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Friday, March 7, 2014

Enough is Enough When it Comes to Race Subsidies

In a recent article in the Sullivan County Post, the case of the MHHA against Monticello Raceway is laid out.  Actually it is a rehash of what we already know.  The horsemen have revoked the right to send their signal out of state resulting in handle tumbling and corresponding purse cuts.  The horsemen allege Monticello management has refused to negotiate since the passage of law which caps slot revenue to horse racing at 2013 levels (I have no way to ascertain if this is true or not).  All this over the issue of slot subsidies and the law which caps contributions at 2013 levels.

The horsemen claim the law is not a cap, but a minimum contribution to racing.  They argue since they were partners in obtaining slots, they should be able to benefit in any future growth of the 'untold riches' should Monticello be given a full casino license.  They claim the legislation sets a floor for contributions and the raceway has the ability to contribute more than the 2013 levels.  If we are to believe the MHHA, the raceway believes 2013 contribution levels are enough.

One of my questions is if the horsemen claim they are entitled to be full partners, if casino revenue declines as it has in Delaware, will they be willing to take less than the mandated contribution level set by the state law?  My guess is they will not; they are planning to use the law as a shield; when times are good they want more than the law mandates but if things go South, they will be hiding behind the law saying 'Give us our 2013 level contributions as the law dictates'.

But this fight between New York horsemen and the six harness tracks (this battle will be coming to your local New York raceway and thoroughbred tracks as contracts come due) leads us to some other questions.

Is there a limit to the riches of slot revenue for horsemen?  Is an industry which is stagnant or moribund depending on your take entitled to more riches when little or nothing is done to improve the product to increase both on-track and/or off-track handle?  Does a track which shows no gain in handle deserve to see their purses continue to go up even though handle remains constant or declines?  Is it sufficient that purses have been artificially boosted a certain amount and enough is enough?

Should there be a limit to the welfare payments to be made to horse racing?  What is racing going to do to grow their business?  Yes, I understand on the whole, racetracks have not been doing much to promote horse racing, actually preferring their customers spend time on those mind-numbing slot machines instead of wagering on the ponies.  Are they going to do much to grow the racing business?  Probably not; at least not without contract obligations.

But as much as racetracks should be obligated to invest in improving the racing end of the business, horsemen should not be immune from working to improve their own end of the business as well.  Rather than fighting to get more welfare payments, it is more important to get in any contract between horsemen and racetracks a commitment that racetracks and the horsemen association will spend a certain percentage or dollar amount towards marketing of horse racing.  Marketing doesn't necessarily mean television or newspaper advertisements (though there should be some of it), it can be seeding of pools, establishing guarantees, offering rebates to make the cost of wagering on their product more attractive, or even lowering takeout rates.  This is far more important than trying to get more slot revenue payments than mandated by law.  However, if the horsemen feel the legislation capping contributions is unfair, may I suggest they do battle in Albany instead at their local racetrack?

Yes, horsemen need help to get them through the current state of the industry,  However, they can't expect purses to keep on going up if the industry remains stagnant and they don't do anything to help themselves. Purse increases (assuming the casinos do well) if horsemen do nothing is wrong.  Horsemen (with the help of racetracks) need to help themselves.

Settlement in Illinois
A contract has been reached between the IHHA and Balmoral/Maywood Parks and it is ugly.  Horsemen will race for 10% less the first 10 months of the contract and then for an additional 15% less the balance of the contract.  A significant contributor to the purse cut is the dreaded recapture.  While it seems horsemen were defeated, it should be noted the tracks are giving horsemen an interest free $2.5 million line of credit.

At least horsemen know what they are racing for during the next 16 months.  No doubt those who can will leave the Prairie State for greener opportunities but those who remain at least know what the story is.  As mentioned in the press release by Dave McCaffery, this contract is long enough that the legislature has three opportunities to save the industry through legislation (read: slots).

Racing resumes on Monday.

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