Stan Bergstein's Daily Racing Form columns

With permission of Daily Racing Form,  Stan Bergstein’s bi-weekly columns for that publication will appear here every other week. 

December 13, 2005

Slots a bandage where surgery's needed

Jim Whelan, president of the Ontario Harness Horse Association, spoke at last week's Racing Symposium here in Tucson, and his remarks triggered sparks of memory.

Whelan said he perceives a growing antagonism between the province of Ontario, which operates slot machines at 16 tracks in the province, and the tracks and horsemen who benefit from them.

He said horsemen in Ontario are beginning to fear that racing will be pushed aside as the government looks for other ways to use the slot receipts.

As I heard Whelan's remarks, I recalled another speech, delivered on the same stage, at the same podium, three years ago.

That one was presented by Dr. Bill Eadington, professor of economics at the University of Nevada at Reno, and director for that school's Institute for the Study of Gambling and Commercial Gaming.

On that December morning in 2002, Eadington talked about the subject bothering Whelan: the economic and political dimensions of slot machines at racetracks.

He outlined the good news first: why racetracks were logical outlets for slot gaming. Here are a few:

* Gaming tax revenue has the benefit of being relatively voluntary, and thus more palatable than other more traditional forms of taxation.

* Existing track facilities can be converted to racinos with limited capital investment, in comparison with traditional casinos or riverboats.

* Tracks typically have good locations, with abundant parking and adequate means of entrance and exit.

* Profits from slots can be used to contribute to purses, making that state or province more competitive against others.

* Tracks can argue that slots level the playing field against the inroads of newly authorized forms of gambling.

Then Eadington put on his professor's cap and taught economics.

The real question, he said, and the one being raised more frequently these days, is why state legislatures should grant slots windfalls to tracks rather than to themselves.

He wanted to know the value of such franchises. One answer comes in Pennsylvania, where the licenses to be issued, hopefully in the life span of modern man, will cost each track $50 million, with some economists saying they are undervalued.

And then Eadington, disregarding the possibility of lynching from his racing audience three years ago, said this:

"The demand for racing remains weak for various long-term reasons. And the efforts to authorize slot machines at racetracks do little to address these fundamental reasons dealing with the inherent popularity or absence of popularity of racing among the general public.

"The economics of racing make it unviable and unsustainable in many existing markets. In all likelihood the industry will continue to shrink as it has over much of my lifetime. Slot machines at racetracks turn racetracks into casinos much more than just enhancing the attractiveness of racing. If you have slot machines at racetracks you really don't have racetracks anymore, you have casinos that happen to have animals that run in circles."

It is inevitable, Eadington said, that someone is going to notice the profits and want them redistributed to their causes.

"In the broad scheme of things," Eadington said, "I suspect some legislators are going to notice that the beneficiaries are perhaps not their core constituencies."

Having fired that salvo, Eadington returned to better news.

"Political processes are not necessarily rational," he said, "and once passed laws are often characterized by inertia. It's much better to have a law in place than trying to get one started, and so there may be tremendous advantage to getting the legislation passed and then, just as in lifeboat theory, try to keep everybody else out of the lifeboat."

His advice to racing on getting legislation passed was to assure governments of a substantial portion of gross gaming revenues, to make them partners. He urged being proactive in developing responsible gaming programs. And he said the racing industry needs to view subsidies for racing from slots as temporary and as a platform to allow racing to move to an independently sustainable level.

"If the racing industry is going to survive in the long term at any semblance of what it looks like now, it is going to have to resolve its issues of how to develop customer base, how to establish loyalty programs, how to create sustainable demand," Eadington said.

Belling that cat, of course, is our job, not his, but what he said three years ago is resounding these days in halls far beyond Tucson.