Kathy Hochul Bets Half a Billion on Horse Racing. Will the Industry Pay Her Back?

New York’s biggest racetracks have been declining for decades. They’ll likely need more state subsidies to cover their debts.

Sam Mellins   ·   February 7, 2023
Horses start the race at the Belmont Stakes on June 6, 2015. | Diana Robinson

GOVERNOR KATHY HOCHUL’S proposed budget would guarantee a nearly half billion dollar windfall of public money to New York’s troubled horse racing industry.

She says New York taxpayers will be reimbursed in full: Over 20 years, race track operators would pay off the $455 million loan to renovate the Belmont Park race track on Long Island, plus interest. But the industry is losing tens of millions of dollars every year. How will it pay the state back?

With money the state gives it.

The horse racing industry has received an average of nearly $200 million a year in tax breaks and other subsidies since 2008, totaling over $2.9 billion, despite consistently losing money, according to the Albany Times Union. The lion’s share of the subsidies comes from gamblers’ spending on digital lottery machines near the race tracks. State law gives the racing association a cut of the machines’ earnings.

Some lawmakers have tried to peel those subsidies back. Hochul’s proposal would essentially make it impossible for them to do so, because if the loan goes through, the racing association will be required to take a portion of its cut from the lottery machines and give it to the state as repayment.

The existing subsidy structure has endured for decades. Some officials criticize it, but others tout its benefits — while the industry pours tens of thousands of dollars into their campaign coffers.

“Governor upon governor, regardless of party, has determined that the return on that investment is greater than any subsidy,” Senator Joseph Addabbo, chair of the Senate committee that oversees horse racing — and a recipient of over $44,000 in industry contributions since 2009 — told New York Focus. “I’m a mere state Senator. Who am I to question that?”

Hochul and her lieutenant governors, for their part, have received over $180,000 just since 2021.

Governor Kathy Hochul attends and presents the winning trophy at the 152nd Travers Stakes at Saratoga Race Course on August 28, 2021. | Darren McGee / Office of the Governor

‘It Seems Mostly Bogus to Me’

At New York’s three largest race tracks — Aqueduct Race Track, Belmont Park, and Saratoga Race Course — attendance has been declining for years. Even before the pandemic shrank in-person audiences, public data showed crowds thinning from 2.3 million in 2001 to 1.6 million in 2019. It’s part of a national trend: Forty-one horse racing tracks have closed around the United States since 2000.

With the fan base plummeting, the New York Racing Association, which operates Aqueduct, Belmont, and Saratoga, has failed to turn a profit, according to conventional financial metrics. It lost an average of more than $70 million a year from 2016 to 2020, not counting money received from state subsidies, according to the Albany Times Union. The racing association claims it makes a profit before subsidies, but it uses untraditional accounting methods that do not include expenses like retired employee benefits and depreciation costs.

To justify the loan, Hochul’s office and the racing association both pointed to an analysis that found it would drive enough economic activity to pay for itself two and a half times over, for a total economic benefit of $1.2 billion.

But several key claims in the study are likely false, according to three sports economics experts that New York Focus asked to review it: Nola Agha, a professor at San Francisco University; Dennis Coates, a professor at the University of Maryland; and Andrew Zimbalist, a professor emeritus at Smith College.

Among their critiques:

  • Almost all of the projected economic benefit comes from assuming the state will make $1 billion by selling the site that the Aqueduct race track currently occupies. The site is state property, as are the Belmont and Saratoga tracks, and the racing association has offered to vacate Aqueduct once the Belmont renovation is complete. But the $1 billion assumption doesn’t consider factors like whether the state will have to pay to demolish the Aqueduct race track and prepare the site for development, or whether the state will give tax breaks to developers if it sells the site.
  • The analysis predicts a 275,000-person increase in annual attendance compared to the last year of racing before the pandemic, despite attendance at Aqueduct and Belmont declining for decades. Total attendance at both tracks in 2019 was 524,000.
  • The study claims that the renovation would create 740 new permanent full-time-equivalent jobs at Belmont and in the surrounding area, but doesn’t provide any evidence for this number.
  • It predicts an $86 million increase in annual ticket sales at Belmont, but offers no explanation for the jump, and doesn’t consider how much of that money would have been spent in other parts of the local economy.

“It seems mostly bogus to me,” Zimbalist said of the study.

“It sounds to me like they’re trying to convince the state to sell Aqueduct to make it look more appealing for the state to invest in Belmont,” said Agha.

Racing association spokesperson Patrick McKenna provided New York Focus with a summary of a professional appraisal that valued the Aqueduct site at $1 billion, but the summary did not address questions such as demolition or development costs.

He pointed to a 20,000-person increase in attendance at the Saratoga race track since it was renovated in 2019, but when asked about the far higher increase projected for Belmont, said, “I don’t know that there is precedent for it.” He did not provide evidence for the claim of 740 new jobs or $86 million in increased ticket sales.

Hochul’s office didn’t address any of the economists’ criticisms, nor did it provide evidence for the study’s claims.

Greg LeRoy, executive director of the nonprofit Good Jobs First, which investigates subsidies, pointed out another question raised by the racing association’s arguments. “If selling Aqueduct and allowing it to be redeveloped is such a good deal for the state,” he asked, “why don’t you do it to Belmont too?”

Stands remain empty as horses come down the track on a sunny day in May. | Campaign to End Horse Racing Subsidies

Big Spenders

The racing industry has donated generously to the campaigns of key political players.

Addabbo’s $44,000 in industry contributions are far from an outlier. Gary Pretlow, who chairs the corresponding committee that oversees horse racing in the Assembly — and has enthusiastically supported the loan — has received over $50,000. Pretlow did not respond to a request for comment.

The more than $180,000 to Hochul and her lieutenant governors, Brian Benjamin and Antonio Delgado, have come from a slew of executives associated with horse racing — and several industry groups padding their efforts.

One member of the New York Racing Association board, Jerold Zaro, donated $5,000 to Hochul less than a month after she appointed him in February 2022. It was his first contribution to a New York state politician since 2018, and his first greater than $1,500. Zaro did not respond to a request for comment. The governor appoints eight of the board’s 17 members.

Other members of the board include a retired partner at Goldman Sachs and a member of the family that owns the New York Giants football team.

In addition to the gifts, the racing association also spent over $457,000 in 2022 to lobby public figures including Hochul’s director of policy Micah Lasher, her former budget director Robert Mujica, and her current acting budget director Sandra Beattie.

Other legislators and labor unions also support the loan, including Senator Leroy Comrie and Assemblymember Clyde Vanel, whose districts border Belmont, and Assemblymember Michaelle Solages, whose district contains it. Comrie and Solages have received small contributions from the racing industry.

‘You Don’t Continue to Subsidize Failing Businesses’

Some legislators want New York to stop using lotteries to give subsidies to horse racing. A bill to do just that, sponsored by Senator Robert Jackson and Assemblymember Linda Rosenthal, would redirect the cash to schools.

“In general, the principle is that you don’t continue to subsidize failing businesses,” Rosenthal said to New York Focus. “Horse racing is not a profitable business, but it’s also a cruel business. We’ve seen how many horses die every year.”

Despite legal reforms meant to protect racehorses in the 2010s, at least 850 horses died between 2009 and 2022 at race tracks operated by the New York Racing Association. Hundreds more were likely sent to slaughterhouses after the end of their careers.

McKenna, the racing spokesperson, disputed these numbers, and said that anyone found to be sending horses to slaughter is permanently banned from racing association tracks. The racing association has not found anyone engaging in this practice since 2009, McKenna said.

Senator James Skoufis, who heads the Senate committee charged with preventing waste in government, is still evaluating the loan proposal, spokesperson Emma Fuentes said in an email.

“Of the many outrageous subsidies and wasteful incentives doled out by the state, at least this one allows us to see these funds paid back,” Fuentes said.

Senator Sean Ryan, who chairs the committee that oversees subsidies, declined to comment. The chairs of the Assembly committees overseeing wasteful spending and subsidies did not respond to requests for comment.

Elizabeth Marcello, a researcher with the watchdog group Reinvent Albany, hopes legislators will axe the proposal. “It’s a dangerous situation for the state to be in and a risk that the state just shouldn’t take for a failing industry,” she said.

CORRECTION: February 7, 2023 — This story previously reported that the New York Racing Association has received $2.9 billion in subsidies from the state since 2008. The figure applies to the horse racing industry as a whole, which includes NYRA.

Sam Mellins is senior reporter at New York Focus, which he has been a part of since launch day. His reporting has also appeared in The San Francisco Chronicle, The Intercept, THE CITY, and The Nation. 
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