As I sit here stewing over the predicament of the standardbred horse breeding industry in Ontario after talking to one of the principal owners of Seelster Farms near Lucan, I decided to put pen to paper.
The Ontario government’s transition panel for the horse-racing industry is designing a model that is unsustainable and will result in an industry represented by three to five racetracks attached to casinos and almost no rural or economic benefits.
Here are a number of things that the transition panel either doesn’t know or feels too handcuffed to solve.
New Jersey is in the early stages of restructuring the racing industry to a parimutuel-driven model.
Around 2005 the state government mediated a settlement between racetracks and Atlantic City casinos, resulting in an annual payment, I believe, of $150 million US from the casinos to the racing industry for a purse account. In exchange, racetracks and industry members agreed to not apply for slots or table games.
Move ahead five years and the casinos, who fund the new governor of New Jersey, suggest the racing industry is the weak link and not worth the “subsidy” that the casinos are paying. Gov. Chris Christie agrees and says the racing industry needs to become accountable to its customers, smaller, downsized — pick your phrase — and eliminates the payment and makes the industry fully funded on the revenue generated by parimutuel wagering.
In the last year Meadowlands and Monmouth racetracks have increased their parimutuel in a dramatic fashion with the following with the result that New Jersey-bred standardbred yearling average prices have fallen steadily from $41,353 in 2009 to $28,251 in 2012.
In 2013 there are only three commercial stallions in New Jersey compared to 16 in 2008. Although I was unable to get exact numbers, the perception of the breeders and farm owners I have talked to is the broodmare numbers in New Jersey have declined by more than 50%.
Having a parimutuel model, as the Ontario transitional panel is recommending, will probably leave three to four race tracks in large cities (London, Toronto, Ottawa), between zero and five standardbred stallions, depending on how optimistic stallion owners are that something will change, and thousands of acres of unused farm land because every mare owner will have been enticed to New York, Pennsylvania or Ohio.
Thoroughbred racing represents more than 70% of wagering dollars in Ontario. The standardbred industry, when measured in economic impact such as industry participants, farmland use, stallions, foals and broodmares, represents more than 70% of the economic benefit to Ontario. Crucially, it represents a rural Ontario benefit.
These two facts make the panel’s solution for the racing industry wrong for Ontario. You are solving a small-city problem with a big-city solution. The only places in Ontario that have enough population to sustain racing on a parimutuel basis are Toronto and maybe London and Ottawa. The only part of the province where breeding, training and raising horses can be done is in rural communities.
Another thing the transitional panel and the Ontario Lottery and Gaming Corp. are missing is the community nature of casinos. The perception in Clinton, Woodstock and many of the other communities is even though casinos suck money out of people’s pockets, at least a large portion is staying in the community.
Prior to the Liberal mistake of 2012, most people had no idea how much money was going to municipalities or the OLG head office, but they believed a bunch was staying in their community because everyone knows somebody who either owns, trains or breeds horses. When the OLG closes these racetracks and stand-alone casinos start sucking the money out of these communities, the 5% the province gives the municipalities will not be enough to overcome the feeling that people’s hard-earned money is going to the suits at the OLG in Toronto.
I believe the province and OLG will find its 75% share of slot machine revenues from last year will have been a lot more than its 95% share from next year. Studies have shown revenue from slot machines increases by as much as 20% when there is live racing at the same facility.
Why is the OLG so adamant about framing these myths with buzz words such as subsidies, self-sustaining and customer-driven? The OLG knows horse racing will never be able to compete with other gaming products because horse racing takes a tremendous amount of capital and preparation time to generate the same amount of churn or win for the house.
Slots, lotteries, card games and sports betting all exceed horse racing in cost versus revenues. Have you ever wondered why there is no racetrack in Las Vegas? Then the question is “Why horse racing?” Answer: rural economic benefit.
To put on a horse racing program, hundreds of thousands of dollars must be spent and hundreds of hours committed to breeding, raising and training equine athletes. The OLG sees this effort as ridiculous, as any good gambling expert knows you get a much better bang for your buck by building a room full of machines and tables.
The only hope is Premier Kathleen Wynne will start listening to her rural roots. Slot machines were put in race tracks 12 years ago to balance the playing field; racetracks needed a partnership with the higher churn products to create the rural economic benefits from horse racing and breeding. I am sure consultants have told Wynne horse racing is not competitive. Translation: horse racing takes more investment than a one-armed bandit.
The transition panel and OLG have floated the bizarre argument the industry will need additional revenue such as V75, sports betting or Instant Racing (racing replays) to be sustainable. Translation: they are suggesting horse racing allows them to introduce higher churn OLG-controlled gambling products to racetracks to replace revenue from the higher-churn, OLG-controlled slots they took away because they were a “subsidy”. Wynne has a chance to right a wrong. If she doesn’t, Ontarians will be buying slot machines and race horses from American suppliers.
Glenn Bechtelm of Kingston, was born in London, Ont., and own parts of 21 broodmares of which all but three have been moved to New York and Pennsylvania.