Fallsnewspress.com - Race tracks want changes in video slot program plan

by Eric Marotta

News Leader Editor

An organization representing Ohio's horse racing venues is asking the Ohio Lottery Commission to consider changes in the way it plans to implement video slot machine operations at their facilities beginning next year.

Included in a list of issues presented to the commission in an Aug. 31 letter is a request the commission draft an agreement between the state and the race tracks outlining key elements of the video lottery terminal program.

"The absence of an agreement containing the terms and conditions under which VLT agents will be operating makes it extremely difficult, if not impossible, to obtain the required financing and other required financial security, and therefore, to proceed with the application process," the letter states.

Under proposed rules, the application deadline is Sept. 15. Late applicants could be assessed a $15 million penalty, which would increase their 10-year permit fee from $65 million to $80 million.

The letter was submitted by lawyers for the Ohio Legacy Fund, which represents Ohio's seven horse racing facilities authorized to operate video slot machine operations.

A representative from the Ohio Legacy Fund did not return phone calls seeking comment.

Lottery Commission spokesperson Jeannie Roberts said the proposed changes are "under review" by commission staff. The commission's next scheduled meeting is Sept. 21, two days after a Sept. 18 public hearing on the rules at the commission's Cleveland headquarters.

'Agreement' terms, proposals outlined

The Ohio Legacy Fund letter states the agreement "must provide" that the operators will receive a 50 percent commission on income from VLTs and that each agent will be allotted "a minimum of 2,500" machines at their facilities.

Proposed rules for the operation of VLTs at Ohio horse racing facilities would limit the number of machines to 2,500 per race track.

The letter also asks the commission to drop "numerous onerous bonding and insurance requirements," including a $52 million performance bond to secure payment of the balance of the $65 million license fee, the first installment of $13 million is due Sept. 15.

Other bonds the commission is requiring includes a $6.5 million annual performance bond, a $30 million bond covering acts of fraud and dishonesty and a $20 million construction bond.

Under the proposed rules, each VLT operator must make $20 million in improvements during the first year of operation.

"Even if the bonds were obtainable -- and they are not, given the current state of the surety bond market -- the cost of obtaining such bonds would, in and of itself, render these projects economically infeasible," the letter states.

Likewise, the letter states the commission's requirement VLT agents obtain $50 million liability and property damage insurance is "cost prohibitive."

The letter also contains 22 proposed changes to commission rules, including how the machines will be selected and how payouts will be managed.

The race tracks want selection of machines to be subject to agreement, rather than under final authority of the commission. If the lottery commission chooses low-end machines, the current rule would require race tracks to pay the difference to install higher quality equipment, the letter states.

The tracks also want the authority to determine the level of payouts based on a minimum amount set by the commission. Current rules would require an average minimum payout of 85 percent among all machines.

Other proposed changes would limit the permit renewal fee to $1 million, remove a clause allowing for the imposition of fines against "key gaming employees" and adjust a requirement to retain surveillance video from 60 to 14 days.

E-mail: emarotta@recordpub.com

Phone: 330-688-0088 ext. 3171