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June 24, 2005
If you want to gamble at El Comandante racetrack in Canovanas, Puerto Rico, you have to do it the old fashioned way -- you have to bet on the horses.
Unlike many stateside tracks and countless other South and Central American ones, video gaming machines are not legal at the island's only race track, despite the lobbying efforts of track management and horse racing owners to turn the financially ailing facility into a casino-style racetrack, or "racino."
Puerto Rico's legislature likes it that way, and is not swayed by promises that a "racino" would bring in tax revenue for the state. This week, an amended bill clearing the way for 2,500 Video Lottery Terminals (VLTs) at El Comandante was rejected in the House despite a 19-2 approval in the Senate. It will likely die in conference committee this week with just days left in the House session. Last year, a similar bill was also tabled due to lack of consensus.
The race track is currently operating under Chapter 11 bankruptcy and is $86.6 million in debt.
Codere of P.R., one of the four companies vying to take over the track, claims VLTs are the only way to see profit. Codere P.R. is the only bidder that has reached a deal with the track's owner, James Wilson, and its management offer is contingent upon the passing of the already embattled legislation to install VLTs.
Three other groups, including the local Camerero group, are bidding for the track license, with the Camarero group claiming it can take the track out of the red without VLTs. The track is operating on a temporary 120-day license, which expires July 14.
In states like Florida, Pennsylvania and New York, it has been an uphill battle to get government approval for slot machine style betting at horse race tracks. But in the end, the slot machines have prevailed and tracks in those states say they are thriving with revenue from the casino-style racetracks. In fact, the horse racing industry profits support claims that VLTs have breathed new life into a dying industry.
So why doesn't Puerto Rico want them?
Opposition to additional gambling at El Comandante has come from all fronts, starting with the hotel industry. The hotels currently house 5,600 slot machines and more than 300 gaming tables spread over 19 casinos in Puerto Rico. According to Tourism figures, the casinos generate more than $242 million in revenue annually, $127.8 million earmarked for the government.
"The hotel industry employs thousands of people in Puerto Rico and we can't endanger those jobs," said House Committee chairman Nelson del Valle this week, listing one of the reasons he voted against the measure. "The money the casinos generate goes to the General Fund, helping to subsidize education."
Of course, if the government were to legalize casino-style gambling at El Comandante, it would also get a cut. Because most of the gambling in Puerto Rico is done by its residents, the hotel industry's fear that the race track would take away its customers is very real.
Canovanas is geographically very close to the hotels and the horse racing industry already has a faithful clientele that gambles regularly at the track or the 650 Off-Track Betting (OTBs) spots around the island. Codere is no gaming novice and its initial proposal for 6,500 VLTs at the track would have made Canovanas the largest gaming facility on the island. VLTs at the racetrack would be bad news for the hotel industry. However, for the government, more gambling at the track only means more tax revenue if the legislature plays its cards right when drafting the track's tax rate.
While the hotel industry's lobbying efforts are one reason lawmakers won't OK more gaming at the racetrack, there's more to the story.
Simply put, the legislators do not sympathize with the race track owner's current financial troubles. James Wilson is the owner of El Comandante race track and the president of Equus Gaming. Del Valle said he doesn't understand why the track is facing foreclosure when $245 million was bet on horse racing there last year.
"If it is really true that El Comandante management is in a financial crisis that has forced it to go Chapter 11, that crisis is due to horrible administration and failed investments," said Del Valle. "The crisis has nothing to do with the absence or presence of slot machines."
Nor do the lawmakers trust the gaming consortium, Codere P.R., which is bidding to take over El Comandante management.
During the past year, Codere officials spent time at the legisature trying to refute allegations of fraud, bribery and money laundering that have haunted the group.
According to reports, the son of Codere S.A. owner Joaquin Franco Munoz had his gaming license suspended in Arizona for allegedly trying to bribe an Arizona Gaming Board investigator into approving a permit to install gaming machines in Arizona casinos. Joaquin Franco Perez is free on $1 million bail.
Rep. Del Valle said ideally he would like to see one of the other groups competing for the license, such as Camarero, take over. But because none of the other groups has a formal agreement with Equus Gaming, that's not likely to happen. Nor is it probable that Del Valle's other alternative, government intervention and expropriation of the track, can occur, given the track's court protection under Chapter 11. Everyone knows that the El Comandante land alone (forget the race track) is worth millions, given its privileged location and acreage.
There's one final reason why lawmakers and most OTB owners don't really care about casino-style gambling at the track. It's because Puerto Rico already has an estimated 30,000 mini slot machines crammed in every small business, including bars, bakeries and OTBs, in every town. Owners of those machines pay a $1,500 annual license fee to the Treasury Department. The machines generate an estimated $46 million annually, but none of those profits (except the license fee) go to the government.
Puerto Rico Horse Racing Confederation president Juan C. Negron has pointed to the mini slot machines as his principal argument in favor of VLTs at the race track. Neither El Comandante nor the horse racing industry gets any cut from the mini slot machines, which profit only their owners and the small businesses and OTBs that house them.
Negron claims the small business owners can "set" the machines so the house wins on any given day if business is slow. Negron said the Treasury Department does not know what percentage of those operating the machines pay the license fee and how much money is actually generated.
"The government is losing millions of dollars in taxable profit from those machines, but prefers to look the other way," said Negron.
Given the current standoff (now going on two years) between the local government (which won't approve VLTs) and the track management (which threatens not to operate the track without them), the real losers are the 8,000 people who make their living at the race track, including the horse owners, breeders, jockeys, trainers and many OTB owners.
Without some kind of consensus, they will continue to lose money.
Gabrielle Paese is a sports reporter in San Juan. She was the 2000 recipient of the Overseas Press Club's Rafael Pont Flores Award for excellence in sports reporting. Comments or suggestions? Contact Gabrielle at firstname.lastname@example.org.
Her Column, Puerto Rico Sports Beat, appears weekly in the Puerto Rico Herald.