FRANKFORT—Gov. Steve Beshear set out a plan on Tuesday to allow slot machines at eight existing Kentucky racetracks, sweetening the deal with tax breaks.
Under Beshear's plan to use video lottery terminals to bring in more money for racing purses and state revenue, the two Lexington tracks — Keeneland and The Red Mile — would share a gambling facility. A VLT facility for one other track would be approved later by the Kentucky Horse Racing Commission.
The site for that final track has not been determined, said Beshear spokesman Jay Blanton.
The details came just six days before a special legislative session is to begin.
Beshear anticipates that his plan would generate about $796.7 million from wagering. About $298 million of that would go to the state's General Fund, which pays for most state programs, in its first year of operation.
The plan also would give taxpayers relief in the form of motor vehicle property tax credits, sales tax exemptions and a tax break for active-duty military personnel.
The fate of the plan is uncertain at best.
House Speaker Greg Stumbo, D-Prestonsburg, said Beshear's bill makes few changes administratively to legislation he proposed earlier this year, relying on the Kentucky Lottery Corp. to run the program.
"There are fairly significant changes, however, on the public policy side, which determines how and where the revenue should be spent," Stumbo said.
House Licensing and Occupations Chairman Dennis Keene, D-Wilder, said, "This is going to be a tremendously difficult vote for many of our legislators, and the legislation must be more palatable for our members."
He said the General Assembly "will improve upon the fine work of the governor."
Senate President David Williams, R-Burkesville, has said he sees no sentiment for the measure in the Senate and does not think the House will pass it.
He had no immediate comment on the specifics of Beshear's proposal.
The Kentucky Horse Racing Commission, which is appointed by the governor, on Tuesday endorsed Beshear's call for slots.
Under Beshear's proposal, the commission could see a several-fold increase in its annual budget, which is now about $3 million, as additional millions from slots would be forwarded by racetracks.
"The KHRC has been chronically underfunded and understaffed, which impairs its ability to regulate the industry and fulfill its statutory mandates for all breeds, and Governor Beshear's bill provides a source of funding," the commission said in its endorsement.
Martin Cothran, of Say No to Casinos, called the governor's proposal unconstitutional and said Beshear has gone back on promises he made during the campaign.
"The governor has basically broken two promises to voters in one day," Cothran said.
He said Beshear, during his 2007 campaign, said voters would decide whether they wanted expanded gambling. Cothran said when voters gave the green light to establishing the Kentucky Lottery in 1988, they thought the provision limited gambling only to the lottery.
Cothran said he is confident the legislature will not approve Beshear's plan.
The group has warned Beshear that if the bill passes, it will take the issue to court. It contends a constitutional amendment approved by the people is necessary to put VLTs at the tracks.
Generous to racetracks
Beshear said his plan is needed because "Kentucky's signature horse racing industry is in a state of crisis."
"I believe my proposal will help level the playing field for Kentucky's horse industry and help retain the 100,000 jobs and $4 billion economic impact that Kentucky enjoys as a result of horse racing," he said in a statement.
"It will also, ultimately, help generate some much-needed funds for the state during these difficult economic times."
Beshear's proposal is initially more generous to racetracks than the national industry average in terms of how much net revenue they keep for themselves.
For the first five years, following state taxes and payments to the horse industry, Kentucky racetracks would get to keep about 59 percent of earnings, compared to an industry average in other racino states of about 51 percent. After five years, when Kentucky's tax rate rose, racetracks would get to keep about 49 percent.
States that are less generous with their racetracks include West Virginia and Pennsylvania, both of which let their tracks keep only 45 percent of earnings.
Under Beshear's plan, 14.5 percent of the net terminal revenue — the amount wagered minus the payout — would be used for purses.
One percent of net terminal revenue would go to the Equine Breed Authority, which would promote non-racing breeds and economic development opportunities in the horse industry.
Under Beshear's proposal, each track facility would pay an initial application fee of $25,000, plus additional license fees based on VLTs at each facility. That would generate $360 million for the state's General Fund. Licensing would be for 10 years, with subsequent five-year renewals.
Gifts for taxpayers
Kentuckians would see some of their taxes cut beginning next January as part of the proposed plan.
Beginning Jan. 1, taxpayers would save an estimated $30 million through an individual income tax credit equal to 50 percent of the state property tax paid on registered motor vehicles, not to exceed $500 per tax year.
Starting the next year, all active-duty military pay would be exempt from individual income tax, an estimated savings of $18 million for eligible taxpayers. Currently the exemption applies only to personnel serving in a combat zone such as Iraq or Afghanistan.
Additional sales tax relief would be provided for purchases related to the breeding, raising, training or transporting of horses, including machinery, feed, farm chemicals and on-farm equine facilities. The exemption does not include barns or automobiles, truck and truck-trailer combinations.
The number of VLT locations would be limited to communities with approved tracks and would require local government approval for the license application. The slots facilities would be located and operated only on or next to approved track premises. Access to them would be limited to those 21 or older.