A REVITALIZED RACING INDUSTRY IN THE KEYSTONE STATE

Presque Isle Downs & Casino in Erie, Pennsylvania concluded its 2010 meet with purses paid out that far exceeded what handle would support. Like other racinos, purses are subsidized. But can this symbiosis continue to be justified to state elected officials?

In 2004, Pennsylvania legalized slot machines at select locations under what was known as Act 71, The Pennsylvania Race Horse Development and Gaming Act. In 2009, the Pennsylvania Equine Coalition commissioned a study by Pittsburgh-based Tripp Umbach to assess the economic impact of Act 71 on the state’s equine industry. Tripp Umbach is recognized as a leading firm for this type of analysis that has completed over 100 studies for an impressive list of blue-ribbon clients.

Tripp Umbach researched the economics of the Pennsylvania equine industry in 2008 and then compared the findings to results from a similar study that had been done by Pennsylvania State University for 2001. Thus it was feasible to contrast the pre-slots and post-slots eras.

The racehorse sector (Thoroughbred and harness) of the overall equine industry in Pennsylvania had an estimated total economic impact of $344.5 million in 2001 and $1.6 billion in 2008. These figures included the direct dollar contribution of racing businesses in addition to indirect contributions from feed suppliers, veterinarians, and the like. The number of employees rose from 6,430 in 2001 to 23,028 in 2008. Racing produced $6.9 million in taxes for federal, state, and local coffers in 2001 and $78.3 million in 2008.

Interestingly, Act 71 also apparently boosted the overall equine industry in Pennsylvania of which racing is a component. The total economic impact from all equine activity jumped from $780 million in 2001 to $3 billion in 2008.

The Tripp Umbach report stated: “…regardless of where a person stands on the issue of slots and gambling, having a viable and strong agribusiness in the state involves the equine industry.” Further, “as a result of Act 71, horse racing actually provides people a chance to make a sustainable living and grow the equine industry segment.”

Under the provisions of Act 71, racing’s share of slot machine revenues is divided as follows: 80% to purses, 16% to breeders, and 4% to a health and pension fund. Tripp Umbach wrote: “For the first time in the history of the sport, members are receiving basic health insurance that includes eye and dental.” Moreover, “an overall impact of investment in new farm facilities and bloodstock helps a slumping economy.” Todd Mostoller, the Executive Director of the Pennsylvania HBPA, tells of prominent out-of-state racing interests looking for farms to buy in Pennsylvania. The state had a 22 percent increase in live foals for 2010, the sole venue to show a positive.

Continued slots-subsidized handle can only be justified using an iceberg-like argument: handle does not come close to revealing the full picture of the documented economic importance of horse racing to agribusiness in racino states like Pennsylvania.

Copyright © 2010 Horse Racing Business

Originally published in the Blood-Horse. Reprinted by permission.

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