state in taxes. Ward’s calculations find about $15,000 in benefits per horse to owners through casinos, while state subsidy programs to college students only amount to about $5,000 per student. Even industry-generated figures totaling jobs and economic impact generated by racing pale in comparison to other industries in Pennsylvania, like tourism, which Ward says aren’t given the same government-mandated cash flow. The fact that owners are among the direct beneficiaries of increased purses, and yet don’t expect to make a profit on their racing stable almost makes the system more problematic, in Ward’s view, as she likened it to the state diverting funds to someone to support maintenance of their sailboat or fishing equipment.

“Most businesses have to make a profit, and if they don’t, they have to change their business model to make a profit,” said Ward. “Why haven’t you? Or, I guess you have, by getting taxpayer subsidies.”

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“What about the people you’re taking this money from?” asked Joe Faraldo, president of the Standardbred Owners Association of New York and director of the U.S. Trotting Association. “What about those grooms, what about those guys who sell food outside the Plainfield Avenue gate at Belmont Park?

“There are guys in our industry that want to get rid of racing (these are mostly private track owners on the harness side) because if they get rid of racing, they get rid of a lot of the costs and a lot of the problems they have with racing. That’s a horrible thing, and it’s going on.”

Joe Appelbaum, president of the New York Thoroughbred Horsemen’s Association and NYRA board member, acknowledged that there is great variability from one state to the next as far as the health of their racing industries and the economic impact of those industries. He expressed frustration, however, that so much casino revenue had gone into purses over the years and not into developing new ownership or capital projects at many tracks.

Many of the usual arguments from the industry, like its ability to preserve jobs and green space in urban areas, aren’t compelling to state legislators like they used to be, according to Dunbar. He said he routinely had Florida legislators ask him why The Stronach Group didn’t give up on racing at Gulfstream and build condominiums on the valuable real estate there.

“We have to be real that we are going to go through a contraction in order for this game to survive another 100 years,” Dunbar said.

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