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Ontario’s horse racing industry facing crisis

A decade after its need for slots revenues drove the Elmira Raceway to Elora, the horse racing industry is facing another crisis: the loss of those same slots revenues. More than the new Grand River Raceway is at stake.

Those around at the time will remember the sometimes-bitter debates that stemmed from what was then the Woolwich Agricultural Society’s desire to introduce 200 slot machines at its Elmira facility. The new stream of revenue was necessary, it said, to keep the racing industry alive. Ultimately, Woolwich council having dropped the ball, the group pulled up stakes and headed a few minutes down the road to Centre Wellington Township.

Money did in fact pour in, making Ontario’s horse racing industry one of the healthiest on the continent. The share of revenue under the province’s Slots at Racetracks Program (SARP) – 10 per cent to the track operator and 10 per cent to the industry – fed large purses, which encouraged growth in the horse breeding industry and its spinoff businesses.

Fed by slots revenue, Ontario purses have become among the largest in North America. For thoroughbreds, in 2010, Ontario’s average purse of $42,000 was the third largest, trailing New Jersey’s $59,000 and Kentucky’s $46,000 but ahead of New York’s $33,000. In standardbred racing, Ontario and New York were tied for fourth in average purse, at $11,000, behind Kentucky at $20,000 and Pennsylvania and New Jersey at $15,000.

Overall purses, however, have been exceptional on the standardbred side due to SARP. For several years, Ontario has been the North American leader in total standardbred purses paid. In 2010, standardbred purses in Ontario totalled $168 million, well ahead of New York with $121 million and Pennsylvania with $106 million. The supply of purse money has led to the running of an astonishing number of standardbred races in Ontario – in 2010 almost 40 per cent more than the next highest jurisdiction, New York.

All of that could come tumbling down if the province follows through on plans to kill SARP as of Mar. 31, 2013. The McGuinty government says it has more pressing need for the $345 million that went to the industry last year. It also wants to expand potential gambling revenue by placing slots facilities where markets are stronger, removing the ties to horse racing.

It’s proposing to provide $50 million annually for three years to help the industry deal with the transition, but even a government-appointed panel thinks that’s not enough.

The Horse Racing Industry Transition Panel, which released an interim report last month, says more needs to be done.

“Without slots revenue or a new revenue stream, the horse racing industry in Ontario will cease to exist,” reads the report.

“The essential ingredients for a viable horse racing industry – tracks, race dates and purses, and product – will dissolve once SARP ends. The industry will enter a downward spiral as decreasing purses and race dates lead to reduced wagering, which leads to even lower purses and fewer races, which leads to even less wagering, and so forth. Without a sustainable funding source beyond the revenues from pari-mutuel wagering, the horse racing industry in Ontario will close down.”

At the Grand River Raceway, for instance, general manager Ted Clarke predicts the number of race dates will fall by two-thirds if the government sticks with its current plan. The 66 per cent loss in track revenues that would come with dropping to 20 days of racing from 65 this year would have a ripple effect through the horse industry, eventually leading to fewer horses taking part in ever-fewer races – a downward spiral.

As it stands, the raceway doesn’t know what will happen with its slots facility. It could remain in place. Or not. There just aren’t enough details to know what to expect next spring, says Clarke, who adds he’s remaining cautiously optimistic.

That said, without the slots money, the racing industry will need new options in order to generate sufficient revenue to remain viable, he stresses.

“Horse racing is limited due to a lack of distribution to a wide base,” he says. “We need to reach a wider audience with a product people want to buy.”

That means new wagering opportunities, perhaps tied into the easily accessible lottery system, for example, as is the case in other countries. Without new sources of revenue, the industry is in peril. The Ontario Horse Racing Industry Association predicts some 50,000 to 60,000 people could be without jobs if SARP is cancelled and no new revenue is found.

The government’s panel says the industry supports the equivalent of 20,000 to 30,000 full-time jobs, though because there are many part-time and seasonal workers, the actual number of people involved would be greater. At the Grand River Raceway, there are some 100 people employed full-time, part-time and seasonally. The uncertainty has many of them worried, says Clarke.

“There’s a great number of people who work here who are concerned about their futures.”

Worried even more are the much larger number of people who work in the broader industry.

“The effect will be more damaging to the people who take part in the races here,” he says of the loss of revenue.

The current arrangement has provided for a tremendous amount of investment in the industry. With that money gone, the future looks grim.

Still, Clarke says he remains “cautiously optimistic” the panel’s final report will recommend measures that provide the chance to generate the revenue necessary to keep the industry healthy, just as was the case when SARP was introduced, paying out $3.7 billion since 1998. What was then the Elmira Raceway needed a new revenue stream, and that presented itself. Now there’s another crisis looming.

“We face similar challenges as was the case 10 years ago,” he says.

What the government eventually comes up with as an offer to the industry – and what’s known today is long on ideas and short on details – will determine the viability of horse racing in the province.

“The devil’s in the details”

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