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

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.

‘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?”