Horse Racing New Brunswick has launched a lawsuit against the provincial government for alleged breach of contract regarding video lottery terminals.

The group says it had a memorandum of understanding with the government to place 150 VLTs at racetracks in the province, which would have seen much needed revenue return to the struggling industry.

But the provincial government walked away from the deal, said Mitchell Downey, president of Horse Racing New Brunswick.

“In 2012, we signed a MOU with the government and the very next day they cancelled that contract,” he said.

Downey said his organization has been working hard to convince the provincial government to return to the table to discuss options to help the horse racing industry.

Mitchell Downey

Mitchell Downey, the president of Horse Racing New Brunswick, said his group had an agreement that would have seen 150 video lottery terminals added to race tracks. He said that plan would have created much needed revenue. (CBC)

The lawsuit was announced Tuesday afternoon.

Brian Murphy, the group's lawyer, contends it is "a clear case of breach of contract."

"The province will defend on the basis of policy, yet it broke the terms of the agreement they drafted, they broke their word," Murphy said in a statement.

The New Brunswick harness racing industry has been financially hurting for several years, which prompted those involved with horse racing to come up with the VLT plan to revive interest in the sport.

Horse Racing New Brunswick says it negotiated to have 150 of the province's 2,000 VLTs placed at racetracks. Of those, 25 were placed at the renovated Winners Lounge in Fredericton.

“The major hurdle in deploying the balance of the allotment of VLT’s was infrastructure”, said the organization's president.

In September 2012, Horse Racing New Brunswick entered into a development deal with the Woodstock First Nation Economic Development Corp. to bring a multi-purpose horse racing facility to Saint John, said Downey.

The proposal would have included a horse racing facility with video lottery terminals and a seating area for spectators.

The very next day, industry stakeholders were told that NB Gaming and the provincial government would not recognize the MOU that HRNB had entered into, and further, had cancelled the contract, denying HRNB access to its allotment of VLTs, he said.

"In short, they breached a contract because they did not like the partner HRNB had found," he said.

The involvement of Woodstock First Nation in the plan meant revenue for the provincial government from video lottery terminals would have been reduced, said Downey.

Downey said video lottery terminals at race tracks have attracted revenue in other provinces, such as Prince Edward Island.

He said the P.E.I. government has seen a tremendous return on investment from the Charlottetown racetrack.

“For every dollar of taxpaying money they invest, they see a return of $10,” he said.

'We're not trying to reinvent the wheel'

Downey said the idea of adding video lottery terminals to a race track in New Brunswick was hardly a new idea, but it would still help an industry that has fallen on tough times.

“The model that we're touting and showcasing and pushing for, is one that works. We're not trying to reinvent the wheel,” he said.

He said destination gaming facilities at race tracks have been a success elsewhere and there is no reason why it would not be a financial boost in New Brunswick. He also said these facilities have important spinoff effects.

“Every model that works in terms of a racino, in states and provinces across North America, has a hugely successfully racing industry and a hugely successful agriculture industry,” he said.

Scott Waddell, a race analyst, said the horse racing industry is being financially squeezed by many other types of games, such as lotteries, bingo and online gambling.

“It's been tough. When I first started, we were betting $100,000 on a Saturday,” he said, adding that betting revenue at horse tracks is a fraction of what it was 25 years ago.

The provincial government requested a feasibility study be conducted by the Atlantic Lottery Corp. in 2013, to see if a horse racing facility with video lottery terminals would be a success. That feasibility report rejected the idea.

However, Downey said the feasibility study “was set up and doomed to fail” by the provincial government.

The group is not permitted to have a so-called racino, which combines harness racing with video lottery terminals and other casino-like games. 

The deal between the provincial government and the owners of the New Brunswick Casino means only the casino can offer certain games. The provincial government also reduced the number of video lottery machines allowed in the province.

Election issue

Those in the province’s horse racing industry say they are committed to finding a way to see their sport survive, despite the tough financial times.

Downey said many horse racing enthusiasts are frustrated with Premier David Alward’s Progressive Conservative government and will remember these problems in the upcoming provincial election.

“The Liberal Party seems to understand, the Liberal candidates seem to understand that our industry is a big spinoff industry. It draws people from all over the province,” he said.

Downey said the Liberals have not made any financial promises to the horse racing industry.

He said he can appreciate why the Liberals have not made any guarantees.

“They are inheriting a situation that we understand is a financial mess," he said.

"We look to be a solution to that in a small way, in terms of growing our industry and growing rural New Brunswick."