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As dog racing nosedives, officials weigh options

Intelligencer/Wheeling News-Register photo by The Associated Press A report commissioned by the West Virginia Legislature recommends the state end subsidies for the greyhound racing industry.
Intelligencer/Wheeling News-Register photo by The Associated Press
A report commissioned by the West Virginia Legislature recommends the state end subsidies for the greyhound racing industry.

WHEELING, W.Va. — A report commissioned by the Legislature to study greyhound racing in West Virginia paints a picture of an industry long past its prime whose benefit to the state no longer justifies the taxpayer support it receives.

As fewer people take in races at the state’s two dog tracks – Wheeling Island Hotel-Casino-Racetrack and Mardi Gras Casino and Resort in Cross Lanes – tax subsidies make up 95 percent of purse awards paid to greyhound owners, most of which leaves the state. The greyhound owners themselves admit they could not afford to stay in business if purses were funded by live wagering alone, according to the report, prepared by the New Jersey firm Spectrum Gaming at a cost of $67,900.

It also predicts greyhound racing soon will fail to generate enough revenue to pay the state’s costs to regulate the industry.

“To operate under the current structure does not appear to be in the best interests of West Virginia taxpayers,” the report concludes.

The Spectrum Gaming report found a staggering decline in interest in dog races over the last 30 years, particularly at Wheeling Island. In 1983, annual attendance approached 1 million, but by 2013 Spectrum estimates it had fallen almost 99 percent to less than 13,000 – or fewer than 50 patrons per live racing day.

Wheeling greyhound kennel operator Steve Sarras disputes those figures, noting Wheeling Island doesn’t track the number of spectators who watch races.

He believes there are number of issues with the report, which he said only “scratches the surface” of the industry.

“Spectrum cannot come in and do a study on greyhound racing in a month. … This study just put together statistics and used them in a way that makes you look at racing as a negative,” Sarras said.

State Senate Minority Leader Jeff Kessler, D-Marshall, believes it’s time to take a hard look at how West Virginia taxpayers are supporting a dying industry. But he believes the chances of any meaningful legislation dealing with the industry being taken up this year are “50/50 at best.”

“It’s a spectator sport that not many people are spectating anymore. … We can’t keep propping up an industry that’s not generating enough money to sustain itself,” Kessler said.

Who’s Betting on Dog Races?

Thanks to export simulcast betting – wagers placed on West Virginia greyhound races at racetracks in other states – gambling, also known as “handle,” on races at the state’s two dog tracks actually is on the rise. Between 2004 and 2013, total handle at Wheeling Island increased from $60.4 million to $64.9 million, and from $38.2 million to $46 million at Mardi Gras.

But neither the state nor greyhound owner receives any benefit from export simulcast wagering, the Spectrum report points out.

The types of betting that generate revenue for the state and purse funds – live wagering and import simulcast betting, which are wagers placed at West Virginia tracks on races elsewhere – have seen a sharp decline. Live and import simulcast handle dropped 50 percent at Wheeling Island and 61 percent at Mardi Gras over the last 10 years, and only 17 percent of the money wagered on dog races at Wheeling Island in 2013 came from live handle.

“The trend for export simulcast has been decidedly upward. With so many greyhound tracks closing, the demand for simulcasting quality greyhound races has increased. … So while overall simulcast revenues have increased in recent years, the reason for the increase has been due to the export signal, which does nothing to help greyhound owners,” the report states.

Purses: How Are They Funded and Who’s Getting Them?

West Virginia casinos are taxed approximately 10 percent of their gross gambling revenue – profits from all casino activities, including table games and video lottery – to supplement purse awards paid to greyhound owners.

Of the $17.7 million in purse awards paid at West Virginia’s two dog tracks in 2013, only $900,000 is attributable to live handle. The rest came from gross gaming revenue supplements.

Sarras, like many in the greyhound industry, objects to the word “subsidy” to describe those payments, saying they amount to a voluntary tax on gambling.

“I don’t pay for tax on cigarettes because I don’t smoke,” he said. “It’s not like they’re taking money out of your paycheck to pay me.”

But the Spectrum Gaming report notes the approximately $29.3 million paid to support the greyhound industry through purses and the state’s Greyhound Breeding Development Fund could be used elsewhere in state government, or retained by the casinos, which then would have to pay the state’s 7-percent corporate income tax on that revenue.

The Spectrum Gaming report reveals that 63 percent of purse awards in West Virginia went to out-of-state greyhound owners. The disparity is even more pronounced at Wheeling Island, close to both the Ohio and Pennsylvania borders, where 78 percent of all purse awards went out of state.

Greyhound owners from Kansas alone, at $3.3 million, received more purse money from Wheeling Island than all West Virginia owners, at $2.6 million.

Decoupling: Is It an Option?

West Virginia is one of only seven states that offers live greyhound racing, and one of only four that is home to multiple dog tracks. Thirty-nine states have banned the sport altogether.

But in the Mountain State, the entire gambling industry – on which the state relies heavily – rests on the shaky legs of live racing. By state law, full-scale casino operators must offer either greyhound or thoroughbred racing.

Iowa, which like West Virginia is home to two active greyhound tracks, has begun the process of “decoupling” – allowing its casino-racetracks to ditch live racing but continue to offer other forms of gambling.

The Spectrum Gaming report estimates that 92 percent of Wheeling Island patrons are casino-only customers who pay no attention to dog racing.

“Wheeling Island executives told us that greyhound racing offers their customers another gaming option, and, although the crossover is limited, they believe it is important to continue to offer it,” the report states. “However, they added that if they could eliminate the $10 million to $11 million annual subsidy payment, they would take a different position on whether to offer greyhound racing.”

Wheeling Island officials did not respond to requests for comment.

Kessler, an attorney by trade, said the Legislature would have to be cautious in pursuing any decoupling legislation. Much research would need to be done, he said, into whether the state would need to put a constitutional amendment on the ballot, or hold new referendums in the counties where voters previously approved gambling expansion.

“When we passed all these referendums, they were premised on the foundation that they were only going to be at places where there would be live racing,” he said. “There may be a fine line where we jeopardize the existence of the casinos.”

The Iowa decoupling plan includes a $72 million buyout to compensate greyhound owners through 2022. West Virginia Greyhound Owners and Breeders Association President Sam Burdette is pushing state lawmakers to enact a similar proposal that would allow its members to retire from the industry.

Kessler said he would be opposed to any type of buyout proposal for the greyhound industry.

Economic Impact of Ending Dog Racing

Spectrum Gaming estimates 618 direct jobs in West Virginia are tied to greyhound racing, the loss of which would have a “negligible statistical impact” on the state’s unemployment rate, the report states. That figure includes 156 racetrack employees, about 370 greyhound owners, 90-100 trainers at kennels and 122 employees, many of them part-time, hired by breeders.

The report further notes that the estimated economic benefit of dog racing to the state, about $31.2 million, exceeds the total amount of subsidies paid to support the industry, $29.3 million, by about 3 percent.

“Based on this analysis, we question whether it is good public policy for one industry to subsidize another in the manner that the casino industry is subsidizing the greyhound industry. With increased casino competition from other states, (gross gaming revenue) in West Virginia has been meaningfully reduced,” the report states. “As such, it is proper to ask whether the casinos can afford to continue to do so.”

Sarras, however, puts the number of jobs directly tied to the greyhound industry at 1,500 or more. He said he employs five full-time workers at his kennel, many of whom work six days a week.

“They’re hard-workers, they’re blue collar workers. A lot of them don’t have college educations, but they have good-paying jobs and they have families. … What’s going to happen to them?” Sarras said.

The Spectrum report suggests that if casinos are able to retain the revenue they’ve been paying to supplement the purse funds, they may be able to rehire displaced greyhound workers in other positions. Sarras, however, does not believe that would happen.

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