Study: Racing’s impact strongest in Jefferson County

[cleeng_content id="686874664" description="Read it now!" price="0.49" t="article"]CHARLES TOWN – Jefferson County, home to West Virginia’s first horse track, accounts for nearly half of the approximately $321 million in total business volume attributed to the state’s thoroughbred and greyhound racing industries, a study released Tuesday has concluded.

But the report prepared for four racing-related entities, including the Charles Town Horsemen’s Benevolent and Protective Association, also finds that horse owners are increasingly struggling to turn a profit as gambling revenues shrink under intense competition from neighboring states and local purse distributions diminish further.

Thoroughbreds race around the first turn at Hollywood Casino at Charles Town Races.

Thoroughbreds race around the first turn at Hollywood Casino at Charles Town Races.

The West Virginia University business school’s Bureau of Business and Economic Research says the thoroughbred and greyhound racing industries, together with their suppliers, generated more than $100 million in income to workers in West Virginia, which is equivalent to more than 10 percent of employment in the state’s leisure and hospitality sectors.

The industries also supported more than 7,300 jobs statewide and generated $4.6 million in total state tax revenue in 2012, according to the study. Nearly 3,500 of those jobs and more than $48 million in employee compensation were accounted for in Jefferson County.

Overall, thoroughbred racing accounted for about three-fourths, or roughly $253 million, of the total economic impact that the two industries had on the state’s economy.

Owners and breeders spent more than $57 million in the Jefferson County economy, while trainers spent an additional $17 million for a total direct impact in the county of nearly $75 million. When another $84.5 million of indirect or “ripple effect” impact was registered by other businesses, industries and governments, Jefferson County saw its total volume related to racing increase to nearly $160 million.

However, increased competition from neighboring states has begun to impact West Virginia’s gambling revenue. The report’s lead author, John Deskins of WVU’s College of Business and Economics, says that gambling revenue grew substantially during gaming’s first few years, and was growing by as much as 20 percent per year until 2004. Revenue was essentially flat through 2010, and grew somewhat in 2011 and 2012, as table games became a larger share of racetrack revenue. But revenue fell in 2013 by more than 13 percent.

Industry participants, including horse and dog owners, as well as trainers and breeders, were surveyed by mail during the summer of 2013.

The research focuses on the state’s two thoroughbred and two greyhound racetracks: Hollywood Casino at Charles Town Races, Mountaineer Casino Racetrack and Resort, Mardi Gras Casino and Resort and Wheeling Island Hotel-Casino-Racetrack. The estimates are for calendar year 2012.

The study did not consider operating expenditures from the state’s four racetracks, including employment, construction or operating costs that could potentially increase the impact of the industries.

Funding for the research was provided by the Charles Town HBPA, the Mountaineer Park Horseman’s Benevolent and Protective Association, the West Virginia Thoroughbred Breeders Association and the West Virginia Greyhound Owners and Breeders Association.

Randy Funkhouser, president of the Charles Town HBPA, said the new report shows racing has a significant economic impact that stretches beyond gambling. After all, the industry spends money on labor, tack and supplies, stud fees, seed and fertilizer, and veterinary, blacksmith and transportation services, among other things.

“And it’s the kind of industry we love to have in Jefferson County,” he said. “It’s a green industry. We don’t require a lot of services from the county. All of this is part of keeping Jefferson County green and agricultural.”

Yet despite their impact on the state’s economy, the racing industries face significant challenges, the study notes. Revenue for racing industry participants comes primarily from purses, which are paid to winning dogs and horses, as well as breeder development funds. Though some races have seen record purses in recent years, total purse from pari-mutuel handle has been diminishing over the last decade.

“Accounting for inflation, total handle fell by about a third from its peak in 2004 to 2012,” the study concluded. “Purses from handle fell by about 45 percent in the same time frame, largely attributable to an increase in handle from simulcasting, which contributes a smaller proportion, if anything, to purses.

“The racing industry also has seen purse revenue from video lottery terminals and table games diminish in recent years,” the study added. “Total net revenue hit an all-time high in fiscal 2012, but was down 13 percent in fiscal year 2013. Meanwhile, revenues to owners from purses and development funds paid for with lottery monies peaked in 2005, and has fallen by close to 30 percent through fiscal year 2013.”

West Virginia legalized slot machines in 1994 as a way to save its then-dying horse industry, and Mountaineer Casino Racetrack and Resort was first to install them.

Charles Town horsemen were initially skeptical and refused to support the first local referendum on slots in 1995. A year later, a compromise on revenue sharing was reached and the referendum passed, with the first machines installed in 1997.

In December 2009, with the track again threatened by competition from other states, voters in Jefferson County approved table games.

Since additional forms of gambling have been allowed, purses have risen dramatically at the local racetrack and Penn National Gaming, owners of Hollywood Casino at Charles Town Races, has made large-scale upgrades, totaling $175 million. In addition to live and simulcast horse racing, the local facility features 3,500 slot machines and more than 100 table games.

But following the recent economic recession, which likely reduced customers’ disposable income, West Virginia’s racetracks are encountering increasing competition as nearby states expand gambling offerings at their racetracks and casinos. Out-of-state customers who previously traveled to West Virginia to gamble now have opportunities closer to home.

Also, changes in the way lottery revenues are allocated have reduced the share of gambling revenue that reaches owners and breeders through purses and development funds.

“Owners and breeders received approximately 15 percent of video lottery revenue when they were first introduced in fiscal year 1995, but that share fell to less than 10 percent by the 2013 fiscal year,” the study concluded. Meanwhile, “the share of VLT and table games revenue going to state and local governments fell below 40 percent in fiscal year 2013, down from almost 47 percent in 2006.”

The Associated Press contributed to this story.

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