Can A New Subsidy Bill Save New Jersey’s Horse Racing Industry?

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A new bill introduced in both houses of the Trenton legislature would provide a $20 million annual purse subsidy to the state’s racetracks.

How urgent is this issue? Meadowlands Racetrack operator Jeff Gural told NJOnlineGambling: “Without [the subsidy], we are going to have to radically reduce dates and stakes next year.

“New York gives its racing industry $200 million for purses and Pennsylvania gives $250 million, while we get nothing. Our purses are half of our competitors. But I am optimistic that the new [Gov. Phil Murphy] administration understands the importance of horse racing to the economy — unlike the previous [Chris Christie] administration that just wanted to save Atlantic City.”

Lots of context needed here: New York and Pennsylvania feature taxes at their casinos and racinos in the neighborhood of 50 percent, while New Jersey’s is under 10 percent. The neighboring states collect a fortune from slot machines and other games installed at the racetracks, then divert a sliver to the horse racing industry.

AC casinos used to boost the horsemen

Atlantic City’s casinos used to send the New Jersey horsemen $30 million annually for purses, back when the former industry was thriving thanks to there being no casinos yet in NY or PA. It was worth it for the casinos, because the payment came with a guarantee that there would be no legal casino gambling elsewhere in the state.

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But the AC casino industry started to falter when NY and PA opened casinos in 2006, the 2008 worldwide economic collapse made things even worse, and Christie’s election in 2009 would lead to the complete elimination of the subsidy.

The Meadowlands, Monmouth Park, and Freehold Raceway had to cut back on every level — cutting salaries, reducing dates, smaller purses, and so on. The state’s thoroughbred horsemen owe Monmouth operator Dennis Drazin‘s non-profit firm Darby Development about $30 million. The New Jersey Sports and Exposition Authority — the state agency that privatized the Meadowlands and Monmouth tracks in 2010 — is owed another $9 million.

Gural, meanwhile, figures he is personally in the hole at least $10 million. While the advent of sports betting will boost his track’s bottom line, Gural does not believe it will be lucrative enough to save the day.

Dividing up the $20M

Should the bill pass, half the money would go to Monmouth Park purses, while the other half would go to the state’s standardbred industry: 60 percent of that half for Meadowlands overnight purses; 16 percent for Freehold; 12 percent to the New Jersey Sire Stakes; 6 percent to purse bonuses for New Jersey-sired horses; and 6 percent for breeder awards.

Assemblyman John Burzichelli, a sponsor of the bill, told NJOnlineGambling that those latter numbers will resonate with residents.

“The challenges faced by horse racing lead to an erosion of the ancillary [equine]economy — breeding, horse farms, and so on,” Burzichelli said. “That warrants our attention, because once a horse farm goes away, it never comes back. Nobody tears down a condo development to build a horse farm.”

The issue of “open space” in the nation’s most densely populated state might be the only bulletproof topic in statewide referendums over the past 20 years. It’s also helpful to the horsemen that when relevant bills have come up in Trenton over the past decade, there has been no partisan split that develops so often in the current political environment.

Trenton politics primer

There is, however, a power struggle at work in Trenton between Democrats Murphy and state Senate President Stephen Sweeney (and that’s putting it mildly). Each has made positive gestures toward the horse racing industry, but when the legislature returns to the statehouse next month, the horsemen will have to hope that this issue doesn’t get caught in the crossfire.

Burzichelli said it was “too early” to read how the legislature might vote, while stressing that this topic has come up many times before. He added that should sports betting revenue numbers — which will skyrocket this fall as college football and the NFL get started — bring bigger than expected returns, perhaps the requested subsidy could be less.

But it’s worth noting that Murphy campaigned on a very progressive platform, and he has yet to achieve many of those goals in his first year in office. Murphy has many higher priorities to fund, while Democratic legislators — like their Republican brethren — are emphasizing spending less, not more.

A $20 million subsidy in a $35 billion budget doesn’t even qualify as a rounding error. But philosophically, getting approval for a new subsidy, however modest, is no slam dunk in Trenton.

This is not just an NJ story

This bill will be watched closely by the North American harness racing industry. The Meadowlands track was its shining star from its ballyhooed opening in 1976, and The Hambletonian — the sport’s richest day — is still held there every summer.

Monmouth Park doesn’t quite have that hold on the thoroughbred side, but its site is called the Fenway Park of the sport for its classic history, and its Haskell race day is one of the key annual dates on that side of the industry.

Should either or both tracks ever shut their doors, the ripples may resound in many other states if legislators there hear the news and decide that maybe they want to keep all those gambling revenues for themselves.

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John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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