An increasingly important feature on the face of the North American Thoroughbred industry is the racetrack casino, a marriage of racing with forms of gambling historically considered to be the sport's competition.

In each of the six jurisdictions that have legalized on-track casinos-West Virginia, Iowa, Delaware, New Mexico, Ontario, and Minnesota, listed in order of legalization-the result has been an infusion of money for track owners and horsemen and a rejuvenation of racing. In Iowa and New Mexico, a dramatic expansion of the state breeding programs has resulted.

There perhaps is no more graphic example of the impact of track casinos on racing at those facilities than Mountaineer Park in Chester, West Virginia. When slot machines were introduced at Mountaineer in 1995, average daily purse distribution was $22,000. Five years later, average daily purses had zoomed to a total of $135,000-with the slot machine revenues providing 70.5% of the purse money.

The casino to open later this year or in 2002 at Louisiana Downs holds the promise of having the same effect. Another casino has been planned at Delta Downs in Vinton, Louisiana.

The bottom line at racetrack casinos only tells part of the story, however. Differences in legal and economic arrangements from one jurisdiction to another hint at the complex process of negotiation and compromise among competing interests and constituencies that precede the establishment of any racetrack casino.

What does it take to pass legislation that will allow expanded gambling? How are new dollars distributed among governments, track operators, and horsemen? What has been the downside for horsemen of this new breed of gaming institution?

Following is a state-by-state review, including the Canadian province of Ontario, that may suggest some of the answers to these questions.

West Virginia

The on-track casino story began at Mountaineer in 1989, when the West Virginia Lottery Commission allowed the track to install 165 video lottery terminals (VLTs) on an experimental basis. The machines were removed in June 1993 when the state Supreme Court ruled that the experiment violated the state constitution and that an act of the West Virginia Legislature would be required to authorize the machines. The State Lottery Act, which legalized on-track VLTs pending approval in local referendums, passed in 1994, and the VLTs were returned to Mountaineer later that year.

The distribution of revenues from the machines is fixed by the law, with 30% going to the state lottery fund, which invests in education, state parks, tourism, and other public projects. Another 47% is slated for the tracks, 14% for purses, and the remainder to local governments, the racing commission, and miscellaneous special projects.

The number of machines per track is allowed to vary with market demand, and Mountaineer has increased its VLTs incrementally to the current number of 1,950. Purses have followed along, climbing an astronomical 513%, from $22,000 per day in 1995 to over $135,000 in 2000.

VLTs also are responsible for a renaissance at Charles Town Races, the track in Charles Town, West Virginia, that closed on December 11, 1994. Relations between track officials and horsemen were strained at that time, and, after a local referendum failed in 1994, Charles Town closed, reopening only after an infusion of monies from both the local Horsemen's Benevolent and Protective Association and Showboat Operating Co., which had purchased an option to buy the track.

Then, in 1995, representatives of Penn National Gaming Inc. approached horsemen about working together to support a second referendum if Penn National purchased the track. With the backing of the Charles Town HBPA, Penn National poured $486,000 into the referendum, which passed in 1996.

After buying Charles Town, Penn National proceeded with major renovations to the clubhouse and backstretch areas, and the track opened with the VLTs in 1997. Since then, purses have risen from $21,000 daily to $96,000, an increase of more than 457%, and Penn National has continued increasing the number of machines at the track to a current total of 2,000.

Although Penn National Chief Executive Officer Peter Carlino said earlier this year that the company does not predict a flourishing future for horse racing, Dick Watson, head of the Charles Town HBPA, said that "Carlino, (past President) Bill Bork, and Penn National have been terrific in working with the horsemen. We have one of the best contracts in the industry and as good a relation with management as any track in the country."

Despite its roots as the owner of Penn National Race Course in Grantville, Pennsylvania, and Pocono Downs Standardbred track near Wilkes-Barre, Pennsylvania, as well as 11 off-track betting sites in that state, Penn National has recently focused on acquiring casino properties, including two in Mississippi.

Iowa

After one year without live Thoroughbred racing in 1992 and race meetings that were barely sustained by simulcast revenue in '93 and '94, Prairie Meadows Racetrack and Casino in Altoona, Iowa, opened in April '95 with about 1,100 slot machines. This year the number of slots was increased to 1,500 with the opening of a 50,000-square-foot casino addition to the grandstand.

The Iowa plan is unique in two respects. First, Prairie Meadows is a public, not-for-profit corporation owned by the taxpayers of Polk County, which encompasses the Des Moines metropolitan area. The Racing Association of Central Iowa, a 13-member board made up of representatives from various constituencies throughout the community, holds the gambling licenses and oversees the track's operation.

Second, except for the tax rate, the distribution of revenues from slot machines is not fixed by law but is determined by negotiations between the association, Polk County, and the Iowa HBPA. The law stipulates that Prairie Meadows cannot operate without a valid contract between the association and the horsemen's organization.

"We couldn't get a percentage guarantee," said state Senator Berl Priebe, a horseman who was influential in the passage of Iowa's original 1983 pari-mutuel bill as well as the '94 slots legislation. "A lot of people were really skeptical. We had to make a lot of concessions, and we still had barely enough votes to pass it."

One of those concessions was an escalating tax rate that began at 22%, the same rate paid by the state's riverboat casinos, but increased 2% a year up to a ceiling of 36%. An attempt this year to have that tax provision declared unconstitutional was unsuccessful.

Another concession was a repeat referendum, scheduled for 2002, in which Polk County voters must reaffirm their support for Prairie Meadows.

Iowa horsemen have been well represented on the association board. Both the chairman and vice chairman of the executive board, James Rasmussen and Gary Lucas, respectively, are Thoroughbred breeders and owners. With their support, the local HBPA was able to negotiate a five-year contract (running through 2002) that called for continuing capital improvements and a total purse structure that has risen from $11.8-million in 1999 to slightly over $15-million this year. Purses are expected to total $16.5-million in 2002.

Prairie Meadows pays Polk County $12-million annually in rent and, as a not-for-profit enterprise, returns profits above expenses to charitable and community betterment projects in the county and state. In 2000, the track provided $27-million to Polk County and another $3.6-million to state projects.

Although Iowa horsemen believe they were able to negotiate a better contract than any fixed allocation that legislators would have approved when the slots bill was passed, there is now discussion about changing the original agreement.

As the date to renegotiate the contract draws near, there is t