The British Columbia Horse Racing Industry Management Committee recently reported on its findings and recommendations for fund allocations, which could see the closure of Sandown Park and

less purse money for both breeds.

Chair of the Committee, Derek Sturko states that "2010 is seen as a stop-gap year, enabling horse racing to continue while providing an opportunity for mid-to long-term options, intended to help revitalize the industry, to be developed and implemented."

The full text of the release is as follows.

I am writing to update you about decisions taken by the BC Horse Racing Industry Management Committee concerning the allocation of funds to various purposes within the industry, the consequences those decisions have for the 2010 race seasons, and the committee's initial thoughts about long term strategies to help revitalize the industry.

Following an intensive analysis of the industry's financial circumstances, the committee met with representatives of the industry's key organizations on Friday, February 5, 2010 to discuss these decisions. Some minor adjustments to the allocations were made to reflect that discussion.

The Starting Point
The Committee was faced with a difficult challenge. In 2009, approximately $49 million was available for all purposes related to horse race events (other than prizes paid to bettors and federal and provincial "levies").

For 2010, the Committee initially forecast a similar amount ($49.56 million). By contrast, the total of all the amounts requested by all industry organizations exceeded that amount by $25.2 million (51%). Significant components of those requests couId not realistically be considered.

The Committee decided that, in determining allocations for 2010, it must only allocate the money that was expected to be available and not create a deficit situation. Despite that, even the core requests would have still resulted in a significant shortfall in 2010.

To address that shortfall:
• Great Canadian Gaming Corporation (GCGC) identified $0.5 million of expense reductions it would implement which which would not fundamentally impact racing;
• GCGC agreed to accept a further reduction to its allocation of over $0.8 million which results in GCGC budgeting a deficit as far as its racing operations are concerned;
• GCGC agreed to defer for 2010 to any repayment of the $2.7 million purse pool debt owed to it by the thoroughbred sector. As a result, the sector wiII not have to make any payments against that debt in 2010 and no interest will accrue. However, GCGC will not make any other "loans" to the purse pool as such an action would increase that debt and not be in the long term interest of horse racing;
• British Columbia Lottery Corporation (BCLC) agreed to contribute $500,000, either in cash or in kind, to industry marketing costs in 2010;
• BCLC agreed to work with TBC Teletheatre BC (TBC) to reduce TBC 2010 operational costs by a minimum of $500,000; and
• Government committed to ensure the estimated remaining $750,000 industry shortfall would be eliminated, in a manner yet to be determined.

After all adjustments were made and including nomination/entry fees, the Committee now anticipates $50.89 million will be available for purposes related to horse race events (other than prizes paid to bettors and federal and provincial "levies"). This includes (1) $50.31 million from the combination of betting activity and Government grants and (2) an estimated $0.58 million in nomination/entry fees.

Other Adjustments to Financial Arrangement

Further, GCGC and the thoroughbred and standardbred sectors worked cooperatively to eliminate the long standing stall rental charges of $300,000 at Fraser Downs, by each taking a $100,000 reduction in their 2010 industry budget allocation. Earlier this year, GCGC withdrew its plans to implement a similar stall rental charge and access fees at Hastings Racecourse.

Finally, in the long term interest of horse racing, Government has eliminated the "debt" owed by the thoroughbred sector to the standardbred sector. This "debt" was based on Government's distribution of a grant reflecting a portion of Government's net proceeds from of slot revenues at casinos colocated with race tracks. In fact, no real "debt" was incurred.

Allocations to the Operators
For 2010, the Committee has allocated the following amounts to the operators (GCGC and TBC):
• Great Canadian Gaming Corporation (GCGC) - $19.36 million
• TBC Teletheatre BC (TBC) - $12.10 million

With such allocations those organizations must fully operate the activities, programs and facilities for which they are responsible. This includes salaries, operator compensation paid by TBC, facilities and maintenance costs, security, advertising and marketing, etc. Further, there will be no fees charged by GCGC for horsepersons' involvement at either track.

Allocations to Horsepersons
For 2010, the committee has allocated the following amounts to the horsepersons:
• Thoroughbred (allocated $10,750,000 + nominations fees (est at $500,000) = $ 11.25 million
• Standardbred (allocated $8,000,000 + nominations fees (est at $80,000) = $ 8.08 million
• Interior Horse Racing - $ 0.10 million

The thoroughbred allocation relates to the activities managed by the Horsemen's Benevolent &
Protective Association, BC (HBPA) and the Canadian Thoroughbred Horse Society, BC (CTHS).

The standardbred allocation relates to the activities managed by Harness Racing BC (amalgamation
of previous BC Standardbred Association (BCSA) and the BC Standardbred Breeders Society
(BCSBS).

With these allocations, each breed must fully fund:
• Purse pools, stake races and breeder bonus programs;
• Breeder programs;
• Association costs not paid through other sources (such as membership fees); and
• The costs of programs such as retirement, stand-by vet, educational and similar programs;

Implications for Horsepersons
These 2010 allocations will result in:
• Shorter race seasons for both thoroughbred and standardbred. Current allocations anticipate race season reductions of up to four weeks for each breed, but will be revisited by the Committee during the year depending upon the revenue situation during the season;
• Support for interior horse racing at the 2009 level of $100,000;
• The elimination of existing fees and the possibility of new or additional charges from any parties, as allocations are expected to cover all such costs;
• No stall rent charges for either the standardbred or thoroughbred sector;
• No allocation to the Sport of Kings by the Committee. However, the horsepersons' associations
may choose to support that activity through their allocations.

Managing the Money
Allocations are to be in effect as of January 1,2010 in order to establish a calendar year financial reporting standard for the industry. While the details remain to be sorted out, the flow of funds will occur as much as possible through one entity in the industry, under the oversight and direction of the Committee. That entity will likely be GCGC, since most funds currently flow through that organization.

All parties receiving and distributing allocations will be required to provide regular, financial reports to the Committee on the use and status of their funding. The Committee will monitor the financial situation throughout the racing season and manage in-season fluctuations as they are anticipated or arise. In the event that the current revenue forecast is too high or too low, the Committee will determine adjustments to allocations in the best interests of all parties.

Mid to Long-Term Options to Grow the Industry
2010 is seen as a stop-gap year, enabling horse racing to continue while providing an opportunity for mid-to long-term options, intended to help revitalize the industry, to be developed and implemented.

The options being actively pursued include:
• The consolidation of the two Lower Mainland racetracks into one dual track;
• The involvement of BCLC to expand and grow the technology aspect of TBe. This might
include a partnership arrangement or the direct involvement of BCLC in the operation of TBC;
• The use of BCLC's existing technology and network to expand access to, and wagering on, horse racing;
• The expansion of marketing and advertising activities, and a better integration with BCLC's marketing activities; and
• The closure of Sandown Raceway and the relocation of the related teletheatre outlet.

Next Steps
To date, the Committee has been focused on "what" must be done in 2010 and the immediate future
to sustain and grow the horse racing industry in B.C. The Committee is now turning its attention to the details of "how" these decisions and initiatives will be developed and implemented, while continuing to identify and develop options and opportunities.

The Committee members feel that important progress is being made on understanding the current
financial circumstances in which the industry finds itself, the development of a spirit of cooperation among Committee members and industry representatives generally, and the identification of both short term and long term initiatives to stabilize and revitalize horse racing in B.C.

Sincerely,
Derek Sturko
Chair, BC Horse Racing Industry Management Committee