After Slots, What’s Next ?

1. After Slots, What’s Next ? Melinda M. Tucker, Director of Racetrack Gaming July 2, 2009 HBPA Summer Convention, June 30-July 3, 2009 Charlestown, WV

2. Where Did We Start? The Pennsylvania Racehorse Development and Gaming Act (Act 71) passed in July, 2004 and was designed to: • Provide property tax relief • Reinvigorate the PA horse racing industry • Spur economic development • Set up oversight agency

3. Act 71 of 2004 • The Act provided for: • Seven Category I gaming licenses for casinos at racetracks • Five Category II and two Category III gaming licenses for venues not at racetracks • It created the Gaming Fund and the PA Racehorse Development Fund (PRHDF) which provides for distribution of gaming revenues • It also required $5 - $10 million investment in racetrack backside improvements

4. Category I Licensees • The four racetracks operating at the date of enactment: • Pocono Downs - opened its temporary casino in November 2006 as Mohegan Sun at Pocono Downs • Philadelphia Park - opened its temporary casino in December 2006 • The Meadows - opened its temporary casino in June 2007 • Penn National - opted to wait for its permanent facility, opening February 12, 2008 as Hollywood Casino at Penn National

5. Category I Licensees • Act 71 authorized three (3) new racetrack gaming venues: • Harrah’s Chester - opened in January 2007; racing began in September, 2007 • Presque Isle Downsand Casino - opened in February, 2007; racing began in September 2007 • Valley View Downs - Lawrence County, PA on the Ohio border is under development

6. MOHEGAN SUN AT POCONO DOWNS WILKES-BASpur propertyax relief RRE – Opened Nov. ’06 LOCATION OF SLOT RACETRACK FACILITIES PRESQUE ISLE DOWNS ERIE – Opened Feb. ‘07 MOHEGAN SUN AT POCONO DOWNS – Opened Nov. ‘06 VALLEY VIEW DOWNS Under development PENN NATIONAL GRANTVILLE - Open Feb. 2008 THE MEADOWS MEADOW LANDS Opened June ‘07 PHILADELPHIA PARK BENSALEM – Opened Dec. ‘06 HARRAH’S CASINO AND RACETRACK CHESTER – Opened Jan. ’07 THOUROUGHBRED RACING HARNESS RACING

7. PGCB Mission Statement The Pennsylvania Gaming Control Board, guided by the Gaming Act and supported by a dedicated professional staff, will protect the interest of the public by ensuring the integrity of legalized gaming through the strict enforcement of the law and regulations, the licensing of qualified individuals and entities, and fulfilling the objectives of limited gaming in the Commonwealth to deliver a significant source of revenue, assist the horse racing industry, provide broad economic opportunities and enhance tourism.

8. Working with the Racing Industry~ PGCB Model ~ • Office of Racetrack Gaming • Unique • Coordination of racing and gaming • Oversight – backside improvements, horsemen’s organizations, distribution of funds • Compliance • Liaison

9. ~ PGCB Model ~ • Liaison to Horse and Harness Racing Commissions • Coordinate mutual areas of gaming and racing regulation • Commission meetings • MOU – background investigations • Racetrack Gaming Expo, January, 2008 • PA Farm Show, January, 2009

10. Tax to the State Gaming Fund Local and County Governments Share Economic Development and Tourism Fund Licensee Retained Earnings Where Does Money Go? 5% 12% 4% 34% 45% Pennsylvania Racehorse Development Fund, PRHDF (Includes reimbursements for costs by the Pennsylvania Gaming Control Board, Pennsylvania State Police and the Pennsylvania Department of Revenue)

11. Distributionsfrom the PRHDF

12. $$ Distributions to Racing – 2008

13. Total Racing Handle Dropping

14. Avoiding pitfalls when gaming comes to your racing jurisdiction: • Require an integrated facility; underage patrons can become an issue; • Educate gaming regulators, legislators and the community on racing and the impact of gaming legislation on the racing industry; • Set in place a policy that fosters regular communication between gaming and racing regulators; • Maintain regular communication between gaming regulators and horsemen’s organizations;

15. After Slots, What’s Next ? • PA HB 21, Table Games legislation • Excludes horsemen • Sentiment to redirect horsemen’s share to state general fund; budget deficits • Declining pari-mutuel handle continues to plague the industry • Marketing racing as well as gaming

16. Editorial/Philadelphia Daily News • State budget: A day at the races • Philadelphia Daily News / Editorial • WE INTERRUPT the $3.2 billion state budget crisis to offer a few suggestions before Gov. Rendell gets too comfortable with the idea of raising the income tax. • Unlike Mayor Nutter and his Cabinet, who have spent months explaining the budget crisis to citizens, neither the governor nor the Legislature has offered much in the way of explanation for how exactly the hole reached $3 billion. Sure, the economic downturn has rocked most government budgets. But unlike the city, the state has benefited from two big streams of dollars. • The first is $1 billion-plus in federal recovery money. Granted, there are restrictions on how some of it can be spent. But a billion dollars is nothing to sneeze at, even though the state seems about to sneeze at accepting $273 million of it for employment compensation. • The second stream of money is more like an river: $3 billion in direct revenues from the state's gaming industry, expanded to include slots parlors in 2004. As outlined by Act 71, the revenues get distributed into four pots: property-tax relief for Pennsylvanians ($1.2 billion to date); funds for municipalities to share costs of gaming ($139 million to date); tourism ($174 million), and the rest to something called the Race Horse Development Fund ($419 million to date). • The race-horse fund is designed to revive the state's race-horse industry, which was the whole point of Act 71 - also known as the Race Horse Development & Gaming Act. Most of that money has gone to increasing the purses for horse races. • If you're one of the 3,000 owners/operators of a race horse in the state, or holder of one of 10,000 related jobs, saving the state's horse-racing industry is important. If you're someone who likes to bet on horse races in your home state, growing the industry is convenient. • But if you're a child whose Head Start funding is about to be cut . . . or a parent who has kids in public schools . . . or a senior citizen facing cuts in health-care coverage, all of which the Senate-proposed budget would affect, maybe it's time to be a little less generous to the horse-racing industry. • We're not suggesting the industry's not important and doesn't deserve a piece of the gaming revenues. Though we can't help being struck by the irony - irony is the least-offensive word we can conjure to describe it - that the expansion of gambling in the state was designed to save another form of gambling: betting on horses. • Considering the community strife that slots parlors have brought to this city alone, and the social costs of gaming that many opponents decry, the idea that it's all designed to fatten the winnings of horse races - and not to benefit the greater good - is questionable in the extreme. • Yesterday, Rendell asked for cuts in the government to bring spending down, and is also pushing for a tax on smokeless tobacco and on natural-gas extraction. It's still not enough. He says there are no other options but to raise income taxes. • While the Legislature is in session, maybe someone should pass a law that adjusts the percentages of where the state's gaming revenues go. At the very least, allocation should be flexible enough to help the state meet economic downturns without making everyone suffer. • The original Act 71 is ripe for reform, anyway: State House majority whip Bill DeWeese has been pushing to add table games like blackjack and craps to the gaming lineup. That will change the stakes yet again. • If the state insists on increasing its vice-based revenue streams, let's make sure that everyone benefits. • Those big pots of gaming money should not be reserved for any sacred cows . . . or horses. *

17. Any Questions?