Kentucky House Passes HISA Funding Review Resolution

One day after Kentucky's state senate adopted a resolution by voice vote to urge a review of the HISA funding methodology, the Kentucky House of Representatives did the same. House Resolution 98, “A resolution expressing concerns regarding the unintended consequences of the current funding methodology of the Horse Racing Integrity and Safety Act,” was adopted by a voice vote in the House.

The resolution was sponsored by Republican representative Matthew Koch, and Democratic representative Al Gentry.

The language is identical to that of its companion resolution in the Senate, contained in Friday's TDN.

The sponsor of the Senate resolution was Damon Thayer, who commented upon what he felt was a need for the review.

“While I support the HISA goals of uniformity and standardization of racing rules, its implementation so far has been less than inspiring and it may still be ruled unconstitutional,” said Thayer in a text. “Now HISA is trying to force a funding model that is unfair to Kentucky racing and potentially taxpayers with an unfunded mandate the punishes us for our success. I do not support this approach and this Resolution, which passed unanimously in the House and Senate, memorializes that and urges consideration of a different formula. At best, HISA should be funded with an annual federal government appropriation, but at the very least should not have a funding model that is punitive to successful racing states like Kentucky.”

A statement from Rick Hiles, the Kentucky Horsemen's Benevolent and Protective Association (HBPA) president, read:

“We applaud the Kentucky Senate, led by sponsors Majority Floor Leader Damon Thayer and John Schickel, and the Kentucky House of Representatives, with Reps. Matt Koch and Al Gentry the sponsors, for their resolution that raises many of the concerns we have about the Horseracing Integrity and Safety Act and the private Authority corporation it created and granted broad powers.

“No matter the inflammatory rhetoric slung at the National HBPA, the resolution–which passed unanimously in both the Senate and House on Thursday–shows that reasonable persons understand that HISA was rushed into existence with a flawed process. They understand our stated concerns about unintended consequences that could devastate portions of our industry across the country, including Kentucky.

“It's gratifying to have leadership that understands that the HISA challenge by the National HBPA, many of its affiliates including Kentucky, the United States Trotting Association, several state racing commissions and attorneys generals and others is because we all want our industry to be strong and to do better and better. All these parties are in complete support of measures that promote integrity, uniformity and fair racing but this must be accomplished only through lawful, accountable and transparent means.

“Prominent in the resolution is the very real threat that the financial structure set up by this unfunded mandate will jeopardize small and medium-sized tracks and smaller stables. That in turn will have a huge impact on Kentucky's breeding and racing industries, as well as the agribusiness that is fueled by horse racing.

“Kentucky is blessed to have legislative leadership such as Senators Thayer and Schickel and Representatives Koch and Gentry, among others, who understand our industry, its complexities and appreciate that racing in Kentucky and elsewhere has many levels that contribute to the entire ecosystem. To destabilize parts of it, we believe, will have unintended consequences to all involved in the industry from top to bottom.”

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Pari-Mutuel Bill Approved by Kentucky House Committee

Kentucky House Bill 607, which contains a provision to greatly benefit horseplayers by effectively eliminating breakage, was overwhelmingly approved Wednesday morning by a Kentucky House of Representatives committee. HB 607 also standardizes the tax rate on all pari-mutuel wagers placed in Kentucky and also makes claiming races eligible for Kentucky-bred purse subsidies. The bill must still be approved by the full House before being sent to the Senate.

Representative Adam Koenig, whose district in Northern Kentucky is near Turfway Park, is a primary sponsor of the bill, which also has the capacity to significantly increase revenue to the state General Fund while allowing horse racing to thrive.

“In a couple of years, we're looking at a $27-million increase, probably at a minimum,” Koenig told the committee, noting that's in addition to the $62 million projected to flow to the state from pari-mutuel taxes in 2022. “So the money is coming in from the industry. I think I found some creative ways generating additional money without hurting the product.”

The bill is the product of last year's legislative interim task force on pari-mutuel wagering that was chaired by Koenig and Kentucky Senate Majority Leader Damon Thayer, a long-time supporter of the Kentucky racing industry. Created following the passage of legislation that protected Historical Horse Racing (HHR) in the state, the task force was charged with identifying ways to increase state revenues without negatively impacting purses and without discouraging racetracks from investing in HHR operations and associated capital projects.

Penny Breakage A Positive Development…

A key element of HB 607 is the virtual elimination of so-called breakage, where tracks round down winning payoffs to the nearest dime based on a $1 wager. Under HB 607, tracks would be required to pay off to the nearest penny, resulting in greater amounts of money returned to horseplayers. Koenig cited the example of 2018 Triple Crown winner Justify paying $7.80 to win in the GI Kentucky Derby, a figure that would have been $7.92 with penny breakage.

“That is the bettors' money,” Koenig said. “I've been very interested since last year's HHR debate in making sure the bettors are taken care of. We took care of everyone else. Everyone is getting healthy on this except for the bettors, and this is how we're going to help the bettors. They're going to get paid to the penny rather than every 20 cents. In addition to taking care of the bettors, it will make Kentucky the place in North America to wager. If you're someone who wagers a lot of money, why would you bet anyplace else?” (Click here to watch Adam Koenig on a recent episode of the TDN Writers' Room podcast).

Also easily passing the “L&O” committee Wednesday were bills that would legalize betting on sports in Kentucky and provide funding for problem gambling.

Additionally, HB 607 calls for the taxation of pari-mutuel wagers at 1.5%, the same rate assessed for HHR gaming. The bill raises the current rate for bets placed through ADWs from 0.5%. The tax rate on simulcast wagers placed at a Kentucky track on an out-of-state race would drop from 3%. The majority of bets are now placed through ADWs, while simulcasting has shrunk considerably as horseplayers opt for the convenience of wagering online.

KTDF Supplements Expanded…

Currently, money from the Kentucky Thoroughbred Development Fund (KTDF) is restricted to non-claiming races, but HB 607 cancels that stipulation, a policy change that has been strongly advocated for by the Kentucky HBPA in an effort to raise purses for the lower-level races in which many horsemen compete.

Rep. Al Gentry, a member of the pari-mutuel wagering task force, called making claiming races eligible for KTDF supplements “very, very important and one of the big pieces of the bill.”

Given that HHR has helped Kentucky to be in a position to offer some of the highest purses in the world, and with HHR revenue expected to grow with the expansion of satellite facilities, HB 607 also stipulates that after KTDF money reaches $40 million and the Kentucky Standardbred Development Fund its $20 million in a year, the rate going to purses would decrease, with the difference channeled to the state's General fund.

“We believe in two or three years, when the Historical Horse Racing facilities are more mature, that we're looking at $20 million additional in the General Fund,” Koenig told the committee. “The increase in the ADW tax from one-half to 1 1/2% will immediately generate $4 million a year. That's the growth area, so that will continue to go up over time.”

 

 

 

The bill also:

 

  • Provides funding to the equine programs at the University of Kentucky and Bluegrass Community and Technical College. The University of Louisville business school's Equine Industry Program already receives funding from pari-mutuel wagering.

 

  • Eliminates the 15-cent per person admission tax racetracks currently pay even if they don't charge admission (which is every track except Churchill Downs and Keeneland).

 

  • Requires tracks to maintain a “self-exclusion” list–where individuals such as problem gamblers can say they don't want to be allowed into a track or HHR facility for a given period of time–to be shared with the racing commission and the other tracks and HHR properties.

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