It hasn’t taken long for Jeff Gural’s American Racing Inc. and its partner, Nevada Gold & Casinos Inc. (UWN) to complain that their Vernon Downs racino is not getting a fair shake in its competition with Turning Stone Casino in upstate New York.
Vernon Downs, in bankruptcy after failing as a harness track, was purchased by Gural who then partnered with Nevada Gold to install slot machines and return live racing, all accomplished during 2006.
Unfortunately, says Gural, Vernon Downs is losing $500,000 a month because it can’t compete with Turning Stone’s full casino offerings and the fact that since it is run by the Oneida Indian Nation it is not required to pay any taxes to the state.
That’s obviously not the case with Vernon Downs. Under the New York State law that authorizes racetracks to install slots, the operations must turn over to the state treasury 60% of its casino revenue. In addition, the track must place another 10% into race winning purses and a breeders’ fund.
"We can’t succeed where basically we’re being taxed at 70 percent of our revenues and our competition is being taxed at zero percent." Gural complained. "I don’t think we can make it the way it’s structured," he was quoted as saying.
Turning Stone Casino is situated just five miles from Vernon Downs.
A casino spokesman scoffed at Gural’s complaints, pointing out that Vernon Downs has the ability to serve liquor, while state officials have denied the Oneidas a liquor license for their casino.
Gural said he knew when he invested in the track that competing with a tax-free Turning Stone would be difficult but he expected local gamblers to abandon the tribal casino and support the race track when it reopened.
For Nevada Gold & Casinos, whose previous involvements in gaming were in Colorado casinos, the affiliation with American Racing has had a detrimental impact on its share price.
When the company’s founder and past CEO Tom Winn ran the company, the share price reached double digits but since his departure last year, the company’s share price has dropped to the $3 level.
In addition to Vernon Downs, the partnership with American Racing also opened a second racino at a formerly closed horse track called Tioga Downs near Binghamton.