Racetracks may be cut from slots revenue

Posted Sept. 27, 2010, at 10:45 p.m.

AUGUSTA, Maine — Some lawmakers are asking whether it is appropriate to continue subsidizing the horse industry with millions of dollars from Hollywood Slots in Bangor when education, social services and other programs are facing reduced funding.

Representatives of Maine’s horse industry on Monday urged state lawmakers not to meddle with the complex formula that has helped support racetracks, agricultural fairs and betting parlors.

Faced with an estimated $1 billion budget shortfall and the possibility of a second gambling facility in Maine, a legislative committee is taking a hard look at how the state’s share of revenue from Hollywood Slots is divvied up.

At the top of the committee’s agenda on Monday were the substantial sums that have helped revive Maine’s harness racing industry in recent years, propping up what supporters claim is a critically important segment of the state’s agriculture sector.

Lawmakers have asked for a complete accounting of how the slots money is being spent in preparation for the looming budget shortfall.

“Everyone has made serious cuts in the past few years, as you know, and we are going to be further and further pressed to make additional cuts,” said Rep. Diane Russell, D-Portland.

State law requires the Bangor racetrack and casino — or racino — to give 39 percent of its net slots revenue to various initiatives. That funding formula, known as the “cascade,” was developed by lawmakers and industry representatives after the 2003 referendum authorizing slots facilities near Maine’s horse racing tracks.

The Fund for a Healthy Maine receives 10 percent of net slots revenue, while Maine’s public universities and community colleges receive 3 percent for scholarship programs. But 21 percent of the money — equivalent to more than $11.4 million in 2009 — flows to the horse industry or Maine’s agricultural fairs.

For instance, 10 percent of the funding goes directly to increase the size of the purses paid out during races, which in turn has increased local interest in harness racing among horse owners and riders.

Industry representatives and representatives of the Maine Department of Agriculture said that funding was included in the formula in order to stabilize the industry and, in some cases, is the only thing keeping some businesses afloat.

“In order for us to operate, we need the funds that we are receiving now,” Sharon Terry, president of Scarborough Downs, told members of the Legal and Veterans Affairs Committee.

“In reality, the racino is what is keeping probably 30 percent of our fairs operating today,” added Frederick Lunt, fair coordinator for the Maine Department of Agriculture.

The American Horse Council Foundation estimates that there are approximately 35,000 horses stabled in Maine for at least six months of the year, of which 3,200 would be considered race horses.

Charles Lawton, chief economist at the firm Planning Decisions Inc., estimated that the horse industry generates slightly more than $190 million in direct sales annually in Maine, supporting 3,600 jobs.

The feeding, housing, care and transportation of horses is an important part of the agriculture industry in Maine. Lawton estimated that in 2006, the total spending on and value of Maine’s horse industry — including equipment and real estate — was in excess of $1.1 billion.

“This source of revenue is a critical component of supporting an industry that has a significant impact beyond simply racing,” Lawton said.

Committee members agreed and said they do not want to make changes that could harm the industry. But several lawmakers questioned at what point the industry will be stable enough to no longer justify the extent of the subsidies currently flowing to harness racing.

“There are far too many businesses who are struggling to keep their doors open right now,” said Rep. Michael Carey, D-Lewiston.

Lawmakers also pointed out that the 2003 ballot question stated that part of the slots proceeds were to be used to “lower prescription drug costs for the elderly and disabled, and for scholarships to the state universities and technical colleges.”

But industry representatives pointed out that it was the harness racing community and racetracks that were the driving force behind the 2003 referendum in hopes that co-locating slots facilities near the tracks would drive attendance.

The funding formula is working, they added, because Maine’s harness racing industry is stronger today than it was seven years ago even though Scarborough Downs has never gained the local approval to build a slots facility. The owners are now considering building an all-new track and slots facility in nearby Biddeford.

“We made a deal with you, and we have met our end of it admirably,” said Denise McNitt, a veterinarian and Standardbred horse owner who was a vocal advocate during the 2003 campaign.

The committee is expected to hold another meeting on the racino funding formula in the coming weeks.

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