An Open Letter To Premier Wynne

"Premier Wynne, your transition panel is designing a model for the horse racing industry that is unsustainable and will result in an industry that is represented by three to five racetracks attached to casinos and basically zero rural or economic benefits to the Province of Ontario."

In an open letter to Premier Kathleen Wynne, standardbred owner Glenn Bechtel breaks down how he feels the Horse Racing Industry Transition Panel's sustainability efforts applied in concert with the Ontario Lottery & Gaming Corp.'s modernization strategy would decimate and cripple Ontario's racing and breeding industry - not right-size it.

Bechtel's letter appears in its entirety below.

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 I decided to put pen to paper with the hope that you might actually read my comments.

This person spent yesterday being briefed on the 30 million dollar Horse Improvement Program (HIP) and its implementation for this year. She said her jaw dropped when the details were given by Mr. Snobelen and Ms Hoogeveen of the Ontario Racing Commission (ORC) as all she could think of is how this was just enough to insure that the standardbred breeding industry in Ontario will be dead in 3 years.

Premier Wynne, your transition panel is designing a model for the horse racing industry that is unsustainable and will result in an industry that is represented by three to five racetracks attached to casinos and basically zero rural or economic benefits to the Province of Ontario.

Here are a number of things that your transition panel either don’t know or feel too handcuffed by Finance to solve.

1) New Jersey is in the early stages of restructuring the racing industry to a pari mutuel driven model. This restructuring is approximately 3 years old. Since your transition panel either don’t know or don’t want you to know, let me give you an update and the history of how they got there and how it is working.

In New Jersey around 2005 the government mediated a settlement between racetracks and Atlantic City casinos. The result was an annual payment I believe of 150 million from the Atlantic City casinos to the racing industry for use in the purse account. In exchange both racetracks and horsemen would agree to not apply for slots or table games. Move the clock ahead 5 years and Atlantic City casinos who aggressively fund the new Governor of New Jersey suggest that the racing industry is the weak link and is not worth the “subsidy” that the casinos are paying the racing industry. Whether knowingly or not Governor Christie agrees and openly attacks the racing industry by saying it needs to become accountable to its customers, become smaller, downsized, pick your phrase and eliminates the payment and makes the industry fully funded on the revenue generated by pari-mutuel wagering.

Today the following statistics and facts are undeniable. In the last year both Meadowlands and Monmouth racetracks have both increased their pari-mutuel in a dramatic fashion with the following results:

• Standardbred yearling averages for New Jersey breds 2012 – $28,251, 2011 – $30,282, 2010 – $32,265, 2009 – $41,353. Conclusion: 31% decline in yearling prices since 2009.
• Perretti Farms moves all of their stallions to a leased farm in Pennsylvania in 2013. Why would the top breeder in New Jersey be leasing a farm in PA while having as they describe 900 acres of rolling hills and pastures in Southern N.J.?
• In 2013 there are only 3 commercial stallions in New Jersey compared to 16 in 2008.
• Although unable to get exact numbers the perception by the breeders and farm owners I have talked to in N.J. the broodmare numbers have declined by in excess of 50%.
• Having a pari-mutuel model as your transitional panel is recommending, will probably create the following racing industry in Ontario within 3 years. A) 3-4 race tracks in large cities where there is enough population. (London, Toronto, Ottawa) B) Somewhere between 0-5 standardbred stallions depending on how optimistic stallion owners are that something will change. In both Kentucky and N.J. the standardbred stallion numbers have declined to less than 5 as breeders have become lured to jurisdictions where legislators have allowed race track owners to earn commissions from other gaming products other than pari mutuel wagering in exchange for promoting racing. C) Thousands of acres of unused farm land in rural Ontario because every mare has been enticed to NY, PA and Ohio.

2) It is a fact that thoroughbred racing represents more than 70% of wagering dollars in Ontario. It is also a fact that the standardbred industry when measured in economic impact, (number of industry participants, farmland use, number of stallions, number of foals, number of broodmares), using any criteria it represents more than 70% of the economic benefit to Ontario. And even more important as the Agricultural Minister it represents rural Ontario benefit. There is a very simple reason these two facts make your panel's solution for the racing industry totally wrong for the Province of 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 pari-mutuel 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.

3) Another thing that your transitional panel and the OLG are missing is the present community nature of the Casinos. The perception that exists in Clinton, Woodstock and many of the other communities is that 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 of the money was going to purses municipalities or the OLG head office but they did believe that a bunch was staying because everyone knows somebody who either owns, trains, or breeds horses. When the OLG closes these racetracks and these stand alone Casinos start sucking the money out of these communities the 5% you give the municipalities will not be enough to overcome the feeling of peoples hard earned money going to the suits at the OLG in Toronto. What I believe is that both the OLG and yourself will find out that 75% of last year is a lot more than 95% of not as much next year. In fact there have been studies that have shown that revenue from slot machines increases by as much as 20% when there is live racing occurring at the facility.

4) Why is the OLG so adamant about framing these myths with buzz words such as subsidies, self sustaining, and customer driven? The OLG knows one simple fact. That horse racing as a gambling product will never be able to compete with other forms of gaming products because of two words “CHURN and CAPITAL”. Horse racing as a gambling product 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, sports betting all exceed horse racing when it comes to the cost versus revenues. Have you ever wondered why there is no racetrack in Las Vegas? Then the question is “Why horse racing?” Answer – Economic Rural Benefit. In order to put on a horse racing program at a racetrack hundreds of thousands of dollars must be spent and hundreds of hours committed to breeding, raising, training the equine athletes to put on a racing program. The OLG sees this time and money spent as ridiculous as any good gambling experts knows you get a much better bang for your buck by building a room full of machines and tables turn up the music and watch the money come in.

5) The benefits of horse racing is a matter of public policy and the only ray of hope that the industry is hanging onto is that as a Premier you will stop listening to the gambling gods and start listening to your rural roots. Slot machines were put in race tracks 12 years ago because in order to balance the playing field the racetracks needed to establish a partnership where the higher churn products be allowed in tracks in order to create the large rural and economic benefits to the Province of Ontario which are provided by horse racing and breeding. I am sure your gambling consultants have told you that horse racing is not competitive and customer-focused. Let me translate. Horse racing takes a lot more capital invested and time spent (labor, employment) then a one armed bandit.

6) Let me give you another bizarre argument that your transition panel and OLG have floated for distraction purposes. “The industry will need to develop additional revenue sources such as V75 (horse lottery), sports betting or Instant Racing (racing replays) as a way to be more sustainable.”

Premier Wynne let me translate again. Your experts are suggesting that the solution for horse racing is that we will allow them to introduce higher churn OLG controlled gambling products into your racetracks as a way to generate revenue in order to replace the higher churn OLG controlled slots that we took away because they were a “subsidy”. That is almost as absurd as the justification of slot like machines at Bingo Halls. The only difference between slots and these other gaming products is that the OLG hasn’t had to paint these with the subsidy brush yet.

If you ask your transition panel or OLG what is the difference between the slots as a revenue for racing and the other high churn products that are being floated as “replacements” don’t accept the horse connection because I will personally go to every racetrack in Ontario and paint horses on each slot machine to meet the horsey criteria.

CONCLUSION

Premier Wynne you have a chance to right a wrong. I will not attempt to convince you that racing is not too large but I will emphatically tell you that the approach that your transition panel and finance department are taking will destroy every economic and rural benefit that exists because of horse racing in Ontario.

There is no economic benefit to gambling on a horse race or pushing a button on a slot machine but there is a huge economic rural benefit to breeding, raising, and racing a horse in Ontario. If you don’t change your transitional panel and Finance Department’s direction with the horse racing file Ontarians will be buying both slot machines and race horses from American suppliers.

Premier McGuinty and Mr. Duncan suggested that the reason for cutting this program was to eliminate the transfer of wealth to all the rich horse owners. As with all poorly conceived policies the target was missed and the casualties are the hard working rural participants in the racing industry. I listened to sound bites of Mr. Leal, Mr. Sousa and yourself prior to the Liberal convention and dreamt that if only you could win that this absurd mandate taken by the OLG regarding horse racing would be reversed. Happily you won but whatever happens to politicians after they win appears to have inflicted you and your cabinet. Such catch phrases as “hit the pause button” have been replaced by “modernization” and smaller racing industry. Unfortunately for yourself and the Liberal party the rural communities of Ontario will reward you for what you do and not for what you say. I also believe they will be a lot tougher critics of your performance than the delegates who elected you at Maple Leaf Gardens.

P.S. I own parts of 21 broodmares and I moved all but three of them to NY and PA so I will be happy to supply Woodbine and Western Fair with racehorses from my new plant locations where governments understand the benefits of the rural community but my preference would be to send a bunch of them back to where they were and start paying the farms and stallion owners in Ontario. Fortunately for me I invested no capital in a farm and have the flexibility to move. The Seelster’s and Tara Hills of the world don’t have the same flexibility.

Sincerely,
Glenn Bechtel