The New York Racing Association will support a measure in the governor’s proposed budget that would use penny breakage for all payouts on bets at New York racetracks, NYRA officials said Thursday.
The proposal would eliminate the handful of calculations that are presently used to round payoffs on New York races and instead round all payouts to the nearest penny, a change that would slightly increase the money returned to bettors. Penny breakage has been adopted across Kentucky and at Emerald Downs in Washington State, to praise from horseplayers.
“Breakage in the parimutuel system is an antiquated practice that does not reflect the modernization of wagering technology,” said Pat McKenna, vice president of communications at NYRA, in a prepared response. “It needlessly penalizes horseplayers, reduces transparency, and creates an added tax on consumers. Eliminating breakage is a common-sense step that will put more money in the pockets of horseplayers, which is why NYRA strongly supports the proposal."”
McKenna said that NYRA retains approximately $800,000 a year from the current state rules on breakage. Separate chunks of breakage go to the New York State Gaming Commission, depending on the bet type and the origin of the bet. New York’s other tracks would also retain lower revenues from betting with the reduction.
While most jurisdictions use 10-cent breakage for rounding, New York adopted a tiered structure in the mid-1990's that used 5-cent breakage on lower payouts with higher breakage rates for higher payouts. That tiered structure, which was advocated by former Daily Racing Form publisher Steven Crist, was designed to be both beneficial to bettors and revenue-neutral to the parties that received shares of breakage.
The proposed budget from Gov. Kathy Hochul is typically generated as a wish list for constituents, adjusted heavily for budgetary realities. It’s not clear what opposition might arise to the proposal to adjust breakage, but New York’s current statutes on the distribution of wagering revenues guarantee flows from betting to a variety of constituents.
A memo in the budget proposal described the current breakage system as taking money out of circulation “at the expense of the bettor with limited benefit to the racing industry.” Supporters of penny breakage have contended that the extra money distributed to bettors is typically churned back through the pools, resulting in an increase in handle.
In Kentucky, handle growth has significantly outpaced other major racing jurisdictions over the past several years, but much of that handle increase has been attributed to large increases in purse distribution at its lower-tier tracks, particularly Ellis Park and Turfway Park. The purse increases are due to increased subsidies from casinos owned and operated by the tracks.
New York law requires the budget to be approved by the first of April, but legislative leaders typically push that date well past the deadline.
Other tax proposals under consideration
The budget also includes a proposal for a flat tax on betting in the state to replace another complicated area of the state’s racing statutes. McKenna said that NYRA is currently assessing and reviewing the impacts of the proposed flat tax. The budget prepared by Hochul was done so under a guiding philosophy to simplify tax structures.
In memos describing the change, which would set the tax at 1.1 percent for all wagers, the Hochul administration said that it would be revenue-neutral and would not lead to an increase in overall taxes paid by the racing industry. It called the present system “overly complex and outdated.”
The budget also resurrects a proposal that was nixed in last year’s legislative budget package that would use an additional 1 percent tax on ADW wagers from out-of-state operators. This would create a funding stream for research that would study ways to use imaging to better detect the early development of musculoskeletal damage that could lead to catastrophic injuries in horses.
The accompanying memo says that the additional tax would, over its first three years, raise $17 million for the Harry M. Zweig Memorial Fund for Equine Research and be used for studies performed at Cornell University, which is based in New York. The provision includes a requirement that NYRA provide $2 million toward the purchase and operation of advanced imaging machines.
“Continuously improving equine safety is an organizational imperative at NYRA, which is why we have long supported measures designed to expand access to the most advanced equine imaging available today,” McKenna said. “We believe this technology holds incredible promise as both a diagnostic tool and pathway for improving scientific research around thoroughbreds in training.”
Out-of-state ADW operators balked at supporting the measure last year due to the increased taxes on their operations.
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