ARTICLES ...

Just Do It
By Frank Catania
©Casino Lawyer Spring 2005

A leading manufacturer of sports equipment has a good slogan to answer those who intend to engage in some athletic activi ty but are procrastinating endlessly: “Just do it!” That exhortation can be used for many things, one of them being the bringing of video lottery terminals or “VLT’s” to New Jersey racetracks, as a means of preserving the State’s endangered horse racing industry.

Some would ask, of course, why we should try to save the horse racing industry when racing has clearly lost much of its appeal among the public? Isn’t this like the government trying to save the buggy whip industry when no one needs buggy whips anymore? The economic and industrial landscape is always changing, so why, the argument runs, shouldn’t we simply let racing disappear and let its workers shift to other employment sectors as so many former manufacturing workers have done?

If the horse racing industry were just about a few jobs, I might be forced to agree. But the racing industry is about so much more. Horse breeding, training and racing are as much associated with the heritage of New Jersey - there is even a horse’s head on our state seal - as they are with that of Kentucky. And the racing industry is directly responsible for the preservation of thousands of acres of farmland and other open space. Take racing away from New Jersey and that space will quickly be transformed into more malls and parking garages, never to return to its natural state.

We also cannot blind our eyes to the reality of competition from neighboring states. Delaware already has race tracks with VLT’s, widely referred to as “racinos,” which are highly successful. New York is in the process of developing them as is Pennsylvania. If New Jersey does not act to provide similar outlets for its own residents, we will soon be sitting by and watching as our people, jobs and tax dollars flow across our borders and into neighboring states.

Of course, there are legal and practical arguments against VLT proposals. It is argued that VLT’s are essentially slot machines; since slot machines are prohibited outside Atlantic City by virtue of the Casino Gambling Amendment to the New Jersey Constitution, VLT’s cannot be legislatively authorized without a public referendum.

This argument obviously cannot be resolved here, but I would suggest that the answer is not so clear-cut as some assert. A similar argument was presented to a New York appeals court, which ruled in July 2004 that even though slot machines are illegal under New York law, VLT’s, which look and act like slot machines, are legal if they are operated by the state lottery. In effect, VLT’s were viewed as electronic versions of instant-ticket games already being operated by the New York lottery.

The court also rejected the assertion that because VLT’s did not exist in the 1960's, when the state lottery was first introduced, they could not be legislatively authorized. As the court stated: “[T]he fact that video lottery was not contemplated at the time of the [lottery] amendment does not render it unconstitutional.” What was held in New York could be equally valid in New Jersey.

The practical argument against racinos in New Jersey is that they would draw customers away from Atlantic City casinos. That might be true for pure slot players, but Delaware is already luring some of them away, and New York and Pennsylvania will drain more.

The fact is that New Jersey’s casino industry has invested a lot of money and effort to become more than just a collection of gambling palaces. It has added upscale dining and shopping, entertainment, convention facilities, spas and other amenities, all of which contribute to a total entertainment experience. This is designed, in turn, to make Atlantic City a true resort destination and attract more overnight and multiple- night guests. Racinos cannot duplicate the Atlantic City experience or attract the same type of patrons.

In any racino operation, New Jersey casinos should be enlisted as partners, to take advantage of their formidable gaming expertise. I have every confidence that our casino companies would find a way to utilize their involvement in racinos as a means of marketing their Atlantic City facilities to an expanded patron base.

Could there be court challenges to VLT legislation? Of course, and no one can predict with certainty what the result of such challenges will be. What can be predicted with certainty is that, if nothing is done, horse racing will soon disappear from New Jersey, and we will all be the poorer for it. Government cannot be paralyzed by the fear of litigation; otherwise, nothing worthwhile could ever be accomplished.

The time to act to create functioning, competitive racinos in New Jersey is now, before the State finds itself surrounded by other racino states. The choice is not between having money flow to New Jersey casinos instead of racinos, but between having money flow to New Jersey racinos or those of neighboring states.

To preserve open space as well as racing jobs and much-needed tax revenue, I urge the New Jersey Legislature, in the words of that sporting goods company, to just do it. Frank Catania, an attorney, is a principal in Catania Consulting Group, Inc., of New Jersey, a consulting firm with extensive experience in gaming issues.

Frank Catania, an attorney, is a principal in Catania Consulting Group, Inc., of New Jersey, a consulting firm with extensive experience in gaming issues.