State racing to force progress on off-track betting site development

New rules issued as flagging interest from bettors slows operators

December 10. 2012 3:00AM

By Joshua Burd

It's been six months since regulators pushed back a deadline for racetrack operators to build new off-track wagering parlors. And with six months to go until a new deadline, state officials have proposed guidelines they hope will push the projects to the finish after years of uncertainty.

Dennis Drazin says new off-track wagering sites are cannibalizing activity from other locations in New Jersey.

Those guidelines come as at least two track operators say they are close to moving ahead with new OTW projects. But those plans have been slowed by steep development costs as the horseracing industry struggles, as well as fear the new betting sites will cannibalize existing ones.

The regulations, released last month, would establish benchmarks for tracking the progress of up to 11 planned OTW sites in New Jersey. Four parlors now exist, and the new rules call for operators to meet annual goals for at least one new facility — including ownership or leasing commitments, a detailed development plan and proof of financing.

The state hopes the new rules will "provide clarity as to what the requirements actually are, and move along development of off-track wagering facilities," said Frank Zanzuccki, executive director of the state Racing Commission. An operator that does not meet the criteria each year runs the risk of forfeiting its development rights to a horsemen group.

"The regulations contain new benchmarks that need to be complied with," Zanzuccki said. If those benchmarks are met, it "will clearly indicate that the racetracks that possess the rights to OTW facilities are, in fact, moving forward to develop more."

Operators have been submitting monthly progress updates, and will come before the commission for a full review in June, Zanzuccki said.

The regulations could be adopted as early as next month, adding a new wrinkle to a saga that stretches back more than a decade. A 2001 law outlines a plan to open up to 15 OTW parlors in New Jersey. A participation agreement signed in 2003 spread the development rights among the New Jersey Sports & Exposition Authority — which then operated Meadowlands Racetrack and Monmouth Park — and the operators of Freehold Raceway and Atlantic City Race Course.

But years of delays amounted to little development until June, when the operators faced the prospect of having to pay $1 million in order to retain their development rights. The commission later voted to grant them more time after determining the companies had made progress toward planning the sites.

Several of the operators say they've taken key steps since then. Penn National Gaming, part-owner of Freehold Raceway, is "very close" to finalizing a lease for a new OTW site in Camden County, said Chris McErlean, vice president of racing. But rather than build, Penn National wants to retrofit existing bar and restaurant space, as racing continues its prolonged slump.

"Everyone has kind of had to rethink the size of the facility, the investment in the facility and the type of facility," McErlean said, noting operators would seek turnkey locations like the Camden County site. The state's original vision for its OTW network, he said, "is just not going to pan out. The economy has changed, the racing market has changed, and we're trying to adapt to that."

Meanwhile, the New Jersey Thoroughbred Horsemen's Association — the group now managing Monmouth Park — has identified sites in Hudson and Morris counties that could satisfy two of its remaining OTW permits. Dennis Drazin, who advises the operating group, said he still needs permission from New Meadowlands Racetrack LLC, owing to the sites' proximity to Winners Bayonne, which is owned by the harness racing venue.

Drazin said the Monmouth Park and Meadowlands operators are coordinating to produce better results for OTW development, including four joint ventures in North Jersey. But the site-selection process raises the issue of whether opening new sites will cannibalize the existing facilities.

He estimated Favorites at Woodbridge, which Monmouth Park controls, has lost some 15 percent of its business since the Bayonne OTW opened in July. Racing Commission figures show monthly betting totals in Woodbridge have ranged from $7.2 million to nearly $9 million from January to August, but fell to $5.8 million in September and $5.6 million in October.

Meanwhile, Meadowlands operator Jeff Gural said publicly in late July that he was disappointed with the initial performance of the 25,000-square-foot Bayonne OTW site. State figures show the venue has recorded between $3.2 million and $3.9 million in total monthly betting from August to October, but Darin Zoccali, director of racing operations for the Meadowlands track, said the operating group is starting to see positive trends in Bayonne. A key focus for the site is drawing customers from nearby Staten Island, N.Y., though the return trip carries tolls of up to $13.

"We're doing things to address that," like providing shuttle service and promotions, he said. "Obviously if you want people who have to go over a bridge, a substantial toll is going to be a bit of a hindrance to that."

E-mail to: joshb@njbiz.com

On Twitter: @JoshBurdNJ


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