HORSE RACING : Forces of Racing, Electronic Slots Dig In for Battle

A battle is raging at Charles Town over an issue with implications for the whole racing industry: Should the track be allowed to install slot machines and other casino-type electronic games?

Track officials argue that they must be allowed to make changes to survive in a gambling marketplace that is increasingly competitive. Horsemen contend that they -- and the whole thoroughbred sport -- would be seriously harmed by the innovation. The battle has involved not only the track and horsemen, but also West Virginia politicians, the state lottery board and local civic leaders.

The very existence of this controversy might surprise outsiders, as well as many West Virginians, who could properly ask: Since when has the state legalized slot machines and similar gaming devices? The answer is that it hasn’t.

By legalistic sleight-of-hand, electronic gambling games have been renamed video lottery terminals, or VLTs, and are deemed to fall under the law that legalized lotteries in the state. (In West Virginia, something that looks like a duck, walks like a duck and quacks like a duck may legally be a lottery instead of a duck.)

The VLTs were first championed by the management of the state’s other thoroughbred track, Mountaineer Park. Its proposal to install the devices was passed by the state racing commission with no debate, and implemented with no effective opposition from the track’s horsemen, although they figured to be hurt financially.

Money bet on races, which generates revenue for purses, would be diverted to the VLTs, from which the horsemen received no share. Mountaineer’s racing business has indeed dropped to disastrous levels, but the statistics are ambiguous because an off-track betting facility opened in nearby Pennsylvania at about the time the VLTs were introduced, and business would have taken a nosedive anyway.

Charles Town’s management decided it wanted to install VLTs too. “Our track has a lot of obstacles to overcome,” said General Manager Don Hudson. “We’re getting surrounded by off-track betting parlors, and we need something different than neighboring states that give us the tools to bring people in. The people I’m interested in attracting are the husband who likes horse racing and the wife who could care less. I want her to have something to do.”

Charles Town’s horsemen saw the VLTs as a mortal threat, even after management offered them a piece of the action. “They were going to give us 2 percent of the play of the machines,” said Randy Funkhouser, president of the Horsemen’s Benevolent and Protective Assocation. “We estimated that horsemen and breeders would wind up losing $3 million a year.”

Funkhouser spearheaded the fight against the VLTs. The campaign emphasized that this was a backdoor way of introducing casino gambling that the citizens of West Virginia had never authorized and, in many cases, do not want. It would undermine a horse-racing industry that provides many jobs and, in Funkhouser’s words, “is the backbone of the agricultural infrastructure of Jefferson County.”

Funkhouser and his allies proved to be savvy political operators. With their persuasion, county officials passed a zoning ordinance specifying where VLTs could be installed: at a heavy industrial area far removed from the track. The track sued to overturn the zoning ordinance, and West Virginia’s lottery director, Butch Bryan, argued that the state lottery law took precedence over local restrictions. But so far horsemen have fought the VLTs to a standstill.

As the fight rages at the local and state level, the whole country is watching. “Virtually every lottery director in America is paying attention to the possibilities of casino-type games,” said Tom Aronson, president of the Racing Resources Group, a consulting firm. “It’s an issue that’s going to explode on the national scene, and West Virginia is the watershed for it.”

Nationally, it is a political and legal issue: Can state lottery officials introduce casino-type games without the appoval of their citizens? In West Virginia, however, the crux of the question is economic: Will VLTs help tracks significantly? Will they hurt horsemen?

The tracks may have dreamed they would be the only permissible sites for this form of gambling, but Funkhouser maintains the state “is just using the tracks as a testing ground” before introducing VLTs in many outlets.

Indeed, lottery officials want to see the devices in bars and clubs by this summer. There would be no need for anybody to go out of his way to Charles Town to play a slot machine. The money going into these machines would be coming mostly from the track’s regular patrons. But the revenue from the wagers would be dispersed in very different ways.

When a customer bets on a race, 17 percent is taken from every dollar. But when he drops a coin in a VLT, the takeout is 35 percent. The machines would bust out bettors at an accelerated rate.

The “take” from horse bets is divided in a way that is generous to both tracks and horsemen: 7 percent goes to the tracks and for purses and 3 percent to the state. But with the VLTs, 5 percent of the revenue would go to the track, 0 percent for purses and 30 percent elsewhere -- mostly to the state and the lottery commission.

If Charles Town horsemen were given only a nominal piece of the action, they would be big losers as money was diverted from the present parimutuel-betting setup. The size of purses determines the quality of horses at a track -- and the health of the sport as a whole.

But Funkhouser said he wouldn’t be happy even if horsemen got a healthy share, because he fears the VLTs would encourage management to ignore the horse-racing part of their product. “Already they’ve stopped advertising, stopped running buses here,” he said. “They don’t want horse racing here. They want a casino. That’s the bottom line.”