Finger Lakes Racing Ass'n v. New York State Off-Track Pari-Mutuel Betting Commission

282 N.E.2d 592, 30 N.Y.2d 207, 331 N.Y.S.2d 625, 1972 N.Y. LEXIS 1394
CourtNew York Court of Appeals
DecidedMarch 23, 1972
StatusPublished
Cited by17 cases

This text of 282 N.E.2d 592 (Finger Lakes Racing Ass'n v. New York State Off-Track Pari-Mutuel Betting Commission) is published on Counsel Stack Legal Research, covering New York Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Finger Lakes Racing Ass'n v. New York State Off-Track Pari-Mutuel Betting Commission, 282 N.E.2d 592, 30 N.Y.2d 207, 331 N.Y.S.2d 625, 1972 N.Y. LEXIS 1394 (N.Y. 1972).

Opinions

Bergan, J.

Plaintiffs are corporations engaged under State license in the business of operating horse racetracks and conducting gambling operations by pari-mutuel systems of betting. In these four actions against the New York State Off-Track Pari-Mutuel Betting Commission, the New York State Racing Commission and other parties having an adverse interest in the controversy, plaintiffs seek judgment declaring chapters 143 and 144 of the Laws of 1970 unconstitutional and restraining official action under those chapters.

These enactments together constitute articles V and VI of the Pari-Mutuel Revenue Law (L. 1940, ch. 254). Chapter 143 of the Laws of 1970 established defendant Off-Track PariMutuel Betting Commission and authorized it to provide for a system of off-track pari-mutuel betting by approved participating municipalities or public benefit corporations for the operation of' such systems, and authorized the commission itself to operate such systems (§§ 67, 68, 69).

Chapter 144 expressly created the New York City Off-Track Betting Corporation as a public benefit corporation for the [216]*216operation of such a system within New York City. That corporation and the city itself are intervening defendants in the actions.

Plaintiffs claim that their property and financial interests in the gambling and horse-racing business are adversely affected by the off-track betting system authorized by the 1970 amendments; that their prior investments in plant and organization have been impaired, and their property required to be used by public authority, for the purposes of the statutes, to the extent they are deprived of property without due process.

Additionally they allege that in purpose, and in form of enactment, the statutes fail to meet relevant requirements of the New York Constitution. The court at Special Term, upholding the validity of the 1970 enactments, granted judgment for the defendants. The appeals by plaintiffs are here directly on constitutional grounds.

From an absolute constitutional prohibition on gambling in New York of any kind, expressly including “book-making”, which has stood almost 80 years in the New York Constitution (art. I, § 9), a specific exception was carved out in 1939. This exception was 1 ‘ pari-mutuel betting on horse races as may be prescribed by the legislature and from which the state shall derive a reasonable revenue for the support of government ”.

Plaintiffs argue that the statutes here challenged did not provide a reasonable revenue for the support of the State government and, therefore, were not valid enactments. At least one of them argues that under the 1939 amendment, the State itself must be the ‘ ‘ exclusive beneficiary ' of pari-mutuel revenues ”.

Implicit in this last argument, of course, is the premise that unless the State itself gets all the pari-mutuel revenues, the exception of the 1939 amendment is inoperative. Since the exception is addressed to an absolute prohibition, if the exception is inoperative no pari-mutuel betting would be permissible. It would follow out from the argument that unless the State received all revenue from the betting, the general prohibition would remain operative. But plaintiffs, which derive substantial portions of those revenues from betting, do not follow the argument to that end. And, indeed, the Constitution merely provides the State shall derive ‘ a reasonable revenue ”. '

[217]*217The State’s revenue share of off-track betting is fixed by the Pari-Mutuel Revenue Law. It imposes a tax of one half of 1% on all off-track pari-mutuel bets (§ 69-c). After operating expenses of the public benefit corporation conducting the system have been paid, 80% of the net revenues up to the point of $200 million are to go to the participating municipality, and 20% to the State. If they exceed $200 million, the State and the participating municipality each receives half (§ 69-c, subd. 4).

This distribution is on its face a ‘ ‘ reasonable revenue ’ ’ for the support of government within the constitutional language. What is a reasonable revenue as a question of judgment and value is normally within the legislative province. But, additionally, as to pari-mutuel gambling, the permission to allow it at all, and the requirement for a reasonable revenue for the support of government, are specifically tied in together following, and affected by, the same constitutional expression “as # * * prescribed by the legislature”. This necessarily includes both the terms of the revenue benefit as well as the overall permissive exception to the gambling prohibition.

Plaintiffs suggest that revenues which go to the support of municipal governments are not for the support of ‘1 government ” within the constitutional language, or at least not for the support of State government. But the part of the net revenues which go to the participating municipalities is so closely tied in to the interrelated financial dependence of the local governments on the State, that fiscal assistance through a State agency to the political subdivisions of the State must be regarded as revenue for the support of State government, since it may, and the Legislature could reasonably conclude that it will, proportionately benefit the State’s revenues. The result in the end is a fiscal bookkeeping balance between governments. The beneficial effect on the State treasury of revenue passing on to municipal governments which are creatures of the State is very different from private profits arising from pari-mutuel races by corporations operating tracks and parimutuel systems.

The 1968 decision of the court in Saratoga Harness Racing Assn. v. Agriculture & N. Y. State Horse Breeding Development Fund (22 N Y 2d 119) was addressed directly to the require[218]*218ment of article I (§9) of the Constitution that a reasonable revenue shall be derived for the support of government from any authorized pari-mutuel betting on horse races.

There the plaintiff, a licensed private horse racing corporation (also a plaintiff in one of the present actions), sought to enjoin the defendant Horse Breeding Development Fund from collecting a portion of the “ breaks ” (odd amounts) received by private racing associations. This was authorized by section 55-c of the Pari-Mutuel Revenue Law, as added by chapter 567 of the Laws of 1965.

The statute authorized the defendant fund to collect 25% of the “ breaks ”, to use the proceeds to establish a fund to foster growth and prosperity of the industry in various programs. Plaintiff argued there that such a use of revenue, though taken and disbursed by the fund as a public benefit corporation, did not provide reasonable revenue for the support of the State government and, therefore, the 1965. statute violated the constitutional provision.

Although the court divided on another constitutional issue in that case, it was unanimous in the view that the statute was consistent with article I (§ 9). The minority accepted the view expressed in Judge Keating’s opinion for the court that the constitutional requirement that a reasonable revenue be derived for support of government had been met in that statute (see dissenting opn. by Judge Breitel, p. 129).

The opinion of the court expressed the view that the legislative act requiring a certain portion of the revenues derived from racing be set aside for the general improvement of the sport and the facilities sufficiently met the constitutional test.

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Bluebook (online)
282 N.E.2d 592, 30 N.Y.2d 207, 331 N.Y.S.2d 625, 1972 N.Y. LEXIS 1394, Counsel Stack Legal Research, https://law.counselstack.com/opinion/finger-lakes-racing-assn-v-new-york-state-off-track-pari-mutuel-betting-ny-1972.