Slots bill clears one House committee but heads to another

UPDATED THROUGHOUT AT 12:05 P.M.

By Janet Patton – jpatton1@herald-leader.com

FRANKFORT – Legislation that would allow racetracks to install electronic slots cleared a House committee without opposition even though most of the members had not seen the final version of the bill until the meeting began Thursday morning.

Fifteen members of the House Licensing and Occupantions Committee voted to approve it, with Rep. Adam Koenig, R-Erlanger, abstaining even though he expressed support.

Opponents of expanded gambling objected to the lack of notice. Copies of the bill were not distributed before the meeting to the public.

Although she called the committee’s action “a travesty” because of the lack of public input, the Rev. Nancy Jo Kemper, executive director of the Kentucky Council of Churches, said she does not see Thursday’s vote as significant. She noted that casino legislation backed by Gov. Steve Beshear passed out of the same committee last year and went nowhere.

“It might get to the floor … (but) it’s iffy as to whether or not it gets sufficient votes,” Kemper said, especially after House members have already taken a difficult vote to raise taxes on cigarettes and liquor. But she said she does expect the issue will resurface in 2010 with another push to put a Constitutional amendment legalizing casino gambling on the November ballot.

Despite Thursday’s swift action, the slots bill proposed by House Speaker Greg Stumbo will go to the Appropriations and Revenue Committee, where Stumbo said it may be shelved for the session.

But Stumbo would not rule out the possibility of a vote. “Anything could happen as long as the legislature is still in session,” Stumbo said. “At this time, on this day, I doubt the bill has enough support to pass this chamber. That may change. We still have a month and a half to go.”

Stumbo said it will be up to the horse industry, which has long lobbied for expanded gambling, to make its case. Kentucky racetracks say they face greater pressure than ever from tracks in states that use slots to support purses.

“As the legislators and the public become more educated about the bill, it seems to gain support. I’m sure there will be extensive debate,” Stumbo said. He said the bill could be incorporated into a larger discussion of revamping the state’s tax code, possibly in the interim between this session and next year.

He said he would not recommend a special legislative session to deal with the bill “unless there’s agreement between the chambers.” Senate President David Williams, R-Burkesville, opposes expanding gambling.

Stumbo had said allowing up to eight racetrack-based slots facilities could generate nearly $400 million in tax revenue annually for the state, and more than twice that for tracks and the horse industry. But a new tax rate incorporated into the bill Thursday might lower that to about $250 million in taxes for the state the first year, Stumbo said.

The bill would set a flat 28 percent tax rate on proceeds from slots for the first five years, then impose 28 percent on the first $100 million in revenue and 38 percent on anything above that.

Other major revisions included: increasing licensing fees that would be paid by racetracks to about $510 million collectively, adding a regional tourism fund, adding sales tax exemptions for agricultural goods for horse farms, and adding a state income tax exemption for active duty military personnel.

Keeneland president Nick Nicholson praised the committee vote, saying the industry would be “open-minded” about the increased fees and the new tax rates. “I never thought I’d see a day when this bill would have such broad-based support,” Nicholson said. “I can only come to the conclusion that there’s some momentum for this bill coming out.”

Nicholson said that while the world won’t end for Kentucky racing if the bill doesn’t pass this session, “the longer it’s put off the tougher the competitive environment’s going to get.”

He said that without some action this year the state’s smaller Thoroughbred tracks, such as Ellis Park in Henderson and Turfway Park in Northern Kentucky, will be threatened.

Under the new licensing structure, Turfway Park would pay the highest fee — $125 million – but would be expected to have the highest revenue — in the neighborhood of $340 million annually, according to Rep. Larry Clark, D-Louisville, who worked on the revised bill.

According to Clark, Keeneland and The Red Mile, both in Lexington, would have to share a slots license, with a fee of $100 million and projected gross revenue of $225 million. Churchill Downs in Louisville would also have to pay $100 million, with projected revenue of $207 million. Kentucky Downs in Franklin would have to pay $75 million and would have projected revenue of $193 million. Ellis Park would have to pay $50 million, with projected revenue of $86 million. Players’ Bluegrass Downs in Paducah, a harness track, would pay $35 million, with projected revenues of $75 million, and Thunder Ridge in Prestonsburg, another harness track, would pay $25 million, with projected revenue of $51 million.

Clark said the higher licensing fees, which could be paid out over five years, along with the reduced tax rate for the first five years, represented a compromise that would provide the state with more money up front while still allowing tracks enough profit to secure financing to build the facilities. Temporary facilities could allow tracks to begin recouping investments quickly, he said.

Filed Under: Featured • Greg Stumbo • KY General Assembly