PA benchmark report reflects challenges for racing, breeding

By: Tom LaMarra

Posted: May 16, 2017

The amount of revenue from slot machines that goes to the Race Horse Development Fund on a yearly basis has stabilized, according to the 2016 pari-mutuel industry benchmark report issued by the Pennsylvania Gaming Control Board, but legislative changes have shifted a chunk of the money to other programs.

The report cites the positive impact the program has had on racing and breeding in the state, but also notes the challenges the industry faces “to remain a viable entertainment option.”

A key indicator in the report is the percentage of purses derived from slots and pari-mutuel handle. Of the $168.06 million in “purses earned” for Thoroughbred and Standardbred racing in 2016, 86.5% came from slots and 13.5% from wagering on races.

The RHDF, which receives roughly 10% of gross slots revenue at racetrack and non-track casinos in Pennsylvania, totaled $244.76 million in 2016, down slightly from $246.09 million in 2015 but higher than the 2014 figure of $242.33 million. Over the same three-year period, gross slots revenue in the state has remained steady at an average of $2.5 billion, according to the report.

The original distributions from the RHDF for the Thoroughbred and Standardbred industries as listed in the 2004 Gaming and Race Horse Redevelopment Act last year were as follows: $141.38 million for purses; $14.84 million for the Thoroughbred breeding fund; $13.42 million for the Standardbred development fund and sire stakes fund; and $11 million for health and pension benefits for horsemen.

More recent line items created by the state legislature accounted for more than $60 million of the 2016 RHDF total, according to the benchmark report: $45.41 million for a “restricted receipts account” that supports the Animal Health Commission, Pennsylvania Veterinary Laboratory System, the State Farm Products Show Fund, fairs in the state, and the State Racing Fund; $10.39 million that reimburses casino promotional expenses; and $6.68 million to help pay for equine drug testing.

Those adjustments in part played a role in the 17.2% decrease in purses paid from $218.69 million in 2012 to $180.96 million in 2016.

The report states that handle on Pennsylvania racing has increased 17% since 2006 because of the opening of two new racing facilities and growth in export wagering.

“Although this increase has been beneficial for the industry, this past year marked the third year since gaming commenced that live racing handle fell year-over-year,” an executive summary says. “It has been recognized that the biggest challenge facing (Thoroughbred) and harness racing in Pennsylvania is creating a new fan base and increasing the popularity of the racing product.”

The report tracks total on-track, off-track, and telephone and online handle on live races in the state from 2012 to 2016. On-track handle dropped 32.6% from $40.70 million to $27.40 million; off-track betting was down 57% from $14.50 million to $6.23 million; and phone and Internet wagering declined 21.6% from $8.12 million to $6.36 million.

The number of OTB facilities in the state has dropped from a high of 23 to just 10 as of today. The contraction began as casinos began popping around the state more than 10 years ago.

Total handle on Thoroughbred and Standardbred racing in the state was $681.40 million last year, off 12.9% from $776.95 in 2012. The number of Thoroughbred starts last year was 28,749 compared with 35,180 in 2012, according to the report.

The complete report is available here.

(Penn National photo by Tom LaMarra)