Apr 20, 2016 5 min read

Despite $246 million in slot machine tax revenue generated for the Pennsylvania Race Horse Development Fund last year, the state’s racing industry continues to struggle to find a new fan base.

That’s the conclusion of the latest report from Pennsylvania Gaming Control Board, released Tuesday.

It isn’t that the money generated from the slots tax hasn’t created significant improvements at the state’s six horse-racing tracks connected to casinos, including The Meadows Racetrack & Casino in North Strabane Township.

The PGCB notes in its executive summary to the 20-page report that the $246 million in slots tax – a 1.6 percent increase over the 2014 contribution – was used to significantly enhance purses, provide health and pension benefits for horsemen and assist horse-breeding operations across the commonwealth.

The failure to attract new fans, the PGCB notes, is evidenced by a reduction in wagering on races.

According to the report, $722 million was wagered on live races across Pennsylvania in 2015, representing a 6 percent decrease from 2014. Despite that decline, the commission notes it is only the second year since gaming began in 2006 that the live racing handle declined year-over-year. Last year’s handle was 24 percent higher when compared to the same time period before casino gaming commenced a decade ago.

However, the racing handle at tracks statewide declined in each of the three methods used for wagering.

According to the PGCB, of the $722 million, $31 million represented the live on-track handle, a 7 percent decline from 2014; $8.5 million was wagered on live off-track racing facilities, representing a 14 percent decline over 2014; and phone wagering at $7.8 million for 2015 was down 16 percent compared to 2014.

Perhaps the most interesting aspect of the live racing handle noted in the report was of the total live racing handle of $722 million, $25 million on Pennsylvania races came from patrons inside the commonwealth through simulcast wagering in 2015, a 14 percent decrease when compared to 2014. The biggest portion of betting – $650 million – was wagered on Pennsylvania races by patrons outside of the state through simulcast wagering in 2015. That was a 5 percent decrease from 2014, but the PGCB notes the figure is 43 percent higher when compared to the same time period before slot machine gaming began in 2006.

“Racetrack casinos export their live racing signal to other properties outside of the commonwealth and retain a portion of the amount wagered,” the report states, noting out-of-state export is not included within the tax base.

Again, the racinos tried to improve their standing at their tracks, the report states, noting several racetracks took steps last year to reduce the number of live races in an effort to boost purse dollars for large-scale racing events. The number of live races in 2015 was down by more than 700, which led to increased field sizes.

“Racetrack casino operators are optimistic that changes made in 2015 will be beneficial in the future,” the PGCB wrote. “Despite the challenges facing the horse-racing industry, revenue generated from slot machine gaming continues to provide a positive impact on live racing in Pennsylvania and continues to benefit the overall agricultural community.”

Sean Sullivan, general manager at The Meadows, said Tuesday the casino is working “hand-in-hand” with Meadows Standardbred Owners Association on ways to incorporate various festivals and special events into the racing experience as a way of tapping into a younger audience for racing.

“We’re working to develop new components where racing would be a beneficiary” to expanded entertainment offerings, he said.

That would be a new promotional area in addition to the infrastructure improvements the venue made for racing since taking over the track.

At The Meadows in the last five years, $9 million was spent on backstretch improvements that include construction of a new paddock with stall space to accommodate enough horses to hold 10 races, and six new barns with 41 to 65 stalls each.

Eight additional barns were renovated with new windows and stall gates, a new fire alarm system, a video system, upgraded barn sprinkler systems and paved roads throughout the backside.

In a section on standardbred breeding support from the Racehorse Development Fund, the report notes 253 individuals or businesses received awards from the state Standardbred Breeders Development fund last year, a 58 percent decrease when compared to 2014. At the same time, however, the number of standardbred yearlings whose nomination fee was paid to participate in the Pennsylvania Sire Stakes program increased by 5 percent in 2015 when compared to 2014.

The report notes the decrease in the number of breeders that received awards in 2015 was because of a change in residency requirements.

But the report shows that while slots generated more than $228 million for purses to be paid to winning horses last year, an increase of 11.5 percent over the previous year, total purses paid were $190,449,000, down from $192,963,000 in 2014. The amount declined each year since 2011, when $216,164,000 was paid.

There also is something of a symbiotic relationship between money wagered on slots and a live racing card. The study notes in 2015, average daily gross terminal revenue was 13 percent higher when there was live racing, as compared with days when there was not live racing.