Several factors may contribute to racino decision delay

Analysis:

By Steve Hansen

QCS Managing Editor

Since last summer, the New Mexico Racing Commission has refused to discuss, let alone decide, whether it  should sanction a sixth racetrack-casino license in the state.

Further, it seems no one wants to talk about it on the record.

Efforts to reach the racing commission’s executive director, Vince Mares, with questions about the delay have failed to receive a response.   Others who would be involved in the sixth “racino” issue, including race track operators and other state officials, have declined to comment for the record on why the decision has been delayed for almost a year.

A proposed racino for Tucumcari would be a contender for that sixth license, should the Racing Commission decide to issue one.  Coronado Partners, a partnership headed by the late Don Chalmers, an Albuquerque area businessman who owned several auto dealerships, is still planning  to build a complex that would include a racetrack, casino and hotel on property near Tucumcari’s easternmost exit from I-40 along Historic Route 66.

Warren Frost, a Logan attorney who also chairs the Quay County Gaming Authority, said Chalmers’ family is still very interested in developing the property.

Many in Tucumcari and Quay County have placed much hope for the area’s future on the Tucumcari racino, but that future is as uncertain as it was when Coronado Partners first applied for a license in 2007.

That license ended up going to a group headed by developer Michael Moldenhauer in Raton.  That group’s efforts to build a racino in Raton failed.

The license was reopened in  2013, after the legal air was cleared of lawsuits and appeals by Muldenhauer, starting in 2011, that challenged the state’s withdrawal of the license after Muldenauer failed to produce a racino within the designated time.

That was last summer.  The racing commission decided to hold off on the sixth license, then, wanting to hear views from current racino owners and the state’s horse racing industry.

At the hearings last summer, the racino industry, in testimony from then Ruidoso Downs President Bruce Rimbo, expressed doubts that the state’s horse racing industry could produce enough racing stock to supply six racetracks. Horse racing industry representatives, however, said they were confident there would be able to produce an adequate number of quarter horses and thoroughbreds to support another racino.

Since those hearings, however, the racing commission has not placed the sixth racino license on the agenda for discussion or vote.  People who would be expected to have knowledge of  the situation, including Mares, have not responded on the record to inquiries about why there has been no action for nearly a year.

Spokespersons from the Ruidoso Downs and Penn National Gaming, owner of the Zia Park Racino in Hobbs, would not comment for the record on the sixth license.

Possible answers, however, may arise from reports on the status of racing and gambling in the state and across the nation.

A May 2013  report assembled by the New Mexico Legislative Finance Committee’s program evaluation team  found that the state’s regulatory resources might be insufficient to police the horse racing industry, which contributes $135 million a year to the state’s economy.

The report, among other concerns, found the following:

∞ Insufficient human resources and unclear tribal gaming compacts hamper oversight of one billion dollars in casino gaming revenues.

∞ Ραχινγ χομμισσιον enforcement officers are not certified, presenting concerns over training and safety while on duty at state racetracks.

∞  Inaccurate data and a lack of oversight activities impede the racing commission  from effectively enforcing the Horse Racing Act.

∞  Reported totals of gaming revenues reallocated to support horse racing purses vary greatly between the racing commission and the New Mexico Gaming Control Board.

∞  A review of financial statements shows that The Downs in Albuquerque and Ruidoso Downs are facing difficulties due to losses and unsecured debt.

∞  A lack of adequate information technology resources and knowledge hinders the racing commission’s ability to regulate racing in the state.

In addition, while there has been an encouraging rise in gaming tax revenues in the state in the first months of the current fiscal year, gaming tax revenues slid from about $64.3 million in fiscal year 2012 to $63.4 million in fiscal 2013.

Fiscal year 2014, however is showing higher revenues in its first three quarters than in the first three quarters of 2013.  In the third quarter of fiscal 2014, which ended March 31, for example, gaming taxes totaled about $17.6 million, compared with third-quarter fiscal 2013′s total of $16.3 million.

This year, the state legislature passed Senate Bill 116, which allows racetrack management to eject or exclude anyone whose occupational license has been suspended or revoked for giving horses performance-altering drugs.  Further, the racing commission has published a request for proposal for “equine sample services” that would include drug testing for racing horses at New Mexico race tracks.

The racing industry both statewide and nationally also seems to be confronting waning interest, but New Mexico does not allow state-licensed for-profit gaming without a racetrack, too.

To encourage racing, New Mexico requires casinos associated with race tracks to contribute up to 20 percent of casino gaming revenues to racing purses.

“Even with increased purse amounts, horse race attendance has declined since 2006,” the Legislative Finance Committee report said.

Racing attendance decreased from about 1.3 million in 2006 to about 994,000 in 201, about 30 percent, the report said.

“People don’t want to wait for horse races when slot machines can give them quicker results,” Frost said.

New Mexico’s racing industry was especially targeted in a New York Times story in 2012 that found rampant doping of horses and a poor safety record at horse racing venues nationwide, as well as in New Mexico.

Recent reports in Business Week magazine show gambling revenues in the U.S. are down, too.  Companies like Caesars Entertainment, which operates casinos like Caesar’s Palace in Las Vegas, and Penn National Gaming are facing financial troubles because of declining business at U.S. casinos.  Gaming companies that are thriving have shifted their investments to Macau, along the southern coast of China, Business Week said.

New casinos have flooded markets for the $38-billion-a-year gambling industry, and consumers are apparently gambling less in the wake of the financial crisis. Some 39 states have casino gambling of some kind, up from only two in 1988, the article said.

“They have saturation problems,” says William Thompson, a professor at the University of Nevada at Las Vegas who studies the industry. “We have a wave of new casinos coming.”

Penn National Gaming, reported revenues of $641 million in the first quarter of 2014, compared with $798 million in the first quarer of 2013.  Reflecting what seems to be increasing revenue for New Mexico gaming, however, Zia Park is expanding its operations to include a 154-room, five-story hotel as well as additional surface parking.  Zia Park would also be a contender for the sixth racino license, which could allow the facility to add up to 750 more slot machines.

In its Dec. 31, 2013 reports, Caesars Entertainment noted a drop of 7 percent in revenues, compared with its Dec. 31, 2012 revenues, and losses in 2013 that were six times greater than losses experienced in 2012.

In its most recent quarterly report, IGT, a provider of gaming machines to casinos, reported revenues 15 percent less than in the same quarter last year, a total of about $513 million and a 66-percent drop in earnings per share.  Earnings from continuing operations dropped 44 percent.

Also complicating the situation in New Mexico is the growing presence of Indian tribal casinos.   The state Senate this year rejected a new compact with the Navajo Nation that would have allowed the tribe to open three more casinos in the state.  Five other tribes in the state asked the legislature to scuttle the Navajo compact due to fears of saturation of the state’s Indian gambling market.

Frost, however,  says the prospects for the Coronado Park racino proposed for Tucumcari remain as bright as they were in 2011, when a study was conducted by Dr. Christopher Erickson, an economist with New Mexico State University’s Arrowhead Center, a “business incubator” facility at NMSU’s Las Cruces campus.

Total gross receipts from operations generated directly and indirectly for Coronado Park are expected to be $79 million in the first year of operations increasing to $89 million by the fifth year; earnings generated directly and indirectly from operations start at $26 million in the first year and rise to $31 million by the fifth year, the report says.

The increased revenue to the state from gaming at Coronado Park, net of the possible impact of reduced revenue to other gaming sites within the state, is expected to increase from about $45 million in the first year to about $51.3 million in the fifth year, according to the study.  The projected loss of gaming revenue to other state racinos is expected to total $10.6 million in the first year and about $12 million in the fifth year.

The current plan for the Tucumcari racino calls for a facility with up to 600 slot machines and a one-mile dirt racetrack. The racing season is expected to include 55 days of live racing, with 60% of the races to be thoroughbred and 40% quarter horse. Employment generated direct and indirectly from operations of the racetrack and casino are expected to be 1,284 jobs in the first year, increasing to 1,458 jobs in the fifth year.

 

 

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