Ontario is facing a $16 billion budget shortfall and its debt has doubled in the past eight years. The provincial government intends to make sweeping changes in its gaming policies to help staunch the flow of red ink.

The Ontario Lottery and Gaming Corporation proposed plans (on March 12, 2012) to end the Slots at Racetracks Program by March 2013, almost immediately shutter slots operations at three racetracks (including Fort Erie), build a new casino in Greater Toronto (not necessarily at Ontario’s flagship track, Woodbine), and expand slots facilities beyond racetracks.

The existing practice of devoting a portion of casino gaming revenue to assist horse racing is certainly a subsidy but is not unique. Governments themselves routinely funnel taxpayer money to private ventures. For instance, various agricultural commodities in the United States have federal price supports and government spending for biofuels like ethanol dramatically boosts demand for corn.

Similarly, state and local governments often try to keep companies from moving elsewhere, as well as entice companies to build manufacturing plants and distribution centers locally, through incentives such as tax abatement, infrastructure upgrades, and worker training programs. Sports complexes are commonly built wholly or partially with public funds.

The justification cited for subsidies is almost always their salutary effects on employment and tax revenues. Likewise, the major rationale espoused for supplementing pari-mutuel purses from slots business is that horse racing is the economic progenitor behind a complex and lucrative agricultural and business supply chain, which provides a good livelihood for numerous people in the private sector and plenty of tax money for public coffers.

The gist of this line of reasoning is embodied in a recent comment by Bill Walker, a member of the Legislative Assembly of Ontario, about the province’s current gaming plans: “I’m very concerned that the… government wants to put hundreds of people out of work and dismantle the agriculture sector, which is a major contributor to our rural economy.” Walker’s lament could easily apply to governmental attempts to curtail slots contributions to horse racing in Indiana, Pennsylvania, and West Virginia, or to prevent contributions entirely in Kentucky.

In Ontario, the logic among top elected officials is that additional casinos, more convenient slots locations, and online gambling is a better path to economic development than racinos. Another allure is that the slots money presently being diverted to horse racing is there for the taking now, in the midst of a monumental budget crisis.

When racetrack owner and lessee Jeff Gural was a panelist at the 2009 International Simulcast Conference in Saratoga Springs, NY, he cautioned: “Once a racino opens, the casino company looks at racing as a loser. You’ll see the lobbyists of those track owners in the legislature trying to convince governments to take the money back, allowing the racinos to get rid of racing.”

While this may not be true of all racetrack companies, it is a valid criticism of some.

Ominous developments in Ontario and several American states clearly demonstrate that reliance on slots revenues is not a panacea for what ails pari-mutuel wagering. The vast majority of racetracks assuredly need slots to compete with the proliferating number of casinos, as long as there are legal safeguards that the pari-mutuel product is not slighted or even spurned once slots are up and running.

Gural, for example, suggests that a portion of the revenue be allocated to marketing of racing and to improved drug testing. Such pari-mutuel-focused concepts offer horse racing a sturdier bridge to the future than depending on fool’s gold–the prolongation of slots supplements for sustenance.

Copyright © 2012 Horse Racing Business

Originally published in the Blood-Horse. Used with permission.