COURT OF APPEALS CONSIDERS RACINO BETTING IN KY.- EDITORIAL BY LARRY FORGY

On April 25, 2012 oral arguments were held before the Ct. of Appeals to decide the “racino” issue. As Forgy views the issue,the Court must decide as “(can)…the Kentucky Racing Commission…promulgate regulations which approve a gambling scheme with gambling on video tapes of previously run horse races and the use of gambling devices to display videos of dead horses”.

A racino is a combined race track and casino. In some cases, the gambling is limited to slot machines.

LawReader welcomes any comments on the Forgy Editorial.

 

GUEST EDITORIAL

By Larry Forgy, Attorney

Lexington, KY

lforgy@lforgy.com

 

“The slot-machine-at-the-race-track crowd is trying to run daylight by the rooster. They got a Frankfort judge to rule that slot machines with pictures of dead horses can be placed in the race tracks when slot machines with pictures of cherries, oranges and lemons cannot.

Obviously, that is a distinction without the difference, but the Governor and the slot-machine-at-the-race-track crowd will go to any lengths to sock the people of this state with over $800 million dollars in annual gambling losses, most of which will go to rich race track owners.

Steve Beshear’s 2007 campaign for governor was funded largely by race track interests. For example, a guy named Yung “who is a Northern Kentucky casino impresario” donated $1 million in one dollop. The Chicago gambling crowd that largely owns Churchill Downs joined with Kentucky track interests to heavily fund Beshear. They own him.

In his 2007 Democratic primary debate with then Speaker Richards, Beshear promised to push approval of slot machine gambling through the General Assembly. Both Speaker Richards and President Williams responded quickly, at separate places, “like hell you will”. Later, the track interests beat Richards but couldn’t get David Williams.

Beshear’s first budget proposal, in 2008, contained a huge gambling program with eight slot machine dens at race tracks. The tracks, according to the LRC, would have gotten almost 70% of the estimated $800 million in Kentucky gambling losses. The plan landed at the Kentucky Senate with a thud. It went nowhere!

Beshear shifted gears. He appointed Republican Senators to high paying state jobs in an attempt to take control of the Senate in the races to fill the vacated seats. He was defeated on that. Thud!

Recently, he lost slot-issue dominated elections for State Senate seats in Bowling Green, Owensboro, Paducah, Richmond, Lexington and Louisville. So, his brazen attempts to gain enough votes in the legislature to pass slots gambling lost. Another thud!

To his credit, President Williams offered to help put the casino issue on the ballot, “Let the people decide”. Because Beshear knew that would lose; he walked away. The people aren’t for slot machines. Beshear knew and knows it. No public vote!

Now, he and his gambling buddies have come up with something called “Instant Racing” and are seeking, in an odd way, to have it validated. As said, they have tried legislation, political power and rejected a direct vote of the people, none of those worked. The next stage is judicial bypass.

According to the current law, betting on horses at racetracks is only permitted in a pari-mutuel form. There must be a wagering pool, you bet against other bettors. But with “Instant Racing” videos, there are no patrons betting against each other. Thus, no pari-mutuel. It is the machine only; thus illegal.

But somehow, the track crowd have convinced, at least one judge, that the Kentucky Racing Commission can promulgate regulations which approve a gambling scheme with gambling on video tapes of previously run horse races and the use of gambling devices to display videos of dead horses.

Also, under current law the Revenue Department has authority only to collect taxes on “tracks conducting pari-mutuel wagering on live racing”. KRS 138.510. Is a video of dead horses, live racing? Obviously not.

There is no statutory authority for the Department to collect excise taxes on bets on videos of previously and anonymously run horse races with the use of gambling devices which display videos and accept bets. But, the Judge, Wingate ruled the Department could. That is quite an illogical stretch.

Beshear and company are using judicial decisions to get done what they couldn’t do politically. They can’t get slots at the tracks legitimately and are trying by judicial subterfuge to run the mess through the back door to the disadvantage of Kentuckians who will be ripped off by the machines to the ultimate enrichment of a bunch of fabulously wealthy race track shareholders. Our Governor is orchestrating this to the detriment of the People

We must not let this crowd “slip shuck” the people of Kentucky with their “Instant Racing”.

If they can’t win this politically by a vote of the people they ought to lose. It’s that simple. No slots without a vote; no dead horses.”

 

 

See KRS 138.510

 

KRS 138.510 Taxes on pari-mutuel wagering on live racing and telephone account, intertrack, and interstate wagering — Exemptions — Uses of tax revenue.

(1) (a) Except as provided in paragraphs (b) and (d) of this subsection, an excise tax is imposed on all tracks conducting pari-mutuel wagering on live racing under the jurisdiction of the commission.

1. For each track with a daily average live handle of one million two hundred thousand dollars ($1,200,000) or above, the tax shall be in the amount of three and one-half percent (3.5%) of all money wagered on live races at the track during the fiscal year.

2. For each track with a daily average live handle under one million two hundred thousand dollars ($1,200,000), the tax shall be one and one-half percent (1.5%) of all money wagered on live races at the track during the fiscal year.

(b) 1. If:

a. A track located in this state is the host track for a live one (1) or two (2) day international horse racing event in 2010 that distributes in excess of a total of fifteen million dollars ($15,000,000) in purses during the international horse racing event; and

b. On or before November 4, 2010, the organization responsible for selecting the location of the same international horse racing event in subsequent years contractually agrees to conduct the international horse racing event at a host track in this state in calendar year 2011 or 2012 or calendar years 2011 and 2012;

then the excise tax imposed by paragraph (a) of this subsection shall not be imposed on pari-mutuel wagering on any live racing conducted during the one (1) or two (2) day international horse racing event held at a host track within this state in calendar years 2010 through 2012.

2. Beginning January 1, 2013, if the requirements of subparagraph 1. of this paragraph are satisfied, the tax exemption established by subparagraph 1. of this paragraph shall remain in effect for any succeeding one (1) or two (2) day international horse racing event if the event returns within three (3) years of a previously-held international horse racing event.

3. A minimum of five hundred thousand dollars ($500,000) of the amount that would have been paid to the Commonwealth but for the exemption provided by this paragraph shall be used by the host track to fund undercard races during each international horse racing event.

4. Notwithstanding paragraph (c) of this subsection, if the requirements of subparagraph 1.a. of this paragraph are satisfied but the requirements of subparagraph 1.b. of this paragraph are not, then the excise tax imposed by paragraph (a) of this subsection shall be imposed on pari-mutuel wagering on any live racing conducted during the one (1) or two (2) day

international horse racing event and the total amount of revenue collected shall be distributed as follows:

a. Eighty percent (80%) shall be deposited into the thoroughbred development fund established in KRS 230.400;

b. Thirteen percent (13%) shall be deposited into the standardbred development fund established in KRS 230.770; and

c. Seven percent (7%) shall be deposited into the Kentucky quarter horse, Appaloosa, and Arabian development fund established in KRS 230.445.

(c) Money shall be deducted from the tax paid under paragraph (a) of this subsection and deposited as follows:

1. An amount equal to three-quarters of one percent (0.75%) of all money wagered on live races at the track for thoroughbred racing shall be deposited in the thoroughbred development fund established in KRS 230.400;

2. An amount equal to one percent (1%) of all money wagered on live races at the track for harness racing shall be deposited in the Kentucky standardbred development fund established in KRS 230.770;

3. An amount equal to one percent (1%) of all money wagered on live races at the track for quarter horse, Appaloosa, and Arabian horse racing shall be deposited in the Kentucky quarter horse, Appaloosa, and Arabian development fund established by KRS 230.445.

4. An amount equal to two-tenths of one percent (0.2%) of all money wagered on live races at the track shall be deposited in the equine industry program trust and revolving fund established by KRS 230.550 to support the Equine Industry Program at the University of Louisville;

5. a. An amount equal to one-tenth of one percent (0.1%) of all money wagered on live races at the track shall be deposited in a trust and revolving fund to be used for the construction, expansion, or renovation of facilities or the purchase of equipment for equine programs at state universities.

b. These funds shall not be used for salaries or for operating funds for teaching, research, or administration. Funds allocated under this subparagraph shall not replace other funds for capital purposes or operation of equine programs at state universities.

c. The Kentucky Council on Postsecondary Education shall serve as the administrative agent and shall establish an advisory committee of interested parties, including all universities with established equine programs, to evaluate proposals and make recommendations for the awarding of funds.

d. The Kentucky Council on Postsecondary Education may promulgate administrative regulations to establish procedures for

administering the program and criteria for evaluating and awarding grants; and

6. An amount equal to one-tenth of one percent (0.1%) of all money wagered on live races shall be distributed to the commission to support equine drug testing as provided in KRS 230.265(3).

(d) The excise tax imposed by paragraph (a) of this subsection shall not apply to pari-mutuel wagering on live harness racing at a county fair.

(2) (a) Except as provided in paragraphs (c) and (d) of this subsection, an excise tax is imposed on:

1. All tracks conducting telephone account wagering;

2. All tracks participating as receiving tracks in intertrack wagering under the jurisdiction of the commission; and

3. All tracks participating as receiving tracks displaying simulcasts and conducting interstate wagering thereon.

(b) The tax shall be three percent (3%) of all money wagered on races as provided in paragraph (a) of this subsection during the fiscal year.

(c) A noncontiguous track facility approved by the commission on or after January 1, 1999, shall be exempt from the tax imposed under this subsection, if the facility is established and operated by a licensed track which has a total annual handle on live racing of two hundred fifty thousand dollars ($250,000) or less. The amount of money exempted under this paragraph shall be retained by the noncontiguous track facility, KRS 230.3771 and 230.378 notwithstanding.

(d) 1. A track located in this state shall be exempt from the excise tax imposed by paragraph (b) of this subsection on wagers placed on all races conducted at a one (1) or two (2) day international horse racing event if:

a. The international horse racing event is conducted at a host track in this state; and

b. The host track is exempt from the excise tax during the international horse racing event under subsection (1)(b) of this section.

2. Notwithstanding paragraph (e) of this subsection, if the host track is not exempt and is taxed pursuant to subsection (1)(b)4. of this section, then the excise tax imposed by paragraphs (a) and (b) of this subsection shall be imposed on wagers placed on all races conducted at the one (1) or two (2) day international horse racing event and the total amount of revenue collected shall be distributed as follows:

a. Eighty percent (80%) shall be deposited into the thoroughbred development fund established in KRS 230.400;

b. Thirteen percent (13%) shall be deposited into the standardbred development fund established in KRS 230.770; and

c. Seven percent (7%) shall be deposited into the Kentucky quarter horse, Appaloosa, and Arabian development fund established in KRS 230.445.

(e) Money shall be deducted from the tax paid under paragraphs (a) and (b) of this subsection as follows:

1. An amount equal to two percent (2%) of the amount wagered shall be deposited as follows:

a. In the thoroughbred development fund established in KRS 230.400 if the host track is conducting a thoroughbred race meeting or the interstate wagering is conducted on a thoroughbred race meeting;

b. In the Kentucky standardbred development fund established in KRS 230.770, if the host track is conducting a harness race meeting or the interstate wagering is conducted on a harness race meeting; or

c. In the Kentucky quarter horse, Appaloosa, and Arabian development fund established by KRS 230.445, if the host track is conducting a quarter horse, Appaloosa, or Arabian horse race meeting or the interstate wagering is conducted on a quarter horse, Appaloosa, or Arabian horse race meeting;

2. An amount equal to one-twentieth of one percent (0.05%) of the amount wagered shall be allocated to the equine industry program trust and revolving fund established by KRS 230.550 to be used to support the Equine Industry Program at the University of Louisville;

3. An amount equal to one-tenth of one percent (0.1%) of the amount wagered shall be deposited in a trust and revolving fund to be used for the construction, expansion, or renovation of facilities or the purchase of equipment for equine programs at state universities, as detailed in subsection (1)(c)5. of this section; and

4. An amount equal to one-tenth of one percent (0.1%) of the amount wagered shall be distributed to the commission to support equine drug testing as provided in KRS 230.265(3).

(3) The taxes imposed by this section shall be paid, collected, and administered as provided in KRS 138.530.

Effective: July 15, 2010

 

Court’s News Release re: the Racino Case:

 

FRANKFORT, Ky. — The Kentucky Court of Appeals will hear challenges to court rulings about instant horse racing and fraud cases involving Medicare, Medicaid and oil/gas leases when it convenes Wednesday and Thursday, April 25-26, at the Court of Appeals in Frankfort. Proceedings are open to the public and will take place in the Court of Appeals Courtroom at 360 Democrat Drive.

 

A three-judge panel comprised of Court of Appeals Judges Sara Walter Combs and Janet L. Stumbo and Senior Judge Joseph E. Lambert will hear arguments in the instant racing case at 1 p.m. EDT Wednesday. Judges Combs and Lambert and Court of Appeals Judge Joy A. Moore will hear arguments in the other appeals.

 

Nearly all cases heard by the Kentucky Court of Appeals come to it on appeal from a lower court. If a case is tried in Circuit Court or District Court and the losing parties involved are not satisfied with the outcome, they may ask for a higher court to review the correctness of the trial court’s decision. Some cases, such as criminal case acquittals and divorces, may not be appealed. In a divorce case, however, child custody and property rights decisions may be appealed. Cases are not retried in the Court of Appeals. Only the record of the original court trial is reviewed, with attorneys presenting the legal issues to the court for a decision.

 

Fourteen judges, two elected from seven appellate court districts, serve on the Court of Appeals. The judges are divided into panels of three to review and decide cases, with the majority determining the decision. The panels do not sit permanently in one location, but travel throughout the state to hear cases.

 

FRANKFORT DOCKET (All times EDT)

 

WEDNESDAY, APRIL 25, 2012

 

1 PM

 

2011-CA-000164

THE FAMILY TRUST FOUNDATION OF KENTUCKY, INC. v THE KENTUCKY HORSE RACING COMMISSION ET AL.

 

Summary: Civil. Judge Combs will preside. The primary issue in this appeal is justiciability/whether a court may provide an advisory opinion of an Executive Branch action in rendering draft regulations in conflict with the violation of pertinent statutes passed by the legislature. The appellant claims that it was deprived of adequate opportunity to develop discovery in the case as a result of a court order. The case also involves a revenue issue. The other appellees in the case are Appalachian Racing, Churchill Downs, the Keeneland Association and the Kentucky Department of Revenue. To see more information on a case, input the case number on the Court of Appeals cases page.

 

Franklin County judge who presided in the case – Thomas D. Wingate

 

Appellant’s attorney: Stanton Cave

 

Appellees’ attorneys: Peter Ervin et al.

 

 

 

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