Business

Drop in wagering eats into Ky. coffers

Last fall, when the economic sky began falling on racetracks, prestigious Keeneland was suffering. Although going to the races was as popular as ever in Lexington, betting dropped precipitously. Live on-track wagering at the fall meeting fell $1.7 million. Total wagering, including out-of-state betting, fell $24 million, more than 17 percent.

"If it hadn't rained on Friday (the next-to-last day of the meet), we would have broken our all-time attendance record," Nick Nicholson, the track president, said at the time. But patrons were stretching their dollars as far as possible. "They ate fewer hot dogs, drank fewer Cokes and made fewer bets."

Now Keeneland has gotten a silver lining of sorts, although it isn't a welcome one.

In August, the track got a tax refund from the state of more than $516,000.

The refund came because live on-track betting fell enough to drop Keeneland into a lower tax bracket.

It's the first time since the last recession that the state has had to issue such a refund, and it has put the state's pari-mutuel taxes in the red by more than $400,000.

Greg Harkenrider of the state Department of Revenue said tracks that have more than $1.2 million in average daily "handle" pay 3.5 percent tax; when betting drops below that mark they pay 1.5 percent.

That happened in 2003 and 2004, coinciding with the previous recession, Harkenrider said, when the state also had to refund hundreds of thousands of dollars, a sort of double whammy for state coffers.

Only two racetracks routinely qualify for the higher rate: Churchill Downs in Louisville and Keeneland Race Course in Lexington.

Pari-mutuel tax receipts are in the hole year-to-date, so that revenue is likely to be down for the year, just as it was in 2003 and 2004.

Pari-mutuel taxes have been declining steadily since a high of $5.6 million in fiscal year 2006; for fiscal year 2009 they totaled $4.4 million, a drop of more than 21 percent.

Betting nationally is down on almost every gambling front; pari-mutuel betting is down more than 11 percent year-to-date, according to Equibase.

Bob Elliston, president of Turfway Park in Florence, said Kentucky's drop does not surprise him. He said Turfway, like other Kentucky tracks, has seen a continuing slide in betting, particularly in live on-track betting — betting at Kentucky tracks on races being run live, rather than those being simulcast from other states.

According to Kentucky Horse Racing Commission figures, Turfway Park's live on-track handle was down more than $2.26 million in 2008, a drop of almost 15 percent from the previous year.

Elliston said tracks like his are hurt by splashier or newer entertainment options such as casinos in Indiana and sports stadiums in Cincinnati.

"You redouble our efforts to demonstrate that you're taking care of customers the best you can," Elliston said. "At Turfway, there's a limitation. We can be as creative as we can be, but at some point there's still going to be a massive differential in the entertainment experience we're able to provide."

A big part of that difference comes down to expanded gambling, which no Kentucky racetrack has, he said.

With Indiana tracks adding gambling this year and Ohio attempting to, Kentucky racetrack operators need the money to reinvest in upgrading facilities, he said.

As for Keeneland, the track plans to fight for every betting dollar. And betting dollars are becoming increasingly important as revenue from Keeneland's Thoroughbred auction business plummets.

"We continue to strive to have the highest possible handle," said Jim Williams, a Keeneland spokesman. Williams said the track has flirted for a long time with an average daily benchmark of $1.2 million, but last year was the first time since about 1997 that Keeneland went below that.

The 2009 spring meet continued last fall's pattern: near-record crowds who kept more of their money in their pockets. On-track handle was down $2.5 million, nearly 10 percent, while total handle was down $29 million, nearly 20 percent.

If betting declines continue at the upcoming fall meet and Keeneland stays in the lower tax bracket, Kentucky's pari-mutuel taxes could slip below the 2004 low of $3.6 million.

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