New York State Racing Ass’n, Inc. v. New York State Off-Track Pari-Mutuel Betting Commission, 27 N.Y.2d 210 (1970)
The state’s authorization of off-track betting, with a portion of the revenue allocated to municipalities, constitutes a “reasonable revenue” for the support of government as required by the New York Constitution, and does not violate due process rights of existing racetrack operators.
Summary
The New York Court of Appeals upheld the constitutionality of New York statutes authorizing off-track pari-mutuel betting. The plaintiffs, corporations operating horse racetracks, argued that the statutes failed to provide a reasonable revenue for the state, violated the constitutional prohibition on gambling, and deprived them of property without due process. The Court of Appeals rejected these arguments, holding that the allocation of off-track betting revenue to municipalities constituted a reasonable revenue for the support of government, and that the state could alter the conditions under which gambling businesses operate to allocate a greater share of profits for public benefit.
Facts
The New York legislature passed chapters 143 and 144 of the Laws of 1970, which established the Off-Track Pari-Mutuel Betting Commission and authorized off-track pari-mutuel betting systems. Chapter 144 specifically created the New York City Off-Track Betting Corporation. The plaintiffs, who operated racetracks and on-track betting, claimed that the new off-track betting system would adversely affect their business by diverting revenues and using their facilities without compensation.
Procedural History
The plaintiffs, New York racing corporations, brought actions against the New York State Off-Track Pari-Mutuel Betting Commission and other parties, seeking a declaratory judgment that chapters 143 and 144 of the Laws of 1970 were unconstitutional and seeking to restrain official action under those chapters. The trial court ruled in favor of the defendants, upholding the validity of the statutes. The plaintiffs appealed directly to the New York Court of Appeals on constitutional grounds.
Issue(s)
1. Whether the statutes authorizing off-track betting provide a “reasonable revenue for the support of government” as required by Article I, Section 9 of the New York Constitution, given that a portion of the revenue is allocated to municipalities?
2. Whether the Governor’s message to the Legislature accelerating the vote on the off-track betting proposal complied with Article III, Section 14 of the New York Constitution?
3. Whether the off-track betting statutes deprive the plaintiffs of property without due process of law?
Holding
1. Yes, because the allocation of net revenues to participating municipalities is closely tied to the financial dependence of local governments on the State and benefits State revenues.
2. Yes, because the Governor expressed the opinion that an immediate vote was desirable, and the facts supporting his opinion were rational and reasonable.
3. No, because the state can alter the conditions under which gambling businesses operate, including allocating a greater share of profits for public benefit.
Court’s Reasoning
The court reasoned that the State’s revenue share of off-track betting (0.5% tax plus 20-50% of net revenues over operating expenses) constitutes a “reasonable revenue” within the meaning of the New York Constitution. The Court emphasized that the legislature has broad discretion to determine what constitutes a reasonable revenue. The court noted, “What is a reasonable revenue as a question of judgment and value is normally within the legislative province.”
The court also held that the Governor’s message accelerating the vote on the proposal complied with the Constitution, finding that the Governor’s stated reasons for requesting an immediate vote were reasonable and that the legislature’s subsequent action in passing the bill demonstrated the public interest in its consideration.
Regarding the due process claim, the court acknowledged the plaintiffs’ investments in their racetrack and on-track betting businesses. However, the court emphasized that gambling is prohibited in New York unless specifically authorized by the legislature. Therefore, the legislature has the power to alter the conditions under which gambling businesses operate, including allocating a greater share of the profits for public benefit. The court stated, “Continuance of this kind of business depends on legislative permission, and this permission may be conditioned and the imposed conditions altered from time to time according to the legislative view of fairness.” The court found that the off-track betting statute attempted to compensate racetrack owners for the use of their facilities and was not grossly unjust or unreasonable.
The court distinguished the plaintiffs’ gambling enterprises from other businesses, noting that “Liquor is permitted unless prohibited; in New York gambling is prohibited unless permitted.” This distinction justified greater legislative control over gambling enterprises.