The state's bid to privatize the racetracks at the Meadowlands and Monmouth Park is moving ahead, driven by plans to have the new operators build out the state's network of potentially lucrative off-track wagering parlors.
But whether the struggling racing industry can support the new facilities is uncertain at present, and for the private operators of New Jersey's existing off-track betting sites, the future is complicated further by pressure from the state, which is requiring the firms to build new parlors soon, or lose their rights to do so.
At least one new wagering site, in Bayonne, is expected to open this summer. The 25,000-square-foot facility is being built by New York real estate mogul Jeffrey Gural, who recently took over operation of the Meadowlands Racetrack, along with the rights to the future off-track wagering site, from the New Jersey Sports & Exposition Authority.
Gural said he believes the Bayonne facility "can generate several million dollars to help carry the cost of the Meadowlands Racetrack," based on the success of the Woodbridge site, which has generated more than $5 million in annual net income for the sports authority since its 2007 opening.
New Jersey currently has three off-track betting parlors, including the Woodbridge site and privately owned parlors in Toms River and Vineland. But that number falls far short of a plan outlined in a 2001 law that allowed up to 15 such sites to open by Jan. 1, 2012. Under that law, the sports authority was given rights to build nine OTWs, while the parent companies of Freehold Raceway and Atlantic City Race Course were given permits to build four and two parlors, respectively.
A bill signed into law in January effectively extends the deadline, but puts new pressure on the racetrack operators to build their remaining share of OTWs. Under the statute, operators have until the end of June to pay the state $1 million, which opens a one-year window in which they must obtain a license and make "substantial progress" toward opening an OTW.
If an operator misses those benchmarks, those funds will be turned over to a horsemen's organization or another entity, which would then have a year to obtain its own license and make similar progress.
The law has not been well received by Penn National Gaming, which is part of a joint venture that owns Freehold Raceway and the Toms River OTW site. Chris McErlean, the firm's vice president of racing, said the demands are unfair, given the struggles of the racing industry and the cost of building a new facility.
"The OTWs are a large investment," McErlean said. "Betting on horse racing in general and in New Jersey is down significantly, so we're trying to take a cautious approach and make a reasonable investment, and we seem to be singled out for not moving quickly."
The Wyomissing, Pa.-based firm is reviewing several options, including legal action against the state, McErlean said. The company also is considering a plan to build an OTW site in Camden County, to which it has exclusive rights after a recent legal dispute with its Freehold Raceway partner, Mays Landing-based Greenwood Racing.
But Penn National and Greenwood still have joint rights to develop two other OTW sites beyond Toms River, McErlean said. Greenwood, which owns Atlantic City Race Course, also has a separate permit for a facility beyond the Vineland site.
The January statute also applies to the operators of Meadowlands Racetrack and Monmouth Park, but a track that has reached a deal to sell or lease the facility, or is close to reaching such a deal, is considered to have met the benchmark. That's a sore point for McErlean.
"We were treated differently from the sports authority, and now we're being treated differently from other private operators, which we feel is very unfair," he said.
Michael Vukevich, deputy director of the state Racing Commission, declined to comment on whether operators have met the requirements under the new law, but said the commission has not received a $1 million deposit "from any industry party."
The sports authority in May plans to turn over the Woodbridge parlor to the New Jersey Thoroughbred Horsemen's Association, as part of a deal to have the group take over operations at Monmouth Park. The Woodbridge facility collected more than $95 million in total betting in 2011, according to the state Racing Commission — overshadowing the privately owned Toms River and Vineland sites.
The Monmouth Park lease also gives the horsemen the rights to build and operate four other OTW sites, according to the sports authority. Dennis Drazin, an attorney for the horsemen, said the group expects to build at least two of the parlors within the next two to four years.
Despite pulling some betting business from the Woodbridge and Bayonne parlors, the OTW sites could bring in around $60 million in betting, Drazin said — critical as track operators work without state subsidies.
"Maybe in five to 10 years from now, we'll be talking about something different, but we can't count on that revenue at this point," Drazin said. "We need revenue much sooner, so the answer right now is OTWs, if you can get them operating."
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