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ASSEMBLY TOURISM AND GAMING COMMITTEE

ASSEMBLYMAN GARY L. GUEAR Sr. (Chairman): Good

afternoon, ladies and gentlemen. Welcome to the Assembly Tourism and

Gaming Committee.

I want to advise everyone this afternoon that we will be

broadcasting live over the Internet. And you see the two smaller microphones

on the front desk, here-- If you would speak, when you do speak -- speak into

both mikes clearly so that our transcribers can be able to write down what

you’re saying, so they can transcribe what’s being said, and we have a manner

of record from today’s hearing.

What we’ll be doing today is -- we’re meeting to discuss the future

of horse racing in New Jersey. The topics are going to include the economic

health of the State’s horse racing industry, the status of the implementation of

off-track and account wagering, and the feasibility and impact of selling or

leasing the State’s two racetracks: that’s Meadowlands and Monmouth Park.

The first person we’re going to hear from -- first two people we’re

going to hear from this afternoon: Art Winkler, the Senior Vice President of

Legal Affairs for the New Jersey Sports and Expo Authority; and Bruce Garland,

who is the Senior Vice President of Racing Operations.

Gentlemen, can you come forward?

Welcome to the Committee hearing.

B R U C E H. G A R L A N D: Thank you.

ASSEMBLYMAN GUEAR: Who’s going to go first?

A R T H U R W I N K L E R: Well, I will address off-track wagering. Bruce

can address the other issues that you outlined.

What’s your preference, in terms of--

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ASSEMBLYMAN GUEAR: Go right ahead. You can start. That’s

fine.

MR. WINKLER: I think the status of off-track wagering was your

concern. That’s a matter I’ve been handling.

ASSEMBLYMAN GUEAR: Would you just state your name?

MR. WINKLER: Sure. It’s Art Winkler, Senior--

ASSEMBLYMAN GUEAR: Push your button. (referring to PA

microphone)

MR. WINKLER: It turned red.

ASSEMBLYMAN GUEAR: That’s good. We do things backwards

here.

MR. WINKLER: Okay. Red means stop.

The off-track wagering and account wagering bill passed in -- was

signed into law, August of 2001. It became effective six months later, in

February of 2002.

The Sports Authority, under the terms of that law, is the only entity

eligible to apply to the Racing Commission for either the account wagering

license or for the off-track wagering licenses. And the law provides that there

shall be, or may be, up to 15 off-track wagering facilities.

However, the law also provides that while we’re the only entity that

can apply for a license, a precondition is that we reach a participation agreement

with other parties. In the case of off-track wagering, we need to reach an

agreement with the people who own and operate Freehold Raceway, and the

people who own and operate Atlantic City Race Course. For account wagering,

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we need to reach a participation agreement with the people who own and

operate Freehold Raceway.

The participation agreement, in general form, is to account for how

the parties will share in expense, revenue, operational, and management

responsibilities.

When the law was passed and became effective, we negotiated with

those parties for both systems. And the concept in the negotiations, at least for

off-track wagering, was that the parties -- two of the parties would become

partners in a certain number of the facilities. And one party, Atlantic City,

would own and operate others by itself. In terms of account wagering, the

concept was that we would -- because there can be only one account wagering

system, and it would be a statewide system -- that we would have a joint venture

with Pennwood.

To be frank, in the course of the negotiations on off-track wagering,

we discovered that we couldn’t reach an accord as to how to become partners,

what the economic arrangements would be between us, and what the

management and operational issues would be, and how they would be resolved

between us.

About that time, Mr. Zoffinger came to the Sports Authority. And

we talked about it with him, and we decided to pursue a different course on offtrack

wagering -- and that is to determine whether there was a way of allocating

the 15 facilities among us, so that we could each own and operate a certain

number of them independently. And we believe we’ve reached an agreement,

with regard to that. We have a concept that, we think, works. And at this

point, we have lawyers trying to document our concept. And it would be as

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follows: The law allows up to 15 off-track wagering facilities. The New Jersey

Sports and Exposition Authority would, exclusively, own and operate nine of

them. The company that owns Freehold Raceway, and also operated -- held the

racing license at Garden State Park in the year 2000, would own and operate,

exclusively, four facilities. And the company Greenwood, that owns and

operates Atlantic City Race Course, would exclusively own and operate two

facilities.

We also reached an understanding as to where each of us would

locate our facilities, essentially, on a county basis. And that-- As I said, that

understanding is, now, in the process of having lawyers try to see whether it can

be reduced to a specific agreement. There are some issues that, yet, have to be

resolved regarding that concept. But that’s where we are with off-track wagering.

we’ve also reached an understanding with that one entity that we have to make

a participation agreement with, and that’s Pennwood. And the understanding,

at this point, is that we would have one phone system. It would likely be

located at the Meadowlands. And we would have a joint venture or partnership

that was a 70-30 partnership, with the Sports Authority being the 70 percent

interest holder and the Pennwood company being a 30 percent interest holder.

And that, by way of outline, Mr. Chairman, is the status of offtrack

wagering and phone wagering.

ASSEMBLYMAN GUEAR: Okay.

Any questions from the members of the Committee?

ASSEMBLYMAN ASSELTA: Yes, Mr. Chairman.

ASSEMBLYMAN GUEAR: Assemblyman Asselta.

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ASSEMBLYMAN ASSELTA: Good afternoon, Mr. Winkler. How

are you?

MR. WINKLER: Good. How are you, Assemblyman?

ASSEMBLYMAN ASSELTA: A few questions and, eventually, get

to the real difficult question.

You mentioned earlier, this -- the OTB and the account wagering

was pretty much on track after the legislation was passed. You, kind of, knew

where you were going to site these facilities. Arrangements, at that point, with

the appropriate entities were in place at that point?

MR. WINKLER: Actually, if that’s what I said, I didn’t mean to

say that. We were pursuing a concept where we would try and partner on many

of the facilities. Twelve of the facilities would be a joint venture between us and

Pennwood. And we had some thoughts about where some of them might be

located, but no specific plans with regard to any specific venue.

As you know, we visited one of your communities and explored

some opportunities there, but I don’t think there were any real specifics to doing

that.

ASSEMBLYMAN ASSELTA: Well, staying with that theme, have

you picked the sites yet? You mentioned sites earlier.

MR. WINKLER: On the basis of the Sports Authority’s nine sites,

we have not.

ASSEMBLYMAN ASSELTA: So these are just theoretic sites

around the State of New Jersey that you still haven’t located yet.

MR. WINKLER: The process is a bit complicated. If we reached

this written agreement with the other parties -- this participation agreement -- we

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would have to present it to the Racing Commission for its review and approval,

and the review and approval of the Attorney General. If that, sort of, master

agreement, if you will, was approved, we would then have to come in with

specific site locations for the 15. And if that agreement was reached, the Sports

Authority would be responsible for coming in with nine locations. The other

parties would have their own locations.

Before doing that-- If you recall, there are provisions in the law that

require us to go to the municipalities that are affected, to the governing bodies,

site where we want to locate them, present plans and specifications, and the

municipal governing body has the opportunity to say no. So, because we

haven’t reached this master agreement, we really haven’t pursued those

locations.

ASSEMBLYMAN ASSELTA: So let’s take this step by step. The

master agreement gets created. You then need to go to each individual

municipality to begin siting these facilities.

MR. WINKLER: Actually, we have to first find the site.

ASSEMBLYMAN ASSELTA: Find it.

MR. WINKLER: Let’s say 100 Main Street.

ASSEMBLYMAN ASSELTA: Which I think you already have that

geographic idea from two years ago. The demographics and geographic

economic implications haven’t changed much, I don’t think, have they?

MR. WINKLER: No.

ASSEMBLYMAN ASSELTA: Okay. So then you must engage in

municipal interaction that could take quite a bit of time.

MR. WINKLER: Right.

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ASSEMBLYMAN ASSELTA: Meanwhile, what’s the per-year

economic impact of these facilities on the State budget? What could it create

for us?

MR. WINKLER: Well, frankly, I defer to Bruce, in terms of what

we would anticipate economically from off-track wagering. Obviously, by not

implementing it, there has been some-- The delay has caused us, at the

racetrack, and others to lose the opportunity for some income. To tell you the

truth, I have no--

ASSEMBLYMAN ASSELTA: Do we have an estimate as to--

MR. WINKLER: --analysis of that. The facilities, really, would

require, depending on the size, probably $4 million to $6 million in capital

costs. And thereafter, depending on whether the market was wisely chosen,

some economic benefit going forward--

ASSEMBLYMAN ASSELTA: Substantial economic benefit.

MR. WINKLER: The real substantial benefit would come after the

system has become mature. It really becomes an incremental growth. To some

extent, some of the income would be offset by what might happen at the

racetrack. You could lose business at your racetrack by operating off-track

wagering.

ASSEMBLYMAN ASSELTA: Well, are we staying with that

economic theme? Are we losing business, today, as we sit here? Are our New

Jersey residents going across the bridge to Pennsylvania and spending their

dollars over there, today?

MR. WINKLER: I don’t think any more are going across the river

now than were--

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ASSEMBLYMAN ASSELTA: I didn’t ask you any more. I asked

you are there dollars being lost today -- as we sit here today -- going across the

bridge every day -- Vets Stadium, Turf Club next to Vets Stadium, etc., etc.

MR. WINKLER: Yes, the answer is yes.

ASSEMBLYMAN ASSELTA: Okay, and it’s pretty substantial.

MR. WINKLER: I couldn’t--

ASSEMBLYMAN ASSELTA: We don’t have a way to quantify

that?

MR. WINKLER: I don’t have it quantified.

ASSEMBLYMAN ASSELTA: So after two-plus years of signed

legislation -- and I guess you’re using the reasoning that there was a changeover

at the Authority -- Mr. Zoffinger came in and changed the philosophy on how

this would be struck--

MR. WINKLER: I don’t think I said that. I said that when we

tried to reach a participation agreement along certain conceptual lines, we were

unable to do it. We were negotiating with the other parties and could not reach

an agreement as to how we would own and operate, in a partnership, those

facilities. We couldn’t. And that’s when we decided to pursue a different course

of action, which, as I described, would be, essentially, allocating 15 among us

so that we can own and operate independently of each other.

ASSEMBLYMAN ASSELTA: Okay. Through the Chairman-- Mr.

Chairman, are we going to address the proposed sale of these particular facilities

-- the racetracks -- in this particular testimony, or someone else? Or can we call

them back?

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ASSEMBLYMAN GUEAR: I believe we’re going to talk about that

now. But I do have--

Are you through, Assemblyman?

ASSEMBLYMAN ASSELTA: Yes.

ASSEMBLYMAN GUEAR: One quick question. How are the

counties divided between the Authority and Pennwood?

MR. WINKLER: The Atlantic City Race Course ownership would

have the opportunity for two facilities to be located in any of the following

counties: Atlantic County, Cumberland County, Cape May County, and Salem

County.

The Pennwood Company, which owns and operates Freehold

Raceway, would have the opportunity for up to four facilities to be located, as

they see fit, subject to the regulatory approvals, in Burlington, Mercer, Camden,

Gloucester, Southern Ocean, and Southern Middlesex counties.

The Sports Authority -- nine facilities would be located in Northern

Middlesex, Northern Ocean, and all the other counties that went unmentioned,

with the exception that we’ve agreed that no one will site a facility in

Monmouth County, which is the home of two racetracks. And the thought is

that we would not want to build one close to those facilities and jeopardize their

business in a serious fashion.

ASSEMBLYMAN GUEAR: Okay.

Any other questions?

Assemblyman Van Drew.

ASSEMBLYMAN VAN DREW: Through the Chair, talking about

that master agreement, can you be a little more specific what the problem is,

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why the agreement can’t be met? I think what we’re all alluding to here,

obviously, is-- We’ve been challenged by the Governor, and challenged in

general, to find sources of revenue. And the longer that we wait to do this, the

less revenue, obviously, is coming to the State of New Jersey, and the less

opportunity.

MR. WINKLER: I didn’t intend to say that it can’t be met. That’s

a conceptual agreement that we’ve now reached, and we are exchanging drafts

of contracts between us and trying to--

ASSEMBLYMAN VAN DREW: So do you have any guesstimate,

estimate, on what time factor would be involved in that? Do you have any idea

in the back of your head that--

MR. WINKLER: Do you know-- I’m sorry.

Assemblyman, I’ve lived with this for three years and given

guesstimates before, and they’ve never been right. Hopefully it can be worked

out soon. We’re narrowing the issues, as you know.

ASSEMBLYMAN VAN DREW: Going back -- excuse me -- going

back previously, through the Chair, what were the issues? I’m trying to -- I’m

just trying to understand a little bit better why it was such a problem, for such

a long period of time, to get this done.

MR. WINKLER: In this particular arrangement?

ASSEMBLYMAN VAN DREW: Yes.

MR. WINKLER: There were other issues when our concept was

different. We need to reach an accord on things like indemnifications, how to--

The law provides that there’s a sharing of racing costs incurred by the Racing

Commission. We have to decide how we’re going to allocate those costs among

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us. We’re talking about the term of an agreement, and we’re talking about what

happens in the event any party to the agreement divests itself of its racing

interest. So I think those are the things that, at this point, probably need to be

worked out.

ASSEMBLYMAN VAN DREW: Okay.

The other statement you made, as well, was, through the Chair,

when the system is mature, there would be a significant financial benefit. Could

you define, in your terms, what you mean by mature?

MR. WINKLER: By mature?

ASSEMBLYMAN VAN DREW: Yes.

MR. WINKLER: Mature means developing the whole system, or

nearly the whole system.

ASSEMBLYMAN VAN DREW: Once that agreement was met --

and, again, I’m thinking in fiscal terms -- what this is going to bring, in revenue,

to the State of New Jersey. Say the agreements were met today, and everything

signed, and we’re ready to go, when do you believe the system would be mature?

Do you have any sense of that?

MR. WINKLER: I don’t. I would defer to Bruce. I work for the

Sports Authority, and if this agreement were signed, we would have the right and

opportunity to develop nine facilities. We’d have to find a way to finance those

nine facilities. So I think it would take not months, but years for us to work

through all the approval -- find the sites, gain the approval of the municipal

governing bodies, and then go to the Racing Commission for their approval. So

it would not be a mature system in the immediate future.

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ASSEMBLYMAN VAN DREW: Okay. Because of the fact of all

the regulatory process and the bureaucracy that you would have to go through

to reach the point of even building them and having them in place, we’re not--

In that answer, you didn’t really address once they were in place, when we

would really start receiving some significant revenue back to the State of New

Jersey. And do you have any projection of that at all? These aren’t numbers

somebody’s going to come back to you in a few years-- The way we’re going,

we won’t be coming back to you in a few years, because they won’t be here in

a few years.

MR. WINKLER: I’m lawyering it. Bruce is the guy who operates

the racing division for us. I would defer to him.

MR. GARLAND: In answer to both your questions, there are some

considerations that we would want to take into account. One is to evaluate the

impact of the first set of off-track wagering facilities on the live racetracks and

the live racing, itself. The main part of any system’s business is the live racing.

You want to preserve live racing. I’m sure there are horsemen in the audience

who want to testify today to encourage you to help provide for even more live

racing. But we want to make sure that the racetracks, themselves, aren’t

negatively impacted, because there will be some cannibalization of your live

handle by making it easier for people to go to these facilities. So we want to

make sure of that impact.

So our intent would not be to build nine facilities immediately, but

rather, to build them, probably, in general terms, in, like, a concentric circle,

beginning further away from the racetracks and moving in. After each round of

construction, having an evaluation process, at that point-- So I would say it

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would probably take five years before a system was mature. We’d probably try

and do four or five, initially. And then maybe a couple more after that, and a

few more after that. And in terms--

ASSEMBLYMAN VAN DREW: Through the Chair, Bruce, when

you say five years, do you mean it would be five years before it was even --

construction began, or--

MR. GARLAND: No, sir.

ASSEMBLYMAN VAN DREW: --five years, and we’re really

starting to see some revenue return?

MR. GARLAND: Five years before you built nine of them. In

other words, I think you’d probably want to build four or five initially, evaluate

those further away from a racetrack -- evaluate the impact on the racing, and

then move closer to the racetracks if that seems feasible. If the impact on the

live racing was so severe, you might want to reconsider that.

But I would say, in racing terms, and in terms of Sports Authority

revenue, you could be talking in the $15 million to $25 million range. That’s

a broad number. And from purse money, probably somewhere in the $20

million range, of a fully mature system.

ASSEMBLYMAN VAN DREW: Okay.

May I, Mr. Chair?

ASSEMBLYMAN GUEAR: Sure.

ASSEMBLYMAN VAN DREW: Let me make sure I understand

this properly. For example, in the most southern end of the state -- if we were

to look at the Cumberland, Cape May, Atlantic area -- and somebody was to

ask me, as an Assemblyman, when I thought we were going to see the first one,

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and I called you up and said, "Could you give me a guesstimate of when that

would be," what would your answer be?

MR. GARLAND: Well, my answer would be that’s a different

company, but I suspect that company will build them as fast as possible.

MR. WINKLER: Remember, under the concept that we’re working

with, the Sports Authority--

ASSEMBLYMAN VAN DREW: Wouldn’t be doing -- I

understand -- those down there.

MR. WINKLER: Wouldn’t be doing that.

ASSEMBLYMAN VAN DREW: That would be Atlantic City.

MR. WINKLER: Essentially south of Middlesex, Ocean.

ASSEMBLYMAN VAN DREW: So you wouldn’t be able -- we

wouldn’t really be able to answer that at this point, right now.

MR. GARLAND: I believe that the concern that I have for the two

Sports Authority racetracks would not be that applicable in that area, because

Atlantic City doesn’t have the concern of a live racing or an extended live racing

season. And I suspect that they would fast-track their facilities.

ASSEMBLYMAN VAN DREW: Chairman, this will be my last

question.

What I’m trying to say is, wouldn’t it make sense, at the most

extreme ends of the state -- where the farthest away -- to get those underway as

soon as possible, because they aren’t going to have an effect on the live racing?

They’re too far away.

MR. GARLAND: I would tend to agree with you, Assemblyman.

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ASSEMBLYMAN VAN DREW: So what I would hope is that we

would get those moving as soon as possible, or allow those that are going to do

it to get it moving as soon as possible.

MR. GARLAND: Yes, sir.

ASSEMBLYMAN VAN DREW: Thank you, Chairman.

ASSEMBLYMAN GUEAR: Assemblywoman Stender.

ASSEMBLYWOMAN STENDER: Thank you, Mr. Chairman. I

apologize for coming in late, because I was at another Committee.

I know that I came in in the middle of a testimony, but when you’re

speaking about getting these up and running, it strikes me that you sound like

you’re talking about something that you’re in the thinking-about stages, or when

it gets here. But didn’t we pass this two years ago?

MR. WINKLER: It was signed into law in August of 2001. It

became effective in February of 2002. There was a six-month effective -- there

was a six-month period before it became effective.

ASSEMBLYWOMAN STENDER: And at the time, what was the --

when it was passed, or approved -- what was the Legislature then told we could

expect as a reasonable time frame before this would be in place?

MR. WINKLER: Frankly, I don’t recall that we offered a time

frame. I think we said what Mr. Garland just said, and that is that it would

require capital resources, and it would take time to build up 15 different

facilities. And I think that time frame was, basically, what he just said now,

that it would take approximately five or six years to fully develop a system.

ASSEMBLYWOMAN STENDER: Oh, I thought he had-- I’m

sorry, I thought that I understand that it would take five or six years for it to be

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fully mature. But there must have been some expectation of a window or time

frame in which it would get started.

MR. GARLAND: The expectation was that the account wagering

portion of it, which is just a relatively small portion of it, would be able to be

done relatively quickly: six months or so from the time of participation

agreement being fully implemented. An account wagering system could be

started very shortly after -- as soon as a participation agreement is done, and we

go through the process of application in the Racing Commission and follow the

statutory time periods.

ASSEMBLYWOMAN STENDER: I guess my question, then, is

that given this -- the crisis that we face with the horse racing industry in this

state, and knowing that this is intended to help the industry, what’s the

problem? How come we’re now a year and a half out, and there’s not even one

up, if you thought you might be able to get one up in six months?

MR. GARLAND: That would not be the off-track wager site.

That’s account wager. Account wagering is not a separate facility. But, again,

I’m not part of the-- There’s something that needs to be done before I can get

involved, and that’s a participation agreement, and that is not yet signed.

ASSEMBLYWOMAN STENDER: And who’s responsible for that?

MR. GARLAND: Well, Mr. Winkler represents the Sports

Authority in that process.

MR. WINKLER: I think you, perhaps, didn’t hear--

ASSEMBLYWOMAN STENDER: I do apologize for coming in

late. So I did miss that.

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MR. WINKLER: The law requires that we can’t unilaterally do this

at the Sports Authority. It requires entering into a contract for off-track

wagering with two other parties, and for account wagering with one other party.

I tried to explain that we tried to negotiate, in good faith, as did the other

parties, that participation agreement, which involves sharing economic risk,

economic gain, management and control responsibilities. And we initially tried

to do it as, basically, a partnership or joint venture. And we discovered that we

couldn’t reach that kind of agreement. We had too many issues that divided us

about how it would be managed, controlled, who would determine which sites

would be selected, which sites would go first. And so we changed course and

came up with a different concept, which is to try and arrange that the 15 are

allocated among us, and that we end up running our own, exclusively -- each

party. In our case, at the Sports Authority, nine. And among the other two --

between the other two parties, a total of six. And we’re, now, exchanging drafts

of contracts to try and pursue that.

ASSEMBLYWOMAN STENDER: So can you -- are you able to

give us an idea of when the first one will then be done, having gone through --

gotten to this point?

MR. WINKLER: If we sign that agreement, it has to be presented

to the Racing Commission and the Attorney General for their review and

approval. If it is approved, it will be, sort of, a blueprint for how to go forward

with the 15 specific sites. And then each party would present their site locations

to the Racing Commission. And I think, as Bruce Garland indicated-- I believe

that the private entities are prepared to go forward quite promptly with

applications.

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ASSEMBLYWOMAN STENDER: What does that all mean in

time? (laughter)

ASSEMBLYMAN VAN DREW: They’re not going to tell you.

Respectfully, we’re going to have each Assembly person ask you

this, until we get a more definitive answer. And then we’re going to go back to

Assemblyman Asselta again. He’ll start all over again.

ASSEMBLYMAN ASSELTA: Welcome back.

I do have another question, Mr. Chairman.

MR. WINKLER: I’m not really trying to duck the question. It’s

an answer that’s very difficult. If we piece it out, I think, hopefully, we can

reach a contract with the other parties reasonably soon and present it to the

Racing Commission and the Attorney General for approval. Again, that would

be approval, by them, of a blueprint or a master plan. Then each party’s going

to have to go out and find sites. And when they find the site -- let’s say they

find an empty food market in town X, that that party thinks can become an offtrack

wagering site, we’ll have to go to the municipal governing body.

ASSEMBLYWOMAN STENDER: I heard that part.

MR. WINKLER: You have to reach an understanding with the

landlord or the owner to rent it. Then you have to go to the governing body of

that town and say, "We found a site at 100 Maple Avenue in your town. Here’s

what the plans look like. Here’s the way it will be operated." And then there’s

likely to be hearings there. And should the municipal governing body approve,

then we have to go to the Racing Commission, which has an obligation, under

law, to hold public hearings.

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So the best I could tell you is we’re hopeful of reaching an

agreement soon, presenting it to the Racing Commission, and then, after that,

trying to find sites in municipalities that are pleasing to the municipality, and

then go to the State for its approvals.

MR. GARLAND: I’ll try and give you an operational answer. Once

the participation agreement is done, it would be my goal to have an account

wagering system up within three months of the signing of the participation

agreement. And then, depending on whether or not we had to lease or build

facilities, within six to eight months from the time period, try and be operational

in at least three or four of the facilities as quickly as possible.

I can’t speak for the other entities involved, but my knowledge of

the way they conduct their business -- they will have similar, if not faster,

timetables for their areas. And I think everybody’s just anxious to get it moving

forward. I don’t want there -- the impression that we’re not anxious to move

forward. We are. We’d set goals. They’d be goals I hope we could meet.

ASSEMBLYWOMAN STENDER: Thank you.

ASSEMBLYMAN VAN DREW: Thank you.

Jack -- Assemblyman Conners, did you--

ASSEMBLYMAN CONNERS: No, I’m okay.

ASSEMBLYMAN VAN DREW: Assemblyman Asselta.

ASSEMBLYMAN ASSELTA: I’m fine. Thank you, Mr. Chairman.

ASSEMBLYMAN VAN DREW: Okay.

Any other questions on this subject? (no response)

We’re going to move forward now to the discussion of the sale of

the racetracks. And I would let you proceed. You can begin.

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MR. GARLAND: Sure.

I think the first thing that I should probably say on that regard --

and that is, that no decision has been made to sell or lease the racetracks.

While there has been some publicity in that regard, and there have been some

entities that have expressed interest, the Sports Authority hasn’t made any

decision and, really, would not make a decision of that magnitude without

consultation with the administration, the appropriate members of the

Legislature, and all the various other bodies involved.

So I think with that as a preface, I’d be happy to answer any

specific questions any of you might have on the sale or anything else. But no

decision has been made.

ASSEMBLYMAN VAN DREW: I know there was a good deal of

press and publicity regarding that. Could you explain what sparked all that

activity?

MR. GARLAND: Well, I don’t know--

ASSEMBLYMAN VAN DREW: I assume you’re having

discussions concerning the possible sale.

MR. GARLAND: I don’t know what sparked the activity. There

has always been interest in our two racetracks. Frankly, the interest has been

because the two racetracks are very successful entities. The Meadowlands is the

largest single location for wagering -- pari-mutuel wagering in North America.

And Monmouth Park does produce a positive revenue cash flow. It always has,

under the Sports Authority operation, and is a high-quality meet. And to use,

probably, a poor analogy -- but it’s, sort of, like the Fenway Park of racetracks.

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It’s a beautiful facility -- seasonal facility. So there’s always been interest in our

racetracks.

At the current time, there are two major entities that have been

acquiring racetracks, and have been for the last several years. Churchill Downs

is one of them. They have six racetracks currently. And Magna Corporation is

the other entity -- major entities. And then, from time to time, there have been

other people express interest.

At its last board meeting, the Sports Authority authorized a contact

with investment banking firms to begin a process of getting somebody to help

advise us on valuation, marketability, that type of thing. So that may have been

what sparked it -- that, and just good, probably, reporters who are out seeking

a good story.

ASSEMBLYMAN VAN DREW: They are profitable.

MR. GARLAND: Yes, sir.

ASSEMBLYMAN VAN DREW: They do well. They do well for

the SEA. Why then would you sell them, just for the immediate--

MR. GARLAND: Well, again, no decision has been made to sell

them.

ASSEMBLYMAN VAN DREW: I know no decision was made, but

there was a decision to pursue this.

MR. GARLAND: Right, because there is interest.

ASSEMBLYMAN VAN DREW: And what sparked that decision?

MR. GARLAND: Just the interest, the fact that we are a public

agency, we own two racetracks that are valuable commodities, they do produce

positive cash flow for the Sports Authority, and we’d like to know what the

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valuation and process would be if we were to actually go through the process of

selling them. So this is just hiring an advisory investment banking firm to just

help us in that regard and to determine what steps to take, were a decision to be

made to actually pursue this.

ASSEMBLYWOMAN STENDER: I have a question.

ASSEMBLYMAN VAN DREW: Assemblywoman Stender.

ASSEMBLYWOMAN STENDER: Thank you.

Aside from the fact that the money, apparently -- the interest is in

the amount of money that can be secured to offset debt -- I mean, that’s what

the press says, anyway.

I’m interested in what the impact would be to people who go to the

tracks. I mean, I am very concerned when I think about, for instance, selling

the Garden State Arts Center, and the fact that people who now go there are

mostly aggravated in dealing with getting tickets, and access, and all the rest of

it. I would be concerned that an asset that was built by the taxpayers, and is

used by our residents -- because it would now be in private hands -- would have

their access changed, and the operation changed, in a bad way.

MR. GARLAND: Again, I would not be the decision-maker in that

regard. That’s not going to be -- way beyond me. But I would say, one of the

considerations that the State should certainly be interested in is what the intent

of the parties would be with regard to: harness and thoroughbred racing,

horsemen, horsemens’ interest, the future of live racing in the State of New

Jersey, and all the surrounding businesses that would be impacted; and what

their concerns are with the employees who are currently employed at the various

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locations, and what their concerns would be to the guests and the patrons and

the fans of racing. I think those are things that should be considered.

But, again, no decision’s been made to enter into that process.

ASSEMBLYWOMAN STENDER: Thank you.

ASSEMBLYMAN VAN DREW: Assemblyman Asselta.

ASSEMBLYMAN ASSELTA: Mr. Chairman.

This proposal has two more implications aside from horse racing,

at least the way I see it. And I’ll just make this statement, because I don’t think

you’ll answer my questions anyway. (laughter)

MR. GARLAND: I will certainly try, Assemblyman.

ASSEMBLYMAN ASSELTA: Two implications-- Number one, we

know the Sports and Exposition Authority also owns the Atlantic City

Convention Center and the Wildwood Convention Center -- which, normally,

most convention centers operate in the red. Consequently, the Meadowlands,

and the horse racing industry, and those facilities help prop up those two other

facilities and entities to keep them, obviously, afloat and financed.

We’re already having a difficult time securing marketing funds for

those facilities. So I see this as a possible problematic issue down the road in

relationship to those two entities -- will they fall further in the red and must be

propped back up by State government, number one.

Number two, I see the sale of these two facilities as a preclude to

VLTs and video lottery. I don’t think, whoever is the negotiating agent here,

with the appropriate partners -- I believe they’re using that as an enticement to

purchase, with the hope that, someday -- and probably a pretty strong hope --

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that VLTs will be placed in these facilities, which would, obviously, enhance the

investment and the value.

So it’s much more than horse racing here -- this initiative. And

there are deep concerns, on my part, on two fronts. Obviously, the Wildwood

Convention Center is in our district -- the Chairman and myself -- and we have

to make absolutely sure that facility remains viable. The Atlantic City

Convention Center sits in the district above us and employs people in our

legislative district. And, most importantly, the gaming industry is South Jersey’s

number one industry, employing over 60,000 people right now. And VLTs, as

testimony has come forward by casino executives, would absolutely kill further

investment in the industry and currently cripple whatever new profits will be

generated.

So this initiative, at least on the surface, seems to have two major

negative impacts on South Jersey, and the first and second legislative district.

And I’ll just make that statement.

You can respond, if you want.

MR. GARLAND: Sure. In regards to Atlantic City and Wildwood-

- I’m the operator of the racing. It’s my goal and job--

ASSEMBLYMAN ASSELTA: Right.

MR. GARLAND: --to produce as much revenue as I can for the

Sports Authority so that they can allocate it to any other purposes that our

board sees fit. Racing does return a substantial revenue, and they have used it

in the past for those types of things. But in terms of actual operation, or those

things, it’s out of my realm.

ASSEMBLYMAN ASSELTA: I understand.

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MR. GARLAND: In terms of VLTs, slot machines, that type of

thing-- Right now, my focus is on how to deal with the competition of those

things in other states. So I’m not really involved in the process of bringing them

to New Jersey, or any of the issues surrounding that. What I’m trying to do is

develop a plan so that we can survive being surrounded by them.

ASSEMBLYMAN ASSELTA: Great. Thank you.

ASSEMBLYMAN VAN DREW: Anybody else? (no response)

Thank you, both, for being here today.

MR. WINKLER: Thank you.

MR. GARLAND: Thank you, sir.

ASSEMBLYMAN VAN DREW: I guess the thought that we would

leave you with -- many of them -- going back to the other subject, is offtrack

betting-- It is a source of revenue. We are very short of funding in the State of

New Jersey, and we would like to see this happen, as soon as possible, especially

in those areas where there, obviously, aren’t any problems geographically, that

are safe.

MR. GARLAND: Yes, sir. Thank you.

ASSEMBLYMAN VAN DREW: Thank you.

And we would appreciate if you could stay, because we might ask

you to come up again if there are further questions.

Thank you.

MR. GARLAND: Certainly.

ASSEMBLYMAN VAN DREW: Now we have Barbara DeMarco,

from the New Jersey Thoroughbred Horsemen; and Leon Zimmerman and Mike

Izzo, from the Standardbreds. If you could all come up together -- I know

26

you’ll speak separately with a different voice and a different vision -- but I think

you can share the table together.

ASSEMBLYMAN ASSELTA: Share the love.

B A R B A R A D e M A R C O: I think Leon is going to be a gentleman and

let me start.

Thank you, Mr. Chairman, for dedicating an entire meeting to the

important issue of the future of horse racing.

This weekend, while most horse racing enthusiasts were greeted with

unlimited media coverage of the Kentucky Derby, and the unlikely win of a

New York-bred by the name of Funny Cide, those of us in New Jersey were

confronted with this: the sale of our racetracks, or the potential sale. To say the

least, while New York and Kentucky were rejoicing, New Jersey horsemen were

filled with overwhelming concern, because the sale of Monmouth Park -- and

I’m speaking thoroughbreds -- could, potentially, be the last nail in the coffin

for New Jersey’s industry.

However, before I address why New Jersey’s thoroughbred

horsemen oppose the sale of the racetracks, let me touch on the first two issues.

As I stated in my opening remarks, thoroughbred racing is thriving in those

states that have made an economic commitment to it, states like Kentucky and

New York. Unfortunately, New Jersey stopped taking an interest in this

industry when it legalized the lottery and casino gaming in the 1970s. The

casino industry killed a healthy New Jersey racing industry. We have seen the

closure of two racetracks in southern New Jersey -- Atlantic City is all but

closed, and Garden State is closed.

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Ledger, "As the casinos’ take sweetened, horse racing soured. Pari-mutuel

machines are no match for one-armed bandits. Slot machines have dictated the

personality of New Jersey’s casinos. They have sucked enough gambling dollars

to cripple racing. Their presence in neighboring states have racing and casino

interests here at each other’s throats. If the slots are permitted at the New Jersey

tracks, customers get stolen away from Atlantic City. If not, racing dies, and the

casinos still lose the customers to other states. The sale of the tracks will

doubtlessly cause even more delay. Let’s hope there are still some racehorses

available when all this is sorted out." And that is a future we are dealing with,

as horsemen in the state.

Let’s move to the second issue, OTB and Phone Bet. I want to

the Legislature determined that 141 days of thoroughbred racing was

appropriate. Running these 141 days, as mandated by OTB and Phone Bet, is

not the reason why OTB and Phone Bet is not up and running. Last year, the

Sports Authority ran the 141 days. The thoroughbred meet closed in November.

It doesn’t open again until this month. Therefore, they had six months to get

the phone portion of it up and running. The OTB, as Art told you, is much

more complicated.

With respect to this year’s meet, we’ve agreed to 120 days, but the

remaining 21 of our days are now going to become harness-racing days. So the

NJSEA isn’t saving any money by not racing thoroughbreds.

The real reason is the participation agreement. Our feeling is that

the reason the participation agreement has taken so long is because the same

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people, who own the racetracks and OTB parlors in Pennsylvania, own the

privately owned racetracks here in New Jersey. Most people believe that the

incentive -- there was no incentive to open the OTB quicker, because when

Garden State Park closed -- located in Camden County -- the Garden State Park

patrons, instead of driving to the race book rooms at the casinos, or to Freehold,

or Monmouth, or Meadowlands, decided it was easier to cross the Ben Franklin

bridge and bet at their OTB location in Philadelphia or at Philadelphia Park, the

racetrack located about 15 minutes from here, and about a half an hour from

Cherry Hill. As a result, the $90 million made yearly at Garden State Park is

now going to the Pennsylvania track owners. And I think that was a question

earlier.

We understand, now, that there are also delays because there are

certain bigwigs out there who want to pick their own OTB locations. We also

understand that there are other leading contenders who have some interest in the

participation agreement, and they want to get a part -- and whether or not they

sign it. All of this is all hearsay, and it’s not -- I cannot validate it.

The final issue is the sale or the lease of the racetracks. My

comments will focus on Monmouth Park, because we are talking -- they’re

strictly thoroughbreds. The horsemen oppose the sale, and I’ll tell you why.

There’s no guarantee that the new owner won’t demolish Monmouth Park and

replace it with high-priced condos or housing. The facility sits on a valuable

piece of property less than one mile from the ocean, on a train stop with less

than a hour commute to New York.

There is no guarantee that the facility will conduct live racing with

a full calendar of dates so that New Jersey horsemen and breeders can make a

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living. For this one, you need to think like a farmer. If a horse were a piece of

produce -- an orange, an apple -- you would need a supermarket to sell your

product. If your supermarket closes, or they start decreasing the number of

hours they’re open, so that you can -- that the consumer can buy a product,

there’s less incentive to go there, or there’s no incentive at all, because the

market closes. Horse racing is the same. Our market is our racetrack. If they

close, there’s nowhere to sell the product. And not only do the horsemen go, the

wagerer goes. But many take their farms and their families with them to other,

more profitable states.

about $50 million in improvements to bring it up to 2003 standards. If the new

owner decided to keep it as a racetrack, will they put the improvements into the

facility so it doesn’t become another Atlantic City Race Course, where the

concrete you stand on crumbles under your feet?

Four, the most likely bidders will be conglomerates from other

states or countries. What vested interest do they have in New Jersey’s racing,

farming, breeding, travel and tourism, and our State’s economy? Are they here

just to take our bets and wagers?

Five, will the potential owner allocate enough money to keep New

Jersey’s purses competitive with the region? As Bruce said, our biggest concern

is that every state around us is a racing state. They will all have VLTs or slot

machines within the next two years. What will that impact have on us? And

if the new owner doesn’t put enough money into purses, we’re going to die

anyway, because we won’t be able to compete, because racing is a regional

sport, and the horses and the owners follow the money.

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Six, will the sale be done on the horseman’s back? Will they do

away with current incentives or reduce breeding incentives? Will the new owner

pull a gimmick like they do at Gulf Stream, where they encourage the bettor to

bet on an 800 number over a credit card, rather than with cash at the racetrack

window? Every time this is done, a third of the money doesn’t go into purses.

proven themselves in other states, and I called most of the racing jurisdictions

in the area to find this out. One of the examples that kept coming up was the

Magna Corporation. Magna, which owns Gulf Stream and Santa Anita, bought

the tracks, promising infrastructure improvements on both the front and back

side of the track. They promised better purses and better conditions for

horsemen. They’ve done very little of what they promised. As a result, their

handle, the total amount wagered, and their attendance are down 10 percent.

Their stock, when compared to some of the other corporations investing in

racetracks, is down, reflecting a lack of consumer confidence. And I’ve

included, for you, the stock comparison.

Will they improve New Jersey’s racing? They certainly aren’t

improving it in other states. And is that a risk you want to take when your

industry is so fragile?

And, finally, the procurement process is probably the most

important issue. Last year, the State Commission on Investigation published a

scathing review of bidding irregularities surrounding the Parsons infrastructure

Motor Vehicle contract. The SCI reported these problems: a small universe of

bidders, hiring of politically connected consultant/operatives and lobbyists,

excessive campaign contributions, secret meetings with senior governmental

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officials where inside information was exchanged, an open-ended bid process of

poorly defined expectations, and a lack of government controls.

Given the monetary size, complexity, and nature of racetrack

procurement, a repeat of this debacle is very possible. This is why the NJSEA,

the Governor, and the Legislature should insist that, if they go forward with this,

that it’s a transparent bid process, where all impacted parties are participating --

most importantly, the horsemen -- because it is the thoroughbred and the

standardbred, or harness horsemen, in the state that make up the majority of

voters, own the farms, and get the major benefit from this industry.

Finally, on the advice of our attorney, Dennis Drazin -- who is in

the room with me today -- and he can answer questions. He’s one of the leading

owners and breeders. He would like to advance a solution. Don’t sell either

track. Rather, put into motion an idea advanced by Governor McGreevey some

time ago. Preserve the racetracks with Green Acres funding, since they occupy

valuable open space and promote the preservation of an additional 80,000 acres

of equine-related farmland.

By doing this, you will also retire the debt on each of the tracks,

which is around $250 million in the aggregate. By paying off the debt, you will

then be able to put approximately $3.5 million back into Monmouth Park’s

operational account yearly.

An amendment would have to be made to Green Acres to allow for

a purchase of commercial open space. The amendment would be limited to

racetracks. Once the racetracks were preserved, lease the facilities based on the

highest bid and the best use. Model it along the lines of the Meadowlands

Arena agreement. By requiring the potential bidder to put together a plan like

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the one for the Arena site, they would be required to show what they are going

to do and how. Further, they would be obliged to do it.

Finally, prior to any decision to lease or purchase, all impacted

parties need to put together a package of legislation to address every aspect of

racing. If there needs to be changes in the OTB and Phone Bet Law, or if we

need to find a guaranteed new revenue source to bolster purses if we can’t have

VLTs or slots, maybe the casinos will help us out. Who knows? We need help.

Everyone needs a clear idea of what is out there. The disposition

of these racetracks is about much more than the facilities themselves. The

transaction will impact gaming from the Meadowlands to Atlantic City, it will

impact current and potential State and local revenues, it will impact travel and

tourism, it will impact over 80,000 acres of open space dedicated to horse

farms, and most importantly, it will impact 6,000 individuals who make their

living directly from live racing and another 25,000 individuals who receive some

ancillary benefit from an active horse racing industry.

This proposal should not be taken lightly, because what may be a

short-term, quick, financial fix may turn out to be a long-term disaster for our

State.

Thank you.

ASSEMBLYMAN VAN DREW: Thank you, Barbara.

Assemblyman Conners.

ASSEMBLYMAN CONNERS: Barbara, I just wanted to ask you

a question. You were talking about purses. What size purse per day -- I guess,

for a thoroughbred race or a standardbred -- is required?

33

MS. DeMARCO: I would have to defer that to either Mr. Drazin

or--

According to the horsemen, they’d like to see 300 a day for

thoroughbred and--

L E O N Z I M M E R M A N: You mean 300,000.

MS. DeMARCO: Three hundred thousand a day, sorry.

MR. ZIMMERMAN: We would like to see 200,000 a day as an

ideal purse structure, and the Meadowlands has been able to come pretty close

to that, and has been at that, I believe.

Bruce, is that correct?

MR. GARLAND: If I could-- Three hundred thousand a day is

what we think, this year--

ASSEMBLYMAN VAN DREW: We have to have you come

forward, please, so we can have you on the record.

Thank you.

MR. GARLAND: We believe that 300,000 a day, this year, is what

Monmouth Park needs, to be competitive. That number will change drastically

in the next couple years, due to the competition from the surrounding states, as

VLTs and slot machines are introduced in those states and money is then

diverted to purse money in those states.

So the number will change. Three hundred is this year’s number for

Monmouth Park. That’s for thoroughbred racing. For harness racing, we’re

currently the highest purse structure in the world in harness racing. And that is

reflected in the fact -- and symbolic of the fact, frankly, that we are the number

one harness racing entity in the world.

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So the idea is to have the highest purses possible in both sports.

That number is just right around the $200,000-a-day level. That number will

also change next year in order to be competitive, again, because the surrounding

states will have -- introduce alternative sources of funding other than racing. So

we’re trying to survive just on racing. They have racing and another product.

And that’s what I referred to, during my testimony, as what I’m trying to

concentrate on. How do we meet that competition?

This year, the Sports Authority has taken an extraordinary step in

thoroughbred racing and guaranteed a $300,000-a-day purse structure for 72

days at the Monmouth Park meet. That’s an unheard of thing to do in racing.

The board and our President, George Zoffinger, have backed that initiative.

In harness racing, we still are the best, so we don’t need to do

anything this year with our harness purses. But, again, in the future years, we’ll

only see those numbers increase in order for us to be competitive.

ASSEMBLYMAN CONNERS: Bruce, I’m sorry. I didn’t get your

last name.

MR. GARLAND: Garland.

ASSEMBLYMAN CONNERS: I don’t know whether you, or Leon,

or Barbara can answer a question. Do you know of farms that have been

preserved with farmland preservation? Are there--

MR. ZIMMERMAN: To the best of my knowledge, there are

several hundred thousand acres of farmland that are preserved now as horse

farms. I was going to address part of that when I made my presentation.

35

I don’t think anybody knows the numbers precisely, to the point

of -- would there not be horse racing, how many of those wouldn’t be there. But

we expect that a lot of it would be lost.

See, that’s something I was going to address. The fact of the matter

is, that the horse racing industry in New Jersey is not what you see as, what I

like to call, the tip of the iceberg. It’s not those three racetracks. It’s far more

than that, that you don’t see. It’s hundreds of thousands of acres that are being

preserved, it’s tens of thousands of people that are being employed, and it’s a

half a billion dollars in the State’s economy.

We recognize that the casino industry produces a lot to the State’s

economy, but it doesn’t produce 400,000 acres of open space preservation. And

that’s why we think it’s -- that the racing industry deserves some recognition.

And, as I said, I was going to address that, and I will in a moment.

MS. DeMARCO: There’s only been one thoroughbred farm that’s

gone into farmland preservation, and there are people here from the Department

of Ag who can probably expand on that. But we had our first thoroughbred farm

preserved last year in Camden County.

ASSEMBLYMAN CONNERS: Okay, thank you.

ASSEMBLYMAN VAN DREW: Thank you, Assemblyman.

ASSEMBLYMAN ASSELTA: So we can’t build on it.

ASSEMBLYMAN VAN DREW: This is going to be a little bit more

to Barbara, and then we’ll move on. It’s a little bit of a philosophical question

here, just if you can answer this. Without-- I mean, there’s always going to be

this argument. There’s going to be some of us who are just opposed to VLTs.

So without getting into that discussion, what would you see, from your vantage

36

point, as a cure, other than what you just mentioned before? What do you see

are the reasons other than the casinos -- why horse racing has gone down?

MS. DeMARCO: Actually, I asked that question of the National

Thoroughbred Racing Association, who hosted the Kentucky Derby. The

numbers haven’t gone down, nationally. They actually have been increasing on

a yearly basis. Why you don’t see it is that a lot of our patrons are dispersed

now. They’re in casino race book rooms, they’re in OTBs, they’re betting from

home on a phone, they’re in the racetracks. So it isn’t -- except for these big

marquis events where you see 140,000, almost 150,000, as you did Saturday at

Churchill Downs -- our people are all over, and they’re betting.

So I take exception to that. In fact, I got on the Internet, and the

Nielsen Media Research group showed that viewership on horse racing was up

118 percent as of February of this year -- watching the pre -- what they call the

prep races for the Kentucky Derby.

ASSEMBLYMAN VAN DREW: Specifically in New Jersey, you

attribute the problems only to the casinos?

MS. DeMARCO: I think you have competition from other states.

I think the casinos, certainly, are the reason why there are no racetracks in

Southern Jersey. I think I would feel very comfortable saying that. I think that

it just became, almost because we’re not as big, or we’re not as -- such a quick

satisfaction as you might get with a slot machine. People just dismiss us. We’re

not important, because we’re 6,000 or maybe 30,000, in the aggregate, people.

And our horse farms -- people don’t make the connection between the racetrack

and the horse farm. And, actually, that’s a connection that has to be made.

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ASSEMBLYMAN VAN DREW: Let me ask you this, just to be the

devil’s advocate a little bit. Everybody wants to see the horse farms stay.

Everybody wants to keep the farms. There’s no opportunity to keep the farms,

to raise the horses, and yet, maybe, perhaps, not have the presence of the tracks

as strong as they have been?

MS. DeMARCO: Absolutely not.

ASSEMBLYMAN VAN DREW: They wouldn’t be.

MS. DeMARCO: You would have no market. You’re closing your

supermarket. If you have no market to sell your product, it’s--

ASSEMBLYMAN VAN DREW: The market for New Jersey horses

is New Jersey.

MR. ZIMMERMAN: Yes. Assemblyman, why would you have a

horse farm in New Jersey and not be able to race the horses nearby? I’m sure

there’s breeding done from state to state and across states, but it would make

no sense. You need the racetracks, the facilities nearby.

I would just point out to you-- I’d like to address VLT issue later.

This is the second thing I’m going to address later. Our racing industry-- I

mean, there are studies that are shown -- and it’s been documented before

legislative hearings in the past. Racing began its decline when the lottery was

implemented, and dropped even more severely when the casinos opened. Our

racing industry did not oppose casinos in Atlantic City. We thought it would

be a help the economy. And we later favored partnering with the casinos so that

simulcasting of horse races were put into a lot of the casinos. And there are race

books there. There are, in effect, OTBs in the casinos.

38

Now, with this great toll that the casinos have taken on the racing

industry, we feel that they -- we need help from them. I ought to point out to

you that in Illinois-- When riverboats were created by the legislature in Illinois,

without any effort at all, they gave a percentage of the riverboat gambling

money to the racing industry. Now, wouldn’t it be nice if the casino industry

could give us a percentage or share with us, in some way, so that we could all

benefit?

I mean, my feeling -- our feeling in the industry is that VLTs at

racetracks, partnered with the State and the casino industry -- there’s enough

money for everybody to benefit. And how long will our casino industry in

Atlantic City last once Pennsylvania and New York are fully implemented, and

people don’t have to get on the buses and go to Atlantic City from midtown

Manhattan? I mean, how much longer are they going to continue? Wouldn’t

it be wiser for them to be partners now with us so that we could both benefit?

I think it’s increased revenue for the casinos, as well as increased revenue for the

racetracks.

ASSEMBLYMAN VAN DREW: I’ll disagree with you in that I

think there could be a very detrimental regional effect to the area surrounding

Atlantic City.

But I’ll entertain further--

Assemblyman D’Amato.

MS. DeMARCO: Assemblyman, before he speaks--

ASSEMBLYMAN VAN DREW: Yes.

MS. DeMARCO: The only thing I’d like to say is, in the ’70s, we

were the first test case. New Jersey was the first time we took a casino industry

39

and put it head to head with horse racing. Our horsemen, at that time, for

whatever reason -- and Leon might know, because I was young-- (laughter) He’s

still young.

ASSEMBLYMAN ASSELTA: Mature.

MS. DeMARCO: They didn’t make any protection for horse

racing, and we had no idea what impact it was going to have. It had never been

tested anywhere else in the country. As a result, now we’re looking at it, and

we’re saying, "God, we should have put a protection in," but we had nothing to

learn from. Now every other state around us has learned from it, and they’re

putting that protection in for their horse racing industry.

ASSEMBLYMAN VAN DREW: I understand that. And just

speaking for myself, I want to see horse racing survive. We want to see the

industry stay here, but we have to protect what’s a regional economy where there

are very few other alternatives, and that’s the casino industry. Those folks that

are from that area are going to be extremely protective of that. It’s a very broad

industry that has a profound effect -- not only the economy of the state, but also

of an entire region of the state.

So we’re with you, but it has to be done in a way that’s not going

to hurt an existing industry. There’s no point in doing that -- in competing with

ourselves.

But I know Assemblyman D’Amato had a question, as well as

Assemblyman Arnone. And we’ll extend that courtesy to him, in the audience,

to come forward.

MR. ZIMMERMAN: Assemblyman, just one question. I just hope

I get to cover some of this.

40

ASSEMBLYMAN VAN DREW: You will.

MR. ZIMMERMAN: It may answer some of your questions.

ASSEMBLYMAN VAN DREW: You absolutely will. We’re going

to come back to you.

ASSEMBLYMAN D’AMATO: I’m going to look for some help to

my colleagues.

It’s my sense that about two-thirds of the states have casinos -- or

some form of -- there’s a house, and there’s legal gaming. Am I right about that

-- two-thirds of the states?

ASSEMBLYMAN ASSELTA: A third of the states.

ASSEMBLYMAN VAN DREW: About a third.

ASSEMBLYMAN D’AMATO: A third?

ASSEMBLYMAN ASSELTA: Well, whatever.

ASSEMBLYMAN VAN DREW: Do not.

ASSEMBLYMAN D’AMATO: A third do not.

What has happened to racing in those states, and how have those

states -- if there has been an impact on gaming -- excuse me, an impact on racing

-- what have the states done in those jurisdictions, do you know?

MR. ZIMMERMAN: I’m not an authority on this, but I can

answer to some extent, and Barbara made reference to it.

New Jersey was the only state where racing was flourishing, and

they brought casinos in. In the other states where casinos went in, there was no

strong racing industry. For example, when they tried to introduce racing in

Nevada, it failed, because the casinos were there and were strongly established.

41

To the best of my knowledge -- and I would defer to -- there are

other people-- I know Bruce Garland is more up on this, and Art Winkler,

because they’ve been in the racetrack management business for a long, long

time. But I know there are other states in which the racing industries were not

as established as New Jersey’s. So there probably is no analogy to be drawn to

some of these other states.

When Delaware-- Delaware, I have to tell you-- In harness racing,

their purses were about -- and I have Mike Izzo with me, Executive Director of

the Standardbred Association -- Mike, help me out if I’m wrong -- something

like 42nd in the nation in purses. They paid $80,000 a day, or night, for racing.

And they put slot machines at their racetracks, and they zoomed up to second

or third in the nation, and they’re paying more than double that.

MS. DeMARCO: Same thing with the thoroughbreds. It mimics

it, but with bigger numbers.

MR. ZIMMERMAN: And I appreciate what you’re saying about

the regional concern in South Jersey, but your regional concern is going to be

severely impacted by Philadelphia.

I’m sorry -- 8,000 to 160,000. I beg your pardon.

So you can see the significant -- what slot machines did. And the

racing industry was not a big industry in Delaware, compared to New Jersey.

And now horses go to race there, because the purses, particularly in

thoroughbreds, are better. They’re not better in standardbreds, because we’ve

had a very good commitment from the Sports Authority -- and the Sports

Authority needs to be commended for that -- to keep our purses number one.

But they’re not going to be able to do it. I read in the paper the other day,

42

Pennsylvania, when they get their slot machines, expect it to go to 600,000 a

day in purses. Where’s New Jersey going to be? There’s not going to be any

racing.

MS. DeMARCO: There won’t be racing.

MR. ZIMMERMAN: You won’t have anything left to save. And

I really want to address a particular point.

ASSEMBLYMAN VAN DREW: You will. You’re going to

absolutely have that chance. We’re just going to go through some other

questions.

Assemblyman Asselta.

ASSEMBLYMAN D’AMATO: Thank you.

ASSEMBLYMAN ASSELTA: I don’t want to get in a debate with

Barbara and Leon on the trade-off between horse racing and casinos, as far as

the quality of jobs that have been created, and that everyone that works in the

industry -- casino and gaming industry-- Obviously the level of compensation

is so much higher than it was in the horse racing industry. And let’s just leave

it at that, and that’s a matter of fact. And you can agree to that.

The best part of your testimony, Barbara, was really the part that

you mentioned about account wagering -- that that was a quick opportunity for

us to get running and get creating some interest back into horse racing in the

state. That didn’t take a whole lot of -- building 10 facilities -- 16 facilities.

My question to Mr. Winkler -- real quick, Art. Can those

agreements-- You, kind of, capsulized everything in one major agreement. He’ll

have to come up -- but I know she’s shaking her head--

ASSEMBLYMAN VAN DREW: Mr. Winkler, come forward again.

43

ASSEMBLYMAN ASSELTA: You have one major agreement to get

this deal moved forward, correct? That is a combined agreement between --

with OTBs and the account wagering -- two separate kind of operations, but it’s

one major agreement, correct?

MR. WINKLER: If I misled you, I’m sorry. There actually would

be two agreements. One would be the master agreement for off-track wagering.

ASSEMBLYMAN ASSELTA: The master one.

MR. WINKLER: And one -- there would be a separate--

ASSEMBLYMAN ASSELTA: But you can’t proceed forward

without the master.

MR. WINKLER: Correct, but there would be a separate agreement

for account wagering.

ASSEMBLYMAN ASSELTA: So I think my question is, can the

account wagering agreement be severed--

MR. WINKLER: Yes, it can, from the off-track wagering.

ASSEMBLYMAN ASSELTA: --from the master--

MR. WINKLER: Yes.

ASSEMBLYMAN ASSELTA: --to be facilitated quicker?

Because it seems like, Mr. Chairman, this is a quick, down and

dirty creation of some resources that we’re losing every day, when we’re not

being able to phone bet, correct?

MR. WINKLER: Yes, they can be separate agreements. The parties

tried to negotiate them together, because the parties were looking as a mass as

to what their economic interests would be, statewide, with both systems, but the

agreements can, and will, be separated so that we could process the--

44

ASSEMBLYMAN ASSELTA: And account wagering could be

processed much quicker and first, before OTB, so that we can begin to enjoy

some revenue.

MR. WINKLER: Yes, you’re absolutely right.

ASSEMBLYMAN ASSELTA: That’s my only question.

Thank you.

MR. WINKLER: I kept it warm.

ASSEMBLYMAN VAN DREW: Next time, I think Leon has to get

up. How come you have to get up and down every time?

MR. ZIMMERMAN: I haven’t spoken yet, that’s why.

ASSEMBLYMAN VAN DREW: I know.

I do know, and I want to extend that courtesy to him -- that

Assemblyman Arnone is here.

Assemblyman, did you want to speak now?

A S S E M B L Y M A N M I C H A E L J. A R N O N E: Well, I just--

ASSEMBLYMAN VAN DREW: Assemblyman, if you could come

forward, as well. I’m sorry.

For those that don’t know, both Assemblyman Arnone and myself

are dentists.

ASSEMBLYMAN ARNONE: Thank you very much.

I’d just like to touch, for just a brief moment, on the history of the

problem with horse racing. As many of you know, the horse racing industry is

in decline. Some might even say it’s in a free fall. And my perception is that

there’s a saucering effect here, and it looks like it’s coming back a little. But one

45

might also say that a dead body will bounce if you drop it off the Empire State

Building.

But let me say that horse racing, when it was legalized by the voters

of this state in 1947, was done so for property tax relief. And at that time,

believe it or not, the revenues from racing comprised 10 percent of the

appropriations in the State of New Jersey.

What’s occurred with it -- it’s not the fault of the casinos. I mean,

there’s been some fault that we can lay at the doorsteps of the racing industry

itself, like in New York, for an example. They resisted television, for an

example. They thought we were going to lose a few clients coming to the track.

Maybe we wouldn’t sell as many hotdogs. They thought maybe it would open

it up for bookmaking. So they resisted that and opened the door for pro

basketball and other sports to take the scene. At that time, also, horses like

Native Dancer -- they were as popular to the public as maybe Michael Jordan

is today. So they were very popular at that time.

And, also, when OTB was questioned, in New York -- NYRA,

especially -- New York Race Association -- didn’t want to get involved with

OTB. They made another mistake. So the city and the state got the OTB going

and made a lot of money with it -- or supposedly did. And we’re trying to sell,

probably, the New York section of the OTB, which is eight of them in the state

of New York -- for $400 million, I might add. NYRA wanted to buy that. They

refused -- turned it down.

But in any event, racing has been a product where it cost too much

to park your car, too much to get in, too much to get a hotdog, too much to get

a seat. And God forbid you went to the window and you said something to the

46

guy behind the window. You know where he’d tell you to go. Whereas, the

casinos treated people -- their clients -- in a much different manner. They’d give

them free drinks, they’d give them free food at many times, comps, and treated

them very nicely. If you went to a table, they’d wish you good luck. If you lost

money, they’d tell you they felt bad that you lost your money, and what have

you.

But racing, I think -- what they’ve done is, I think they’ve identified

their base. I think they’ve got a solid base out there. And they are, probably --

hopefully going to come back a little. But one of the concerns, I believe, that

the thoroughbred owners have -- which is a justifiable concern-- They recognize

that the decline of racing occurred for quite a few reasons. And I think the slide

probably started with the lottery approved, which was a very easy, convenient

down of the gambling public. People do not understand complex gambling

methods. In fact, everything is, sort of, more of a rapid -- even the music is

faster and quicker. And the slot machine, of course, is a -- you can make quite

a few bets on a slot machine in a matter of a few hours.

Horse racing is eight races a day. To keep a horse in training can

range anywhere from $60 to $100 a day. And that’s not even factoring in,

folding into that, veterinarians’ fees. So the cost of conducting horse racing is

very, very expensive.

So one of the concerns they have -- and I’m going to ask the -- your

OLS, nonpartisan representative to jump in if I stray from accuracy on this--

But the structural problem that exists in the very bill itself, that approved OTB

and account wagering in the state, states that anyone, in the year 2001, that

47

holds a license automatically becomes a participant, by fiat of this, of OTB and

account wagering for life.

So, in other words, there’s no guarantee there that live racing will

continue in the State of New Jersey. Monmouth Park can discontinue racing,

Freehold Raceway -- hopefully they don’t -- but they could discontinue racing.

They still would be participants in the OTB and the account wagering system.

Down at Atlantic City Race Track, Levy, of course, folded his track up, and he’s

still a participant in the OTB; but I don’t think he had enough racing days to

participate in account wagering. And I believe that the Camden facility -- the

rights to the Camden facility were purchased by Pennwood, and they picked up

those rights.

So I think that this provision, if it’s altered, would give some

assurances to the thoroughbred industry that whomever conducts these facilities

would continue to have live racing in the State of New Jersey; which, of course,

one of their concerns is for the horse farms and the open spaces.

And there’s another little bit of a problem that, for some reason or

another, the tracks -- or the license holders -- were the ones that were vested with

the power to conduct OTB and account wagering. But yet, on the other hand --

back to the comment I made a moment before -- they’ve got the right, also, to

fold up the track and still keep those rights.

So I would say that-- I was an advocate of, actually, just bidding --

the State of New Jersey bidding out account wagering. I think that’s where the

dollar might be. I think the ability to conduct account wagering in the State of

New Jersey -- which, if you step back and look at it, is probably the highest per

capita income area in the country, if not probably in the world -- that large

48

stretch. That particular product could range anywhere from $300 million to

$400 million -- just the rights to sell account wagering.

But here again, I’ll leave that to smarter people than I. We can get

that kind of thing off the ground.

So thank you for your time. Thank you very much.

ASSEMBLYMAN VAN DREW: Thank you, Assemblyman.

My quest for power has come to a rapid conclusion. The Chairman

is back.

ASSEMBLYMAN GUEAR: Ladies and gentlemen, I apologize. I

had to step out. As the prime sponsor of another bill, I’m testifying in Law and

Public Safety, but I’m back. I’m sure Assemblyman Van Drew did a wonderful

job.

Leon, you’re on, again, I understand.

MR. ZIMMERMAN: Well, thank you very much. I feel like I’ve

been commenting on everybody else’s things, and I wanted to-- There were a

couple of points that I did want to make. And I’ve made some of them, sort of,

throughout, so I’m going to try and pull it together.

The most important thing that I think the Legislature has to realize

is that we’re dealing with thousands and thousands of peoples’ livelihood here,

and hundreds of thousands of acres of open spaces. We’re not dealing just with

the racetrack building where races are taking place, because the money that’s

generated from there is keeping all this other stuff going. And we talked a little

bit about the breeding end of things.

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There are people who are involved in this industry because it’s their

business. They’re independent, small business people. Or maybe their in it just

for a hobby, and they love it.

I don’t know whether you realize -- I’m sure you know -- and if you

look on the State seal, you see the horse’s head there, and you know that the

State animal is the horse. And I have been around a long time. That was a bill

that lobbied through in the ’70s, and it was passed by this Legislature and made

the horse the State animal. And I’d like to think the Legislature would want to

continue to do it justice and care about it in that sense.

I won’t go into all the numbers -- and I’m trying to summarize it --

but we have to realize that we have -- who needs to be protected here. And we

have to help these people and their farmland. And it goes beyond the racetrack,

as I said.

The other thing is, as was pointed out to you, of the Sports

Authority’s profit last year, $25 million came from harness racing alone -- I’m

sorry, $25 million came from racing, almost $21 million of which came from

harness racing. So we’re protecting a lot here.

The biggest problem we face is the competition from our

neighboring states. To our south, Delaware has already got the slot machines,

and they’ve already boosted their purses where they’re among the most highly

competitive racing states in the nation. Pennsylvania, soon, will implement it.

There will be people in South Jersey, in your districts -- the gentlemen from

South Jersey -- who have access to Pennsylvania, just as easily as they do to

Atlantic City. And they’re going to be affected by that. New York is going to

have it, and New York is going to have VLTs at its racetracks very soon.

50

I’d like to ask Mike Izzo, who is with me-- He’s been studying this

everyday.

Mike, what are we at now for New York and Pennsylvania?

Mike Izzo is the Executive Director. I wanted him to address,

really, the kind of numbers we’re talking about here.

M I C H A E L I Z Z O: Well, when you’re talking about numbers, we’re

talking about purse money or percentages. The Pennsylvania-- There’s two bills

in Pennsylvania, now, that would give the horsemen 15 percent or 25 percent,

and the estimate of purse money is anywhere from $230,000 a night, to

$400,000, to $600,000 a night.

I know the percentages in New York. The horsemen gets 7.5

percent. I don’t know what that means in dollars. I don’t know what their

projections have been. But both are going to cause a significant increase in

purse money, which will definitely-- Horses will race in Pennsylvania and New

York. They won’t race at the Meadowlands.

MR. ZIMMERMAN: Incidentally, not only for harness racing --

our biggest competition comes from Ontario, Canada, where they have slot

machines at the racetracks. And their purses are comparable with the

Meadowlands. They are in that -- close to the $200,000 range. And that’s the

next best venue.

Is that right, Mr. Garland?

MR. GARLAND: Yes, sir.

MR. ZIMMERMAN: I got that one right.

We’ve been hearing talk lately about VLTs at the racetrack. You’ve

seen some articles about it. Some of your colleagues have introduced bills to do

51

it, and it’s just, sort of, come from out of nowhere. We in the racing industry

have been talking about having slot machines and/or VLTs at our racetracks as

a way of providing new revenue to help us compete with the neighboring states.

All of a sudden some people in Trenton are talking about it.

But what we discovered was they were talking about it to help

balance the State budget. They didn’t really care about the racetracks. And I

have to tell you, that if you’re going to put -- if the Legislature’s going to vote --

and I assume Assemblyman Van Drew is not -- but I assume if you’re going to

vote for VLTs at a racetrack, you’ve got to give a fair share of it to the racing

industry, as well as to the people who manufacture and operate the machines,

because a VLT is, just about, a slot machine. I mean, they’re called differently,

but the way they’re manufactured today, they’re identical, and they would have

the same competitive nature to them. And the State of New Jersey has to,

obviously, have its share. But it can’t be just dominated by that.

I mean, I saw a bill -- the proposed piece of legislation for VLTs at

the racetrack that talked about 5 percent to the horse industry. Well, that’s not

enough. We’re going to have people betting on machines in our racetrack

building, in our home, and not betting on the races. So we’re going to lose

money. We’re not going to get, even, a fair percentage of it. So I would

emphasize that if, in fact, VLTs come before you as a possibility, that you’ve

got to consider compensating the racing industry fairly in that regard.

I heard you ask before about what other things can you do. In

2002, as you know -- and Assemblyman Asselta told me, the last time I sat here

-- "Didn’t we appropriate money for you?" And -- $18 million was given in lieu

of the fact that we didn’t have any other source of revenue. And that allowed

52

us to keep our purses competitive for one year. And then a second bill was

implemented, and it was cut to $6 million, I believe.

In any event, Assemblyman Asselta said to me, "Well, how about

we don’t worry about the VLTs? We’ll just appropriate the money to you,

again." Well, in lieu of your budgetary problems, I don’t think I’m going to --

the racing industry’s going to see revenue like that, although that’s fine, too. I

mean, if you don’t want to give us VLTs at our racetrack, then appropriate

another $18 million every year. I’m not being -- I’m being facetious, but I’m

just trying to point out that that’s one of the alternatives.

Now, there was another alternative that floated out there a couple

of years ago, and that was to establish a slot machine center in Atlantic City,

owned and operated by the casinos, with revenue shared with the racing industry

in the old convention hall, which is being remodeled, and put it in there. That’s

something that never got enough serious attention, to my way of thinking,

because I think that would be a way of solving the problem without having the

competitive location. It would still be Atlantic City casinos operating slot

machines, and dedicating a fair share of the revenue to the racing industry.

Remember, I said to you, in Illinois they put riverboats in, and they

gave the racing industry money. Why did they do that? Because they didn’t

want to hurt the racing industry, so they gave them some of the money. So

maybe that’s something that we ought to reexamine -- someone ought to look

at.

All I can tell you is, the vise is getting tighter and tighter every day.

And we’re lucky, in a way, that harness racing has done so well. But it’s largely

because the Meadowlands, as Mr. Garland pointed out to you, is the number

53

one, pari-mutuel wagering facility in North America. More money is wagered

through that facility than anywhere else, and that has helped us.

And I have to, again, caution you. If Pennsylvania racetracks, right

across the river, 15 minutes from here, are going to have slot machines; and New

York racetracks, right across the river, are going to have VLTs; and the bulk of

the business in Atlantic City is machines, how long will it be before the Atlantic

City casino industry is in trouble? Maybe it would be wise for them to get a

new partner, and go to the racetracks, and stop those people from midtown

Manhattan, who can then go across the river to the Meadowlands and use those

machines. And the casino industry would share in that money, obviously. Or

Philadelphia could come across the river here. And I just think that it makes a

lot of sense to look at it.

The life of New Jersey’s very valuable equine industry is on the line,

it really is. We’ve got to do something soon.

Thank you.

ASSEMBLYMAN GUEAR: Thank you.

Any other questions from Committee members?

Assemblyman Asselta.

ASSEMBLYMAN ASSELTA: I’ll do the appropriation bill.

(laughter) It will solve all our problems, right?

ASSEMBLYMAN GUEAR: Again.

MR. ZIMMERMAN: I don’t know if you’re serious or not, but I

would certainly support it. (laughter)

ASSEMBLYMAN VAN DREW: That’s a real surprise.

ASSEMBLYMAN GUEAR: Thank you, gentlemen.

54

MR. ZIMMERMAN: Thank you.

ASSEMBLYMAN GUEAR: Next, Karyn Malinowski, from the

Equine Science Center, Rutgers University.

K A R Y N M A L I N O W S K I, Ph.D.: Thank you, Mr. Chair.

I’ve asked my colleague, Dr. Ken McKeever, to join me up here this

afternoon.

ASSEMBLYMAN VAN DREW: Mr. Chair, if I have a point of

personal privilege for a second.

ASSEMBLYMAN GUEAR: Go ahead, Assemblyman.

ASSEMBLYMAN VAN DREW: She knew this was going to

happen. I went to college with Karyn Malinowski.

Karyn, I won’t tell any of the stories.

DR. MALINOWSKI: Please don’t, sir.

ASSEMBLYMAN VAN DREW: It was a long, long time ago. But

it’s really good to see you here and how well you’re doing at Rutgers.

DR. MALINOWSKI: Thank you, Assemblyman Van Drew.

ASSEMBLYMAN GUEAR: Ms. Malinowski, I would advise that

it’s just about ten of four. I realize that you’ve waited for a couple hours to

come up. But I would just request that you give us the thumbnail on your

testimony, if at all possible.

DR. MALINOWSKI: We’ll make this very quick, Assemblyman.

I have provided a written copy of testimony for you.

What’s very interesting, in listening to the almost two hours of

testimony so far -- and to, kind of, give you some answers, other than VLTs, of

55

how we can bring the racing fans back is -- not one time was our product

mentioned, and that is the horse.

I’ve been asked to come here to talk to you about the future of the

New Jersey horse industry and, specifically in view of today, the racing industry.

Some of our colleagues have shared some of the numbers with you.

We know that equine-related assets in New Jersey amount to $3.2 billion. The

industry employs some 6,000 full-time men and women, and generates almost

$700 million annually, and this is excluding, of course, pari-mutuel wagering.

Horses are the third-largest agricultural commodity in the State of

New Jersey and the number one livestock commodity. We account for 49,000

animals, on 7,100 facilities, in every county, statewide.

Beside the economic importance of the industry, the 7,100 horse

farms maintain open space of 81,000 acres in the state, and there are several --

Assemblyman Van Drew -- horse farms such as Walnridge, in Monmouth

County, that have been in farmland preservation for a long time.

This, in turn, provides increased quality of life to New Jersey

citizens. Horse operations tend to be more viable than other types of

agricultural businesses, making the horse industry critical to the growth and

land-use strategy, which is on all of our radar screens in the state.

Barbara has mentioned that horse racing in New Jersey, as we have

heard today, is fragile, yet both thoroughbred and standardbred racing have a

significant impact on State revenues, wages paid to employees, and quality of

life for New Jerseyans through open space maintenance.

The racing industry deserves the State’s support in a number of

areas, not the least of which is an extremely strong and powerful Equine Science

56

Center. Our Center, at Rutgers University, is recognized internationally for its

research, teaching, and outreach. It is a unit of Cook College and the New

Jersey Agricultural Experiment Station. It was created to identify problems, such

as what’s being discussed today, in the horse industry; to find solutions through

science-based inquiry; and to offer those solutions to the industry and horse

owners -- and to influence public policy to ensure the viability of the horse

industry. Our slogan is "Better horse care through research and education."

The Equine Science Center is critical in the economic development,

integrity, maintenance -- if you talk about bringing fans back to horse racing,

when the integrity goes out the window, that’s when we lose our fans -- the

quality standards, and sustainability of the racing industry in New Jersey.

Numerous Equine Science Center programs support thoroughbred

and standardbred racing in our state. For instance, some of you may have heard

recently of the two products that we’re presently drug testing for -- and again,

to maintain integrity in racing -- one called Epogen, or Epo, and growth

hormone, both tests which were developed at Rutgers, The State University. Dr.

McKeever and colleagues perform exercise physiology studies to safely maximize

equine performance, again enhancing the quality of the product that we’re trying

to sell.

We also do a lot of work in detection of reproductive problems,

which result in foal loss in mares; recommendations in pasture and manure

management; and workforce preparation for future employees in this wonderful

industry. We also have helped equine business develop through marketing

assistant and financial management planning.

57

For the past 20 years, the essential, behind-the-scenes partner

regarding horse industry issues of the New Jersey Department of Agriculture and

the New Jersey Racing Commission has been the people at the Equine Science

Center. We have provided unbiased, research-based solutions to challenges

facing the New Jersey equine industry. The ESC has been described as the

unbiased docking station for all aspects of New Jersey racing and other equinerelated

interests including -- and made public today -- humane standards for

horse care.

New Jersey is the horse state, where the horse is recognized as the

official State animal, and where more horses per square mile reside than any

other state in the United States. Rutgers is looking at this in a very visionary

manner, and our strategy of responding is this Equine Science Center. However,

we believe the State of New Jersey has neglected the equine industry and now

is the time to correct that oversight.

For example, why is there no economic development authority for

the racing industry? Economic development processes have been developed for

casinos, tourism, for agriculture and food industries, for health care, but not for

equine. That needs to change. Other states are devoting substantial portions

of racing revenues to the support of research and outreach for their equine

industries. This is true in California, New York, and Michigan, to name a few.

We believe that a racing industry recovery initiative is appropriate, at this time,

for the State to launch at the Equine Science Center.

In New Jersey -- in addition to directing racing-generated revenues

to regulation of the industry and breeding incentives -- it is necessary to begin

utilizing the industry’s own moneys to such activities as proprietary research, to

58

enhance the economic competitiveness of the New Jersey racing industry, in

relation to other states and to other leisure pursuits. It also is essential to direct

outreach programs targeted to racehorse owners and to racetracks, again to

enhance the quality of the product that makes up our industry. The Rutgers

University Equine Science Center is the logical and ideal entity to perform these

important economic development and outreach activities. These are part of our

mission, that are consistent with the activities in which we already are engaged.

We propose that in order to accomplish these essential activities,

and bearing in mind that New Jersey must expand revenue opportunities for the

industry, New Jersey can devote a percentage of these expanded revenues to

support the necessary work of the Equine Science Center.

It is our vision to catalyze the investment in the infrastructure and

the future of the racing industry -- and the equine industry in its entirety -- in

New Jersey, and to enhance the quality of the product that we’re trying to sell.

Thank you, Mr. Chairman, Mr. Vice Chairman, for your attention.

ASSEMBLYMAN GUEAR: Thank you very much. That was brief,

but quite informative.

Any questions from any Committee members?

Assemblyman Asselta.

ASSEMBLYMAN ASSELTA: Doctor, it sounds like your testimony

should be directed to the Appropriations or the Budget Committee, not really

the Tourism and Gaming Committee, number one.

Number two, your mission, now, is to identify the problem and

create solutions for that problem, currently. And you’re saying, without an

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economic development component, the solutions you have come to know at this

point can’t be implemented.

DR. MALINOWSKI: You’re correct. The mission of the Center,

and everything that we do, is to ensure the viability and vitality of the New

Jersey horse industry. We worked tirelessly -- and unbiasedly -- to ensure that

horses remain very viable in the State of New Jersey.

We feel that, besides the hardcore physiology and research, the

Equine Science Center can provide strategies. We have marketing people. Soji

Adelaja, our Dean, is one of the top agricultural economists in the country. And

we would be committed to looking at the economic development component of

the horse racing industry. But not only the racing industry. I know that’s the

primary focus of today’s discussion. But we really need to take a serious look

at the horse industry in New Jersey in general, both recreation -- socioeconomic

component, as well as the open space component.

ASSEMBLYMAN ASSELTA: Thank you.

DR. MALINOWSKI: You’re welcome.

ASSEMBLYMAN GUEAR: How long has the Center been

operational?

DR. MALINOWSKI: Mr. Chairman, the Center was passed and

formed by the Board of Governors at Rutgers University in February of 2001.

Some of us have been there almost as long as Leon has. (laughter)

Leon, are you still in the room?

ASSEMBLYMAN VAN DREW: He never left.

DR. MALINOWSKI: We’ve been working for the industry

approximately 25 years, but it’s only been the last two that the Center --

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bringing in scientists from all different venues besides just horse interests --

economic people and marketing people -- have come together in one voice.

ASSEMBLYMAN GUEAR: Okay. Thank you.

Assemblyman Van Drew, you had a question.

ASSEMBLYMAN VAN DREW: I just wanted to commend Dr.

Malinowski. They’re doing wonderful work there, and really are on the cutting

edge in the country.

I think it’s an interesting avenue to pursue, actually. We’re always

at odds here. We’re always arguing -- and we’re not, down in South Jersey,

going to do anything that’s going to hurt one of the few industries that we have

that make our communities thrive. And at the same time, I think it would be

fruitful to pursue what avenues are there for the horse industry, in order to save

it. If the only avenue to save it is to hurt the casino industry, they’re going to

have a difficult time.

So I think we really do need to look at some of the issues that she’s

brought up. I think this was valuable.

ASSEMBLYMAN GUEAR: Okay.

Any other questions?

Assemblyman Asselta.

ASSEMBLYMAN ASSELTA: We could sure utilize that

management study. We have a lot of use for that.

DR. MALINOWSKI: Some ideas.

ASSEMBLYMAN VAN DREW: That wasn’t in reference to me,

was it? (laughter)

DR. MALINOWSKI: I’m taking you seriously, Assemblyman.

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ASSEMBLYMAN VAN DREW: No, in the Legislature, we could

use some hot air studies, too.

ASSEMBLYMAN GUEAR: It’s getting rather deep.

DR. MALINOWSKI: Thank you, folks.

ASSEMBLYMAN GUEAR: Okay.

Gregory Boehmer. Am I pronouncing it correctly?

G R E G O R Y B O E H M E R: That’s correct.

ASSEMBLYMAN GUEAR: Step right up, sir, and identify yourself,

please.

MR. BOEHMER: I’m Greg Boehmer, Executive Director of the

New Jersey Sires Stakes, and also head of the Equine Division for the

Department of Agriculture.

I will try to follow my predecessor, Dr. Malinowski, and be very

brief for you, as I know we are short on time.

Not only is the New Jersey racing industry at a crossroads, but this

is a crossroads for the entire agricultural industry. The domino effect, which

could happen, could have just a disastrous impact on all of agriculture in the

State of New Jersey.

The domino effect could go something like this: The attraction of

higher purses in neighboring states, most likely, would prompt New Jersey based

owners and trainers to take their horses elsewhere. The State Stakes Program,

which I run, along with thoroughbred stakes -- neighboring states will offer

richer purses. Currently, as Bruce Garland mentioned, New Jersey standardbred

purses -- number one in North America. That could soon change. And the

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Meadowlands would be hard-pressed to, once again, keep raising the purses to

keep up with states that have additional sources of revenue.

Breeding farms -- already seeing a problem with breeding farms

keeping stallions, top stallions, here in New Jersey. The thoroughbreds have

taken a beating, as far as their options of who they had to breed to. The

standardbreds really haven’t lost anybody. But at the same time, to keep

interest in the breeding industry, it’s the latest and the greatest: who’s hot, who’s

not. And right now, Jersey got a boost from a couple edition of trotting

stallions. Pacing stallions have been stagnant, and that has been very, very

detrimental to the breeding industry of pacing mares in New Jersey, and that is

a problem.

Obviously, some of the things that will happen cannot be undone.

The farms that eventually do get sold that are not preserved, and they’re

developed -- there’s no getting those back. And, obviously, we don’t want to see

that happen.

Trainers-- There are some fans, customers, that follow particular

trainers, that know that these trainers put out quality horses every time they

race. And that’s -- whether or not the horse shows a whole heck of a lot on

paper, these people will bet the trainers. And if Jersey loses these trainers to

competitive jurisdictions, such as the Ontario circuit, which is offering rich

purses; Pennsylvania and New York -- Maryland is not too far behind them.

Obviously, we need to keep our trainers, our drivers, and our jockeys here,

because these are the people that our fans go to wager on.

Loss in handle will definitely compromise the bottom line of all

these racetracks and, once again, will shrink purses. The need for backstretch

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employees -- such as caretakers, exercise riders -- will decline. Racetrack

employees -- need for them decline. New Jersey hay farmers suffer. Grain

producers suffer. Blacksmiths, equine dentists, veterinarians -- also going to

move elsewhere to maximize their incomes. So, obviously, the domino effect

that the continued downward spiraling of this industry could have, obviously,

is very, very big.

I’m not going to hit, too much, the numbers. Dr. Malinowski did

a fine job of that. One thing I will also commend Dr. Malinowski on -- their

program that we have. And the Department of Agriculture strongly supports

everything going on at the Equine Science Center.

If the racing industry is at fault for anything in particular -- we

missed out on a generation. The 20- and 30-somethings, really, did not have

the education needed to continue the interest in racing. And racing was at its

peak at the time these 20- and 30-somethings were youngsters. The majesty of

the horse, and all that, have, kind of, passed away, to Xbox and game station,

too. And, to me, that’s a tragedy. And Horses 2003, the conference just held

at the Cook College at Rutgers -- amazing to see the young people, and not all

of them involved in the harness racing industry -- rather, in the racing industry --

many of them coming to see what this is all about. And I hope Dr.

Malinowski’s able to continue to get the young people back into the sport of

racing.

Money is not the only answer, and I know money solves a lot of

problems, but it doesn’t solve all the problems. Strategies have to be in place

to move the racing industry forward. Thirty million dollars can’t come from the

casinos in Atlantic City, $18 million can’t come from the State Legislature, and

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just money go to these purses. And the Department of Agriculture -- Secretary

Kuperus feels very strongly that strategies need to be in place to invest in the

future of racing.

New breeder programs, breeder award programs for the

thoroughbred-- Projects are already being framed, for the future, to help the

racing industry move forward -- and not just with the idea of taking money and

just throwing it back into the purses, but really trying to expand everything that

has gone on that’s made New Jersey racing so wonderful. Also, promoting the

industry, providing better education efforts, and also assisting the breeding farms

and all the major racing operations in their labor issues, as well.

ASSEMBLYMAN GUEAR: Thank you, sir.

Any questions or comments from Committee members? (no

response)

The later it gets, the questions diminish. (laughter)

All right. Thank you, sir.

MR. BOEHMER: Thank you, Mr. Chairman.

ASSEMBLYMAN GUEAR: I appreciate your testimony.

Do I hear a motion to adjourn?

ASSEMBLYMAN VAN DREW: Motion.

ASSEMBLYMAN GUEAR: Second.

Thank you.