PA gaming bill includes protections for Race Horse Development Fund

By: Tom LaMarra

Posted: Oct. 26, 2017

A major gambling expansion bill that passed both houses of the Pennsylvania legislature Oct. 25-26 doesn’t include new revenue from gaming for the horseracing industry but it contains language that would convert the Pennsylvania Race Horse Development Fund into a trust.

The bill, which passed the Senate by a vote of 31-19, was sent to the House of Representatives where no action was taken the evening of Oct. 25, but the House Oct. 26 approved the measure by a vote of 109-72.  It now goes to Democratic Gov. Tom Wolf for his signature.

The measure calls for up to 10 Category 4 casino licenses that include slot machines and table games; up to five video gaming terminals at qualifying truck stops; iGaming under the auspices of licensed casinos; online gaming at airports; fantasy contests; sports betting should there be a change in federal law that bans it in all but four states; and an option to offer full-card simulcasts at all casinos that have pari-mutuel contracts with current racetrack casinos. Tax rates for the various forms of gambling vary under the bill.

Language in the bill also would drastically reduce the amount advance deposit wagering companies pay for licenses—from $500,000 to $50,000 for the initial license and from $100,000 to $10,000 for renewal. The higher numbers were included in the 2016 horseracing reform bill that combined the Thoroughbred and Standardbred racing commissions into one entity, dedicated 1% of RHDF revenue for marketing, and shifted a cut of the RHDF to help pay for equine drug testing and enforcement.

Another provision in the gaming bill repeals language that a licensed racing entity or secondary pari-mutuel organization may not accept a wager or establish ADW operations for a person located in the primary market of a racetrack other than the actual racetrack.

The RHDF, created in 2004 under the Race Horse Development and Gaming Act and supported by revenue from casino slot machines, has been a target of state lawmakers and other groups for years; the legislature has from time to time taken money from the share that goes to purses and breed development to pay for other state programs.

The Senate’s amended bill renamed the fund the Race Horse Development Trust Fund, which in effect would protect the money from being used for things other than its intended purpose. An overview of the bill states that the language “specifies that assessments received are not Commonwealth funds” but notes that doesn’t apply to certain statutory deductions now in place.

The overview also states there would be a “claw-back” provision requiring that money diverted from the RHDF since 2009 be repaid.

Racing and breeding industry officials have repeatedly said diversion, or the threat of diversion, of RHDF money has dented growth in the overall program because of perceived instability in the amount available each year.

A fiscal note on the bill, which originated in the House, shows the state tax rate on sports betting at casinos would be 34%, with a license fee of $10 million and a renewal fee of $250,000. The tax rate for iGaming would be 52% of daily gross revenue for slots and 14% for table games. The new casinos, which could have 300-750 slot machines and up to 30 table games, would pay a 50% tax on slots and 14% on table games, plus small cuts for county and local governments.

The Category 4 casinos couldn’t be located within 25 miles of another casino but can be within 25 miles if the winning bidder operates the existing casino.

The fiscal note says total application and license fees for the general fund would be $238.5 million under a full buildout. The Pennsylvania legislature is looking for ways to help patch a multibillion-dollar budget shortfall.