REPORT SAYS $10 MILLION STATE SUBSIDY GOES PRIMARILY TO OUT-OF-STATE DOG OWNERS Eliminating Subsidy Would Not Hurt VLT Revenue or Jobs at Lincoln Park

01-27-2004

A study released today by Governor Donald L. Carcieri concludes that the elimination of the state subsidy to the greyhound dog owners at Lincoln Greyhound Park would cause neither the termination of greyhound racing nor a decline in state revenue from video lottery terminals.

Instead, eliminating the subsidy would simply prevent the outflow of millions of dollars in state funds to dozens of out-of-state greyhound owners living in places like Texas, Oklahoma, and Kansas. Because the subsidy acts as a pass-through to these owners, the elimination of the subsidy would not threaten the actual operation of the races, or the jobs connected to the races.

"As you know, I recently submitted legislation to end the state's subsidy to the dog owners at Lincoln Park, effective February 1st," Governor Carcieri said. "I don't believe that Rhode Island's taxpayers should be subsidizing dog racing at the expense of other, vastly more important priorities. Not surprisingly, my proposal has been met with a good deal of consternation, disagreement and, unfortunately, misinformation."

"Today, I am releasing a State Budget Office report that details the actual impact of greyhound racing in Rhode Island," the Governor continued. "The facts in this report are clear. Ending the state subsidy to the dog owners at Lincoln Park will not kill racing, and it will not kill jobs. Instead, ending the subsidy will simply end the egregious practice of sending Rhode Island money out of state."

Specifically, the State Budget Office report - "A Critical Assessment of the Importance of Greyhound Racing in Rhode Island" - demonstrates three important conclusions. First, the state government subsidy goes primarily into the purses that are paid to the owners of winning dogs after each race, and not to the facilities' employees. In 2003, 250 out of 286 (or 87%) of the greyhound owners lived outside Rhode Island.

Second, wagering on video lottery terminals (VLTs) at Lincoln Park does not depend on the continuation of greyhound racing. Therefore, state revenues from VLTs - which make up $215 million of the FY 2004 budget - would not be affected by the cessation of greyhound racing at Lincoln Park. Finally, the decline in greyhound racing began locally in late 1980s, long before VLTs were introduced at Lincoln. Data indicate that the decline in wagering on greyhound racing is consistent nationwide.

As a result, the study concludes that the elimination of the dog subsidy would not result in a net loss in revenue for the State of Rhode Island, or in massive job losses at Lincoln Park.

Racing Not Dependent on Continued Subsidy

A study prepared by prepared by Lawrence R. Kunkel on May 20, 2003 has generated claims that the termination of the VLT subsidy to the greyhound owners at Lincoln Park would cause the end of greyhound racing in Rhode Island and the elimination of numerous jobs at the track.

However, the Budget Office report demonstrates that the Kunkel study was incorrect and that -- while ending the subsidy would lower the value of the racing purses - the average payout to the winner of each greyhound race would remain sufficiently high to support the continuation of greyhound racing at Lincoln. In fact, even without the subsidy, Lincoln Park would still offer a higher purse than most other greyhound tracks in New England.

According to the study, the average purse - the money paid to the owners of the winning greyhound after each race - was nearly $35,000 in 2000, which represents the highest purse in the country. The purse included funds from the $9.9 million VLT subsidy paid to the Rhode Island Greyhound Owners Association that year.

Without the VLT subsidy, the average purse would have been $5,234. The result would have been the third highest purse available at New England greyhound tracks. Five other New England tracks successfully operated that year with purses that were worth much less than would have been offered at Lincoln Park if the VLT subsidy had not existed.

Consequently, there is no reason to assume that the elimination of the state greyhound-owner subsidy would force Lincoln Park to end greyhound racing. There is also no reason to assume that ending the subsidy would result in significant job losses.

This new information, combined with licensing information from the Department of Business Regulation (DBR), indicates that the vast majority of the subsidy is paid out in the form of purses to greyhound owners who live outside the State of Rhode Island.

According to DBR records, of the 112 greyhound owners licensed at Lincoln Park in 2004, 93 live outside the state. Only 19 currently licensed greyhound owners live inside the state. In 2003, only 36 out of 286 greyhound owners - or 12 percent - were Rhode Island residents. As a result, the vast majority of the purses - and therefore the vast majority of the state subsidy - is ultimately disbursed to residents of states as far away as Florida, Texas and Oklahoma.

Greyhound Racing Has No Affect on VLT Revenues

The Budget Office report determined that another conclusion of the Kunkel study -- that VLT wagering would decline by more than $12 million per year if greyhound racing were eliminated - was also incorrect.

In reviewing Mr. Kunkel's assertions, the Budget Office discovered that he had made an invalid comparison to arrive at his conclusion. Mr. Kunkel mistakenly compared a period when racing was curtailed due to an outbreak of "kennel cough" - but when a number of special VLT promotions were held to increase VLT revenue above the average - to a period in which racing did occur, but with different special promotions. When the dates with special advertising promotions were eliminated from the analysis, the Budget Office concluded that the state share of VLT revenues actually increased by over $82,000 when live races were not held.

As a result, the State Budget Office analysis demonstrates the probability that the revenues generated by the state from the VLTs at Lincoln Greyhound Park would be unaffected by the termination of dog racing.

Greyhound Racing: An Industry in Decline

The report concludes that Rhode Island's greyhound racing industry was in steep decline before the installation of simulcast or VLTs at Lincoln Park. Gross wagering on live greyhound racing at Lincoln Park declined by 6 percent from 1987 to 1990. This decline continued with the addition of simulcast pari-mutuel in 1991, with a 10.9 percent drop in gross wagering on live greyhound racing. Gross wagering on live races declined by another 21.8 percent in 1992.

Since the installation of VLT's at Lincoln Park in 1993, the decline of greyhound racing has accelerated. Wagering on live greyhound races declined by 24 percent that year. Between 1993 and 2002, wagering on live greyhound races at Lincoln Park has declined by another 62 percent to $29.9 million.

The decline in greyhound racing in Rhode Island has mirrored a national trend. Between 1991 and 2000, the total gross amount wagered on live greyhound racing fell from $3 billion to $887.4 million, a decline of over 70 percent. The study also compared the success of 43 greyhound racing tracks in 15 states for this period. Of 43 greyhound racing tracks, 37 tracks experienced a decline in gross wagering of over 50 percent from 1991 to 2000.

To read the report "A Critical Assessment of the Importance of Greyhound Racing in Rhode Island", please copy the following address into your browser. http://www.governor.ri.gov/Greyhound_Racing_Report.doc