State Report On Racing Industry Shows Its Struggles, Even Before COVID’s Impact

Pennsylvania's racetracks have been facing challenges for years, as a new gaming board summary of 2019 explains.

The year 2020 will go down as a difficult one for Pennsylvania’s horse racing industry, as for everyone, but newly released data for 2019 shows the challenges it was already facing.

The Pennsylvania Gaming Control Board has just released the 13th edition of its annual Racetrack Casino Benchmark Report, a 20-page summary of how the racing industry fared at the state’s six tracks last year.

The gaming board has no oversight role for racing, which is regulated by the Pennsylvania Horse Racing Commission, within the state Department of Agriculture. The casino industry and horse racing are, however, intertwined.

That’s partly because half of the state’s 12 casinos can be categorized as “racinos,” where racing takes place in addition to Vegas-style gambling. Also, part of the justification for legalizing casinos in 2004 — the law was called the Race Horse Development and Gaming Act, not the Casino Act — was to siphon a portion of slot machine revenue to prop up the long-declining race industry.

The report reminds that the original gaming law spelled out its intent “to positively assist the Commonwealth’s horse racing industry, support programs intended to foster and promote horse breeding, and improve the living and working conditions of personnel who work and reside in and around the stable and backside areas of racetracks.”

Horse fund gets casino revenue totaling $238.3M

In 2020, which the benchmark report does not address, the six tracks were shut down by the state for three to four months starting in mid-March, due to COVID-19 concerns.

As a further safety precaution, in most cases the tracks are still not permitting spectators, which has tampered the entertaining atmosphere that can surround the races.

On top of that, the horse industry has had to lobby against a proposal by Gov. Tom Wolf in his 2020-21 budget to divert slots revenue dedicated to the racing industry to go instead to tuition assistance for students at state-owned universities. The governor’s plan, to horsemen’s relief, has not received legislative support.

Those points may be covered in next year’s report, but 2019 had its own issues.

The report noted that the Pennsylvania Race Horse Development Trust Fund, which is funded by about 10% of the revenue from slot machines in the state, was down about 1% last year to $238.3 million. The fund is used for a variety of racing-related purposes, mostly to increase purse sizes ($159.8 million of the total) but also to promote horse breeding and to cover health and pension benefits for those employed in racing.

The six tracks had combined taxable handle of about $300 million, down 11% from 2018.

In addition, even before COVID concerns affected anyone’s ability to attend a race, the trend of declining attendance at tracks — as defined by the live, on-site betting handle — continued.

The wagers placed directly at the six tracks amounted to $22.8 million in 2019, out of a total overall handle of $669 million wagered on Pennsylvania races nationally. The live handle was above $30 million in 2015 and has been decreasing at a rate of about $2 million annually.

While far more wagering on races is always done by out-of-state simulcast bettors ($622 million of the $669 million), crowds connected to the on-site handle are particularly sought.

“Live racing held at the racetracks adds value to the overall entertainment experience at the racetrack casinos,” the report notes. “Big racing events are proven to attract large crowds and complement casino gaming by adding an additional entertainment option.”

There’s hope that OTB wagering will rebound

The most optimistic note sounded in the report was on the potential future of off-track betting, which is ironic considering it was also noted that the state is down to fewer than one-third of the 23 OTB locations it once had.

The hopeful note is because sports wagering is now possible at OTBs, which could turn around the fortune of those venues that saw a decline of 26% to $3.6 million in handle on Pennsylvania races in 2019.

“With sports wagering now permitted in off-track wagering facilities, thus attracting new and different customers, it is hoped that a result will be an increase in horse race wagering in the future,” the report stated.

Due to the timing of the report, it did not note the recent closure of The Oaks Race and Sportsbook by Parx Casino in the Philadelphia suburbs.

Sports wagering is done, however, at the South Philadelphia Race and Sportsbook and The Downs at Lehigh Valley, and it is anticipated at OTB sites connected to two mini-casinos Penn National Gaming plans to open in 2021 in central Pennsylvania.

In all, the report said, there were 905 racing days with 10,025 races in 2019 at the three thoroughbred tracks — Parx, Penn National, and Presque Isle Downs — and three harness tracks: Harrah’s Philadelphia, Mohegan Sun Pocono Downs, and Meadows Racetrack.

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