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Detailed Fiscal Analysis
The Instant Racing System
consists of a database of previously run horse races, which are sent
electronically to terminals at which bets can be placed on the races. Under the bill, these terminals could be
installed at the state's seven commercial horse racetracks. The identities of the races are hidden to prevent
bettors from gaining an advantage using knowledge of the winners of these
previously run races. The races are
replayed at individual terminals whenever players choose to rerun them. Players need not wait for the full race to
be run, but can jump ahead to find out quickly if they won, subject to the
restriction that the system not permit the last ten seconds of a race to be
fast-forwarded. Consequently, action
can be fast and the system could allow bettors to place wagers on many more
races in an afternoon or evening than with a live racing program.
This betting system has the
potential for substantial growth. It is
in use at a horse racetrack in Arkansas, and a track in Oregon is building a
facility for an Instant Racing System.
The web site for the track in Arkansas, at which this system has been in
operation since 2000, indicated on May 23, 2007, that more than $17.7 million
is wagered each month through the system.
The amount of wagering through the system roughly tripled from 2004
through 2006. If similar levels of
betting were realized on installations of the system at Ohio's seven commercial
racetracks, the total wagered could rise to more than $1 billion per year.
This program could bring in
additional money to the racing industry, by adding to horse racing purses and
by attracting additional customers.
Larger purses might attract faster horses and more gambling dollars for
live racing programs in Ohio. Some
portion of the wagering on an Instant Racing System might displace bets made on
the tracks' current programs of live and simulcast races.
Payout structure
The bill provides that
proceeds from an Instant Racing System would be subject to a set of
requirements for distribution separate from those for other racing programs in
Ohio. The commission on instant racing
would be 12% or less of the total wagered through this system. Implicitly, the rest would be returned to
bettors as winnings, though disposition of this remaining 88% or more is not
explicitly specified in the bill. A tax
equal to 20% of the commission would be payable to the Tax Commissioner. The bill does not specify what is to be done
with this tax or the fund or funds into which it is to be paid. Revised Code sections 113.08 and 113.09
require that all money received by the state be paid to the Treasurer of State
for credit to the General Revenue Fund, unless otherwise provided by law. In the absence of other provision for the
disposition of these tax receipts, therefore, the funds would be paid to the
GRF.
Out of the commission net of
this tax, which would be at most 9.6% of amounts wagered, 19% (at most 1.824%
of amounts wagered) is to be paid into each participating track's purse
account, except that horsemen's groups may designate half or 9.5% of the net
commission (at most 0.912% of amounts wagered) to go to either horsemen's
health and benevolence programs or to the Ohio Thoroughbred Race Fund, and the
other half or 9.5% of the net commission to any of horsemen's health and
benevolence programs, the Ohio Standardbred Development Fund, or the Ohio Fairs
Fund. An additional 1% of the net
commission, or less at the discretion of the Racing Commission, would be paid
into the Racing Commission Operating Fund as an administrative fee. This fee would be at most 1% of 9.6%, or
0.096%, of amounts wagered. The
balance, 80% to 81% of the net commission, would be retained by each track
under the bill. The fee charged by the
provider of the Instant Racing System presumably would be paid out of this
share of the amounts wagered.
These fees are illustrated
in the following table:
Fiscal effects on the state
Implementation of an Instant
Racing System would generate additional tax revenues to the Tax Commissioner
plus a much smaller amount of additional receipts to the Racing Commission
Operating Fund. For example, if the
system generated $100 million in wagering and commissions were set at 12% of
total wagers, $2.4 million of tax would be owed to the Tax Commissioner, which
in the absence of provisions specifying the fund or funds into which this tax
is to be paid, would go to the GRF. An
administration fee of up to $96,000 would be payable to the Racing Commission
Operating Fund. Additional amounts, up
to $1.824 million, could be added to purses or, at the discretion of horsemen's
groups, could be divided among the thoroughbred and standardbred funds
administered by the Racing Commission, the Ohio Fairs Fund, and horsemen's
health and benevolence programs.
Larger purses and a
resulting more competitive Ohio horseracing program could attract additional
gambling dollars to the state and as a result increase state receipts. Alternatively, some erosion of betting on
live and simulcast horse races, with wagers instead shifted to instant racing,
could result. Implementation of an
Instant Racing System might also lead to additional regulatory responsibilities
and expenditures by the Racing Commission.
The amount of any such increase in regulatory oversight costs appears
likely to be small. An assessment from
the Racing Commission was that existing systems could be used for this purpose,
with little added workload for Commission staff.
Fiscal effects on local
governments
An Instant Racing System
would have no direct fiscal effects on local governments. To the extent that such a system proved very
popular and resulted in significant increases in traffic into and out of
racetracks, it could require additional policing in the vicinity of the
tracks. To the extent that such a
system increased the incidence of problem gambling in the state, it could lead
to increased local outlays for social services.
LSC fiscal staff: Phil Cummins, Economist