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Horse Racing News

NJ strikes deal with casinos to subsidize horse racing

by Maura McDermott/The Star-Ledger
Monday March 03, 2008, 7:43 PM

The casino industry will pay $90 million to keep New Jersey's horse-racing industry alive for the next three years, Gov. Jon Corzine said today.

In exchange, the state has agreed not to allow video lottery terminals at the racetracks during that time, the governor said in a statement. Legislation to approve the agreement is expected to be introduced soon.

"Both the equine industry and the casino industry play important roles in New Jersey, from preserving open space to attracting visitors, and it was essential to strike a balance that will allow both industries to thrive," Corzine said in the statement. "The agreement involves no taxpayer dollars and will not reduce casino funds that flow to the state."

The funds provided by the casinos will supplement racetrack purses, the prizes paid to horses, and will support horse-breeding programs, according to the governor.

The New Jersey Sports and Exposition Authority has spent $4 million to supplement purses at the Meadowlands Racetrack since the most recent casino subsidy deal expired Dec. 31, said Dennis Robinson, chief executive of the state agency that runs the track.

Under the previous deal, the casinos paid $86 million over four years to subsidize purses. Racetrack operators have been lobbying the state to allow electronic gambling machines at tracks, arguing they are losing patrons to so-called racinos in neighboring states such as New York and Pennsylvania.

The casino industry has been subsidizing the purses in exchange for agreements not to install the gambling machines at the tracks.

"Not getting the supplement would have been devastating to the industry," Robinson said. "We really appreciate the tireless efforts of the governor and his staff to bring this purse supplement home, and we look forward to working with the racing industry and the governor's office on a long-term solution to ensure we stabilize the racing industry."
New Jersey's horse-racing industry employs nearly 4,000 people either directly or indirectly, according to a study by the Rutgers Equine Science Center.

Industry News

Stocks Slip After Disappointing Earnings
Tuesday April 8, 11:36 am ET
By Madlen Read, AP Business Writer

Wall Street Retreats Following Worse-Than-Expected Reports From Alcoa, Advanced Micro Devices

NEW YORK (AP) -- Wall Street retreated Tuesday after disappointing reports from aluminum producer Alcoa Inc. and chip maker Advanced Micro Devices Inc. raised concerns that corporate America's first-quarter results might come in weaker than expected.

The stock market's decline was modest, indicating to analysts that investors are more level-headed than they were just a few weeks ago when the global banking system was in crisis mode. Still, given a 54 percent drop in Alcoa's first-quarter profit, a 15 percent drop in AMD's first-quarter sales and a lowered profit outlook at rival chip maker Novellus Systems Inc., it appears to some on Wall Street that they might have to pare back their profit estimates for this year.

"While investors had a pretty much washed-out, pessimistic view of the economy, those investors also had a unrealistic view on earnings .... It seems investors are conflicted between their pessimism on the economy and their optimism on earnings," said Jack A. Ablin, chief investment officer at Harris Private Bank. "The good news is, we've moved away from emotional, jittery trading to a reconciliation of values. The market is substantially more rational than it was."

The nation's major banks are not scheduled to report their earnings until next week. But investors, who sent stocks soaring last week on the growing belief that the worst of the credit crisis has passed, got some bleak news Tuesday on the financial sector.

Washington Mutual Inc. said it is raising $7 billion by selling a stake to a private equity investment group, but the Seattle-based thrift also said it will lose $1.1 billion during the first quarter, stash away $3.5 billion for loan losses and cut its quarterly dividend to shareholders to a penny from 15 cents.

Meanwhile, the IMF said that despite "unprecedented intervention" the Federal Reserve and other central banks, "financial markets remain under considerable strain." The group estimated that potential credit-related losses for the financial industry had reached $945 billion as of March -- a "staggering number," said Hugh Johnson, chief investment officer of Johnson Illington Advisors, following Standard & Poor's forecast of about $250 billion in credit-related losses and Goldman Sachs' prediction of some $460 billion.

"Forecasters can be wrong, and hopefully they'll be wrong, but that's a much higher number than we'd been thinking about," Johnson said.

In late morning trading, the Dow Jones industrial average fell 42.42, or 0.34 percent, to 12,570.01.

Broader stock indicators also dropped. The Standard & Poor's 500 index fell 5.56, or 0.41 percent, to 1,366.98, and the Nasdaq composite index fell 8.37, or 0.35 percent, to 2,356.46.

Government bonds were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was at 3.53 percent, the same as late Wednesday.

Tuesday's dreary reports arrived ahead of the release of minutes from the Federal Reserve's meeting March 18, when it lowered interest rates by three-quarters of a point to 2.25 percent.

The credit markets have been performing much better after rate moves and massive lending efforts by the Fed, but many experts say it will be hard for the credit markets to loosen further with the housing market still on the decline. The National Association of Realtors said Tuesday that February's pending home sales fell by 1.9 percent compared to January, worse than many analysts had predicted.

WaMu shares fell $1.21, or 9 percent, to $11.94. The bank said that by the end of June, it will no longer purchase mortgages from brokers and close all its freestanding home loan offices.

Alcoa shares slipped 37 cents to $37.07, having fallen 4 percent Monday ahead of its earnings release.

AMD shares fell 23 cents, or 3.6 percent, to $6.11, and Novellus fell $1.76, or 7.4 percent, to $22.05.

Light, sweet crude fell 92 cents to $108.17 a barrel on the New York Mercantile Exchange.

Gold prices fell, while the dollar traded mixed against other major currencies.
The Russell 2000 index of smaller companies fell 0.33, or 0.05 percent, to 712.35.
Declining issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 369.3 million shares.

Overseas, Japan's Nikkei stock average fell 1.49 percent. In afternoon trading, Britain's FTSE 100 slid 0.88 percent, Germany's DAX index lost 1.01 percent, and France's CAC-40 dropped 1.00 percent.

New York Stock Exchange: http://www.nyse.com 
Nasdaq Stock Market: http://www.nasdaq.com 

Legislature News

U.S Horse Owners Tax Incentives

Recently, the United States government enacted the following Bill, which provides significant tax benefits for horse owners.

Washington, DC --- President Bush signed into law the Economic Stimulus Act on February 13, 2008. The bill is intended to provide a jump-start to the lagging U.S. economy.

“The new law includes two tax incentives that would allow a much bigger write-off for horses and other depreciable property purchased and placed in service during 2008,” said Jay Hickey, President of the American Horse Council. “This should provide an additional incentive for people to invest in more horses for racing, showing and breeding as part of their business activities.”

The first incentive would increase the so-called Section 179 expensing allowance for horses purchased and placed into service in 2008 from $128,000 to $250,000. This expensing allowance also applies to farm equipment and most other depreciable property. Once total purchases of horses, and other eligible depreciable property, during 2008 reach $800,000, the expense allowance goes down one dollar for each dollar spent on eligible property over $800,000.

“The horse industry almost lost the Section 179 expense deduction in 1996. The House of Representatives passed legislation taking this deduction away from the horse industry,” said Hickey. “But we were able to convince the Senate to remove this restriction before passing the final bill and the deduction was preserved. It was worth $17,500 then. Over the years it has been increased and will now go up to $250,000 for 2008. That is a real benefit to horse owners.”

To illustrate the expensing allowance, assume a horse business purchases $750,000 of depreciable property in 2008, including $650,000 for horses. That business can write off $250,000 on its 2008 tax return and depreciate the balance. If instead, purchases were $900,000, the expense allowance would go down by $100,000. In either case, the amount of the purchases not expensed may also be eligible for bonus depreciation, which is reinstated for 2008 in the new tax stimulus package.

The second incentive brings back 50 percent first-year bonus depreciation for horses and most other depreciable property purchased and placed in service during 2008.

“Bonus depreciation was first passed in 2002 as a way to stimulate the economy. It phased out at the end of 2004,” noted Hickey. “It was a benefit for the industry then and it should be again.”

It does not apply to property that has a depreciation life of over 20 years.

Also, as was the case when bonus depreciation was available in 2003 and 2004, the property must be new, meaning that the original use of the horse or other property must begin with the purchaser for the property to be eligible. “Original use” means the first use to which the property is put, whether or not that use corresponds to the use of the property by the purchaser.

“There is no limit on the amount of bonus depreciation that can be taken, as there is with the expense deduction,” noted Hickey.

To illustrate bonus depreciation, assume that in 2008 a business pays $500,000 for a colt to be used for racing and $50,000 for other depreciable property, bringing total purchases to $550,000. The young colt had never been raced or used for any other purpose before the purchase. The business would be able to expense $250,000, deduct another $150,000 of bonus depreciation (50 percent of the $300,000 remaining balance), and take regular depreciation on the $150,000 balance.