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In re Application of N.J.S.A.

August 15, 2008

IN THE MATTER OF THE APPLICATION OF N.J.S.A. 5:5-153A(1)(2) AND B(1)(2): VINELAND CITY OFF-TRACK WAGERING FACILITY PROCEEDS DISTRIBUTION.


On appeal from the New Jersey Racing Commission.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: May 21, 2008

Before Judges Cuff, Lihotz and Simonelli.

In this appeal, the New Jersey Thoroughbred Horsemen's Association (THA) appeals from the March 15, 2007 order of the New Jersey Racing Commission (Commission) that prescribes the distribution of the proceeds generated by the Vineland City off-track wagering facility. The Commission ordered that 65% of the proceeds are to be distributed to benefit thoroughbred racing and 35% to benefit harness racing. Appellant THA contends that the distribution scheme adopted by the Commission is contrary to the plain language and intent of N.J.S.A. 5:5-153. It argues that 100% of the proceeds from the Vineland City off-track wagering facility should be distributed to benefit thoroughbred racing. THA also contends that the order is void because the Commission failed to provide due process to interested parties.

In 1998, voters adopted an amendment to the State Constitution to allow off-track wagering. N.J. Const., Art. 4, § 7, ¶ 2F. Legislation to implement the constitutional authorization for off-track wagering was enacted in 2001. One of the stated purposes of the Off-Track and Account Wagering Act (the Act), N.J.S.A. 5:5-127 to -160, is "to promote the economic future of the horse racing industry in this State." N.J.S.A. 5:5-128b. The Act authorizes the establishment of an off-track wagering system in this State with up to fifteen licensed off-track wagering facilities under the supervision of the New Jersey Sports and Exposition Authority. N.J.S.A. 5:5-136a. In turn, the legislation authorizes the Commission to issue a license to the Sports and Exposition Authority to establish an account wagering system. N.J.S.A. 5:5-139. The legislation also establishes the New Jersey Racing Industry Special Fund (the Special Fund), N.J.S.A. 5:5-153, and prescribes the manner in which proceeds of the Special Fund are to be distributed between thoroughbred racing interests and harness racing interests. N.J.S.A. 5:5-153a(1)(2) and -153b(1)(2). Distribution of the Special Fund is the focus of this appeal.

Establishment of off-track wagering facilities proved to be a protracted process. A municipality in which an off-track wagering facility desires to operate retains the authority to block the facility. N.J.S.A. 5:5-131h. Thus, the first facility in Vineland City did not open until March 2007. In anticipation of the commencement of off-track wagering, an issue arose about the distribution of the proceeds generated by this first off-track wagering facility.

On January 23, 2007, the Commission wrote a letter to racing industry representatives seeking input on the interpretation of N.J.S.A. 5:5-153. It invited representatives from the THA, The Standardbred Breeders & Owners Association, and the operating race tracks in the State to a meeting on February 14, 2007. The question under consideration was whether the statutory language applied only to any off-track wagering facility which replaces the Atlantic City Race course? In other words, is it to be applied to any off-track wagering facility which may replace the operating Atlantic City Race course either at the existing site of the Atlantic City Race Course, or to any off-track wagering facility which may replace the operating Atlantic City Race Course in the event such a facility is located off the present site of the Atlantic City Race Course. Conversely, is this language to be applied without regard to the status of the Atlantic City Race Course? If this is the case, does it therefore come into play with the opening of the first off-track wagering facility in this State, presumably Vineland City, as that facility will be the one close[s]t to the Atlantic City Race Course? If so, and assuming the off-track wagering facility approved for Vineland City opens in March 2007 as projected, should the subject funds deposited into the special fund from that first off-track wagering facility benefit thoroughbred racing 100%? If this interpretation is adopted, what happens if a second off-track wagering facility opens which is closer to the operating Atlantic City Race Course than the Vineland City site? Are the funds derived from the Vineland city otw facility then split 65% thoroughbred and 35% standardbred, and the funds derived from the newly operating otw site, which is closer to the Atlantic City Race Course, applied 100% to the thoroughbred industry?

The Commission also sought legal advice from the Attorney General.

Due to inclement weather, the February 14 meeting did not occur, but conversations between industry representatives and Commission staff occurred before March 7, 2007. On that date, the Commission advised racing industry representatives that it had independently resolved the issue. In the March 7, 2007 letter from Michael Vukcevich, Deputy Director of the Commission, industry representatives were advised that 65% of the proceeds generated by the Vineland City facility would be allocated to thoroughbred racing and 35% would be allocated to harness racing. The Deputy Director observed that the closure of the Atlantic City Race Course was a condition precedent to the allocation of 100% of the proceeds from the Vineland City facility to thoroughbred racing. On March 15, 2007, the Commission adopted an order reflecting this determination, and it is from this order that the THA appeals.

The THA asserts that the interpretation afforded section 153 is wrong as a matter of law. It argues that the plain language of the statute requires 100% of the proceeds from the Vineland City off-track wagering facility to be dedicated to thoroughbred racing. It contends that the Legislature did not establish a condition precedent, i.e., the closure and cessation of thoroughbred racing at the Atlantic City Race Course, before 100% of the proceeds from the Vineland City facility should be dedicated to thoroughbred racing. Rather, it asserts that when the statute was enacted in 2001 "the Atlantic City facility was, at best, a former race course." In fact, the THA claims that "[t]he curtailment of thoroughbred racing at that location had damaged the interests of thoroughbred racing in our State." Furthermore, the Legislature redressed in section 153 the harm inflicted on thoroughbred racing interests in this State due to the demise of the Atlantic City Race Course. It also argues that the legislation authorizing off-track betting must be read in pari materia with the 2001 amendments to the legislation governing simulcasting.

The Commission counters that the interpretation of section 153 is consistent with the plain language of the statute and the legislative history. It rejects the contention that the word "former" refers to the Atlantic City Race Course in its current reduced circumstances. Rather, it contends that the word "former" means that the Atlantic City Race Course must close with no off-track wagering facility operating at that site before 100% of the Special Fund proceeds may be allocated to thoroughbred racing interests. The State agrees the 2001 off-track wagering legislation and the 2001 amendments to the simulcasting legislation are related but argues that the interpretation implemented by the Commission is entirely consistent with the legislative intent of both statutes.

The statute at issue in this appeal, N.J.S.A. 5:5-153, established the Special Fund. It is funded by money remaining in inactive or dormant off-track wagering accounts, N.J.S.A. 5:5-145; undistributed sums wagered at off-track wagering facilities on races being transmitted to that off-track wagering facility from an in-State sending track, and sums wagered through the account wagering system on a race conducted at an in-State host track, N.J.S.A. 5:5-147; and sums wagered on races conducted at out-of-State tracks, N.J.S.A. 5:5-151. Generally, 65% of the money deposited in the Special Fund shall be disbursed to permit holders conducting thoroughbred racing and 35% to permit holders*fn1 conducting harness racing. N.J.S.A. 5:5-153a(2) and b(2). One hundred percent of the money deposited in the Special Fund shall be distributed to permit holders conducting thoroughbred racing "in the case of money deposited into the special fund from the off-track ...


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