Pataki appeals Aqueduct video terminals decision

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Pataki approves of the machines' use at certain facilities, while Padavan hopes to stop such projects because he opposes gambling.

The governor's decision to go to the Court of Appeals came a day after the Appellate Division of State Supreme Court in Albany found the terminals to be legal but deemed the formula to share the revenue unconstitutional.

For both sides it was only a partial victory, and Padavan said he and his co-plaintiffs also planned to appeal.

Pataki and state Senate Majority Leader Joseph Bruno (R-Brunswick) plan to use money from the terminals to meet a court mandate to provide additional funds for New York City schools, the result of a lawsuit brought by the Campaign for Fiscal Equity. The two leaders cannot, however, agree with state Assembly Speaker Sheldon Silver (D-Manhattan) on a funding formula and the court deadline of July 30 is rapidly approaching.

Silver and Republican Mayor Michael Bloomberg have both opposed plans to use money from the terminals for education, calling the revenues unreliable, while Padavan has referred to the machines as addictive devices that prey on the poor and the weak.       

"We need to help those who get into trouble as a result of this immoral policy that is disguised as economic development and a funding source for education," Padavan said in April.

Gambling is forbidden by the state constitution, but several exceptions have been made, including lotteries as long as the proceeds go toward education. In 2001, the Legislature passed a law allowing the state to set up video lottery terminals at eight racetracks, including Aqueduct.

Aqueduct is run by the New York Racing Association, a non-profit corporation licensed by the state. In April 2003, Pataki announced a $100 million deal to install 4,500 video lottery terminals on the second floor of the grandstand at the track, located at 110-00 Rockaway Blvd.

The space has already been gutted in preparation and an environmental review is complete, but employees at Aqueduct were the subject of a recent federal probe into tax evasion. Under an agreement, the association itself avoided prosecution but must demonstrate it is following court-ordered instructions until next June.

Padavan and his co-plaintiffs challenged the bill that authorized the Aqueduct project, and when State Supreme Court in Albany ruled in favor of Pataki in 2003, they appealed.

The argument before the Appellate Division centered on whether or not the video lottery terminals are slot machines, which are generally not allowed outside of casinos.

The court ruled that while the terminals, or VLTs, look like slot machines, they constitute a "valid, state-operated lottery" and thus fall under the exception.

At a terminal, each player receives an electronic ticket. Like the paper scratch-off lottery tickets bought at convenience stores, the ticket is already determined to be winning or non-winning in a random process, and the result is instantly apparent, the court found.

"We agree with the defendants that VLTs are simply a new method of presenting lottery games to the public," the Appellate decision read.

Padavan disputed that interpretation.

"They are slot machines in the practical sense," he said.

In its unanimous ruling, however, the court did declare the revenue-sharing formula for the terminals unconstitutional. The amendment to the constitution states that all net lottery proceeds must go toward education, but some of the money from the terminal is earmarked for horse breeding and higher purses for races, the court found.

"Simply put, reinvestment in breeding funds and enhanced purses is not a reasonable, necessary expense or cost of maintaining VLTs," the decision stated.

The court left open the possibility that the Legislature could devise a new revenue-sharing plan.

With the terminals at Aqueduct, the New York Racing Association is hoping for a new customer base, and the project could be completed with eight more months of work. But construction has halted, as the association's contract with the state is up in 2007, a concern for its partner in the project, MGM Mirage of Las Vegas, association Senior Vice President Bill Nader said.

A bill is currently being considered in the Assembly, Nader said, which would hold any operator of Aqueduct responsible for the loan for the terminal project, assuring MGM.

But Padavan, who still hopes to have the terminals completely banned, said of MGM, "If I were them, I would be wary of proceeding."

Reach reporter Michael Morton by e-mail at news@timesledger.com or by calling 718-229-0300, Ext. 154.

Updated 7:07 pm, October 10, 2011
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