Odds On Racing - Harness Racing

IRB Hearings

July 17 & 18, 2006

A pair of hearings were held by the Illinois Racing Board on Monday, July 17 and Tuesday, July 18 in downtown Chicago to discuss the state of racing in the Prairie State. Prominent harness and thoroughbred owners, trainers and breeders were invited to share their views on the industry.

"We hope to work together so that horse racing might benefit in this state," IRB commissioner John Simon said. "We’ve seen a decline across both industries—both harness and thoroughbred. There is a continuing trend among Illinois bettors in that they prefer wagering on simulcast races over live racing. The fact is that Illinois gamblers are spending seventy-five cents of every dollar on simulcast races as opposed to live racing, contributing to the downward slide of racing in this state."

D.Wayne Lukas, thoroughbred trainer
"From a trainer’s perspective, the loss of the horse population in Illinois is because we have trouble getting people to invest in this business—getting our clientele-base is the foundation of our industry. We have a small core of people at the sales buying aggressively. Most of the people I have dealt with over a long career have been successful business people in their own right. Most of these people are looking for a challenge and more exciting than profitable.

"We have a certain stigma in horse racing that we are a high-brow business and that it’s hard to make a profit. What we find is that if we can convince these people to get involved, we are able to better fuel the breeding industry, which fuels the agricultural industry, which ultimately means bigger fields on the track—which is what the gamblers want. So it’s a cycle. We’re still breeding 50,000 to 60,000 horses a year and we’ve added 18 or more racetracks than what we had 20 years ago. So it’s natural that we’ve got a horse shortage.

"As a trainer you have to make the game profitable for the owner at some level," Lukas continued. "I think the climate in racehorse investing is better now than in the 1980s. Owners have a better chance of earning their money back on the track now than they did 20 years ago. We just have to get more people involved—more owners, and we have to increase our field sizes to make them more attractive to the gambler.

"The purse structure is only part of it. As a trainer you have to be able to put your horse in a spot where he is able to race on a consistent basis. A trainer needs to study the condition book/sheets to see if his horses are going to race well at a particular meet. Do the horses fit, are they competitive, does the track have races that best serve me, that serve my clientele well? Also, you have to be savvy at the yearling sales. For instance, we don’t buy horses from states that don’t have a good program to support those breeders or the racetracks.

"We cannot keep passing on the cost of doing business to the owners. I think they’re strapped enough," Lukas noted. "The horses and the business of racing has to stand on its own merit. I’m all for the tracks and the states making money, but the horsemen need to make money as well. Everyone needs to make money. We need to accept the fact that we’re in the gambling business, as much as a lot of us don’t like to accept that."

Eddie Arroyo, Senior State Steward, IRB
"A large number of people live where they work and this presents a very unique subculture; a multi-lingual and transient situation that resolves around the care and consideration of the racehorse.," Arroyo noted. "Employment is the major factor on the backstretch. 40 years ago the predominant employees on the backstretch were white males. That changed as more blacks became involved. Now, a new generation of backstretch workers have emerged. These include women and Latinos specifically as horse caretakers. Nowadays we have more and more families living and working on the backstetch.

"In Illinois we are fortunate to have services in place to help them: dental, medical and after-school programs for children are all a part of this unique world. Enhancing the quality of life on the backstretch for the workers will ultimately enhance the quality of races presented to the public. Without the support system of the backstretch personal, racing couldn’t exist.

"This is the first year I’ve ever seen that we have empty stalls at Arlington Park," Arroyo added. "And empty stalls mean smaller fields at Arlington. This means that the revenue streams are not there anymore.

Bill Wright, horse owner & past IHHA president, chairman of the Strategic Planning
"The inadequate purse structure here in Illinois is driving owners like myself to either get out of the business or go race elsewhere. Initially I only bought ICF horses and now I mainly buy out of state horses. I’m a hands-on owner—I want to be close to the action, close to the horses and I want to be involved. Racing horses out of state doesn’t allow me that option.

"I like to race colts in the Illinois program," Wright said. "In 1980 we raced for $698,000 and in 2006 we race for $600,000. Of the four drivers I’ve used over the years, only one (Dave Magee) is still around. Tony Morgan, Andy Miller and Eric Ledford all went out east to ply their wares. Our two top horses, Dream Master (to Europe) and Classic Photo (to New Jersey), have both gone elsewhere because it was felt we they wouldn’t get support in this state to stand them as stallions.

"The Strategic Planning Counsel is a six-year-old think tank for harness racing and for racing in Illinois in general. We need to get a gaming resolution that will help both harness and thoroughbred racing in this state and that will give help to horsemen and the racetracks alike. We need gaming legislation that we ensure that Illinois’ breeding program that will then further fuel the Illinois agri-based infrastructure.

"Recapture has been a series drain on the industry but it’s not our only problem," Wright noted. "Part of the solution is not only with legislation, but it’s with making our product visible. We need to build our sport into a popular entertainment choice. This is not just a marketing problem that the tracks aren’t doing. The horsemen aren’t marketing either, although they could. The drivers are going to where the purses are the best, just like the horses—people migrate to where they’re going to make more money.

"Ontario has a system whereas they relocate monies into their purse structure from other sources. I think that slots at the tracks are sustainable. It’s one thing to pass something, it’s another thing to sustain it. I’d much rather race in Illinois where I can be hands-on, however I have to go where the money is currently. Of course we want the tracks to be profitable as well. There’s synergy here if we all work together."

Terry Hunt, Standardbred owner & breeder of Cottonwood Farm
"We’ve been fortunate at Cottonwood Farm to have tremendous success over the years. But now we’re producing quality that is surpassing the amount of purses that the Illinois tracks are able to offer us on a state level. Many of our horses are now able to go elsewhere and race competitively.

"Right now we have 38 county fairs that are conducting harness racing in this state," Hunt said. "The level of participation at these county fairs is still tremendous. I recently attended the harness racing at the county fairs and the enthusiasm by the people in the grandstand was encouraging. These fairs provide an option for young horses and young drivers to gain experience. Because we no longer race at Quad Cities or at Fairmount Park, these fairs provide up and coming trainers, horses and driver the opportunity to get their feet wet in the business.

"It is generally accepted that there are 35 to 40,000 jobs that are directly or indirectly related to horse racing in Illinois. At Cottonwood, this past weekend I just processed paychecks for 31 employees. I also employ a blacksmith, vet and tack shop vendor. I spend $114,000 for hay, $50,000 on the vet (excluding pharmaceuticals) and over $800,000 for the employees that we have at our farm per year.

"It’s really important to note that at the end of the day the owners, the trainers, the drivers, the breeders and the track owners are all on the same page," Hunt stressed. "Without a reasonable expectation of making a profit, it is awful hard to entice owners to get into this business.

"It’s a tough job to identify the average, Mr Joe Fan, but he’s one person that so far has been left out of these hearings. We have to keep the customer up at the top of our list and formulate strategies to keep him interested in our business as well.

"It’s important to note what happened after the passing of the Illinois Horse Racing Act in 1975," Hunt said. "In 1984-1985 we had peak years as far as breeding with 280 foals in the program. In 1990 with the Riverboat Gambling Act, the next seven years show a difference in the number of mares bred. But what really did happen is that the number of stallions dropped by 21% over that same period. This probably improved the overall quality of the Standardbred stallions. With 1995 we had the simulcasting measure that passed—after which the number of mares bred, foals born and stallions standings went into a free fall.

"The number of foals since then has dropped 27% and the number of stallions (150) has dropped another 37% from 1995 through 2005," Hunt said.

"There are two main sources of revenue for a breeder: mares bred with foals and stallion fees, and our yearling sales. From 1994 through fall of 2005 (Cottonwood Farm and the Land of Lincoln Sale—Walker’s and all other sales together), for the breeder the summaries are pretty discouraging. We’ve sold 5,773 in Illinois for an average of $7,000+ each. Our sale and the Walker sale have done far better than the average sale. The 1995-1996 sale prices dropped 22%, and this number fell off the same time full-card simulcasting took hold. Three years after the full card simulcasting was passed, the average sale prices did not rebound. Sale averages came up a bit in 1999—this was the first year we sold yearlings eligible to the million dollar bonus program—which seemed responsible for a regenerated interest in yearlings. When this program fell off—we saw that reflected in the yearling prices again.

"I feel strongly that the Illinois breeders have done a good job of producing horses that can compete nationally and have horses that are indicative of a sound purse structure," Hunt noted. "I think we have a product that we can market successfully. But we need the purses here to get people involved that want to race and maintain their horses here in this state.

"My long range plans would include a Horse Racing Act of 2006—which doesn’t yet exist. Integrity—this issue needs to be included in all aspects of this sport. I think we need to do everything we can to convince our fans and horsemen alike that we are racing within the highest possible standards and integrity with uniform standards. The horsemen need to take control of this issue. I believe firmly that a minority of horsemen have caused violations which have given our sport a bad name. I think testing should be held at the county fairs as well so that they are held to the same standards as the pari-mutuel events. Horsemen should be more pro-actively involved in promoting the sport which is their livelihood.

"In the very least recapture should be subject to a rolling average as opposed to a fixed average. Recapture is often added in an adversarial fashion between the horsemen and the tracks without reason.

"We need to entertain other forms of gambling revenue: racing slots, racinos, and the reallocation of existing gaming conditions (such as HB1918)," Hunt noted.

"We need incentive for the Illinois program: there have been discussions to initiate bonus programs. The Million Dollar Bonus program was hugely successful and I’d love to see that back in play. It was a big shot in the arm for our yearling sales and it gave our owners and trainers a different type of excitement when they came to the sales, and also helped spur entries at both Springfield or DuQuoin.

"When we talk to legislators, we always do try to explain the benefits to the agri-business. The allocation of racing dates is something that needs to be looked at. I don’t think the IRB should allocate dates with any track that doesn’t have a contract in place with the respective horsemen’s association.

"Illinois cannot hope to compete for the best horses, trainers and drivers if our purses continue to be sub-standard. For us to make this leap, we need help. If that comes in the form of legislation, than we can look forward to a strong future here in Illinois.

"If it came down to one point, it would be purses," Hunt said. "If the tracks are able to pay high purses, then it means the tracks are making a lot of money. Purses are the bottom line. Any horsemen’s association has to work at increasing participation. I can’t imagine any association that would be against supporting larger fields.

"It’s long been my personal opinion that Illinois races too many harness dates in the Chicagoland market to sustain the level that we want. The problems are multiple. It’s virtually impossible for a horse to stay sharp all year long. Weather is a factor. Racing happens today. If you don’t go to the races today, not a big deal. You can go the next day and the day after that. I think we would benefit from time off. I think our fans would benefit from having an opening day. We never have an opening day because we never have a closing day.

"I think the tracks feel that they can’t afford to lose the weekends, so coming to the best combination of racing the optimum number of days during the year is a tough thing to do. The current combination of the six-day week at Balmoral and Maywood seems to be working but I hope that next year doesn’t bring a 365-day a year racing schedule. The dollars are there and it’s a question of how the money is allocated. If a trainer races primarily overnight and claimers than that trainer is looking for more racing dates, while a stakes trainer is looking for a set schedule."

Phil Langley, USTA President & Director of Racing, Balmoral & Maywood
"Tracks opening in Wisconsin, Indiana and Iowa in the 1990s have had an affect on the racing in Illinois. The Riverboats, of course, have had an affect on us as well. There’s been a lot of things that have happened to effect racing. The racing industry hasn’t been very smart…we sold it too cheaply and we haven’t gotten any new revenues.

"I don’t think the bettor has changed that much over the years. We have five million people betting on races here in Illinois throughout the year. That’s a lot of people who like racing. I think there’s some things we need to do, to put racing back on top here in Illinois.

"Our product is good, but the long-term prognosis for racing is shaky," Langley said. "We’ve had people leave to go elsewhere to race for a variety of reasons. We have great facilities, great horses and great trainers and drivers here. The trouble is we’re economically challenged here in Illinois. The costs have gone up and that’s our main problem—with no additional revenue to take care of these issues.

"Other states are struggling as well. Michigan is in bad shape. Yonkers will see a dramatic increase in purses higher than The Meadowlands come this fall. So will Pennsylvania and Florida who are all giving slots a chance. I don’t see any other action that will help us other than slots.

"I think we’re going to get slots," Langley said. "I’ve heard so many legislators talking about how the horsemen need the slots. Once we get them, they’ll be a lot of things that will need to be taken care of like race dates, schedules, state-bred restrictions, etc. Hopefully, as a results of these hearings, the state will be inclined to push the slots over the top.

"At the present time the tracks and the small horsemen have to race every day just to keep operating. The tracks have employees that rely on their jobs and can’t afford to have a three or four-month vacation every year.

"Right now there are only a few places that have higher purses than we do: Delaware, The Meadowlands and the Ontario tracks.

William Stiritz, President of Fairmount Park, Thoroughbred horse owner, former Chairman of the Board of Ralston-Purina
"I became involved in thoroughbred racing in 1975 as a horse owner, farm owner and breeder and horseback rider. I’ve been involved in every aspect of the racing business in downstate Illinois.

"In 2000 I underwrote the purchase of Fairmount Part and there was hope that casino sharing would stabilize the business," Stiritz said. "Fairmount Park is now a David, facing the Goliath of outside casino products, that siphon off our customers. Fairmount Park lost $1.8 million in 2005 and we are currently competing with five major casino interests right now. Unlike the owners of the casinos, the owners of Fairmount Park are more interested in the social interest of horse racing rather than the monitory interest and that’s a true statement. I wanted to prevent the demise of Fairmount Park and horse racing in our area and that’s why I bought this track. There are thousands of people whose livelihood depends upon racing at Fairmount Park.

"Fairmount Park is the only horse racing facility outside of Chicago that still conducts live racing in this state. With legislative help, we would reinstate a harness meeting there. Fairmount Park is the largest employer in Collinsville, Illinois. Our local horse racing economics is currently in trouble. Horsemen are going out of business or are going to other states to race.

"We have a steady declining off-track wagering: because of conflicting wagering at casinos, and as a result Fairmount has had to close three off-track wagering facilities. Fairmount Park has an economic impact of $50 million to the southeastern sector of the state of Illinois. If we close, the state will lose $5 million in revenue.

"What should we do now? We’ve committed to the HPBA to conduct a meeting in 2007, but after that our future is questionable. Surprisingly, I’m optimistic that something good will come to our sport," Stiritz said. "Fairmount Park is located in the St. Louis market, drawing its economics from another state. Live thoroughbred racing is labor intensive and accounts for one to three percent of wagering in this state—generating a huge number of jobs. The state has awarded the boats a monopoly on slot machines and this is killing the racetracks. Especially tracks that are part of local culture and local economics—like Fairmount Park."

Lanny Brooks, thoroughbred owner/trainer, president HBPA
"No other track faces what Fairmount Park does, surrounded by five casinos with two others currently under construction. For horse racing to survive, something serious needs to happen," Brooks said. "Recapture is the sore spot among all horsemen. If we were able to put $15 million into our purses every year we’d be jumping for joy. Slot machines and a percentage of the boats that can’t be taken away is what we need. We have to revitalize the Illinois thoroughbred breeding program which is just in a shambles right now."

"Horsemen want to race. We don’t make any money with our horses standing in the barn—we want as many days as we can get and we want more quality horses."

"The tracks are telling us that under the current climate they don’t have funds either because of the boats. If there’s no hope of the recapture ever going away surely the tracks could make some type of compromise with the horsemen."

Dave McCaffrey, Standardbred trainer
"The IRB thinks that they’re doing something that they want or vice versa. I guess that a gaming bill is all the rage right now and is probably very much needed. But I think that we spend too much time on the gaming bill and not enough time on what to do with it once we get it."

"I think the racetrack owners love racing and try hard to put on a good show. But one of my fears is that if a slot bill comes and the tracks are made into mini-casinos that their values triple overnight we’d see a sale coming quickly. The very thing that would open the door to these slots (horse racing) could be phased out if ten years down the road a gaming concern bought the racetrack and realized that the slots were doing so much more for the track than the racing operations were doing."

"I think that a minimum number of racing days or races per week are important," McCaffrey stressed. "Racing opportunities need to be protected. I think to blindly give slot machines to racetracks and not hold them accountable to the racing aspect is not the way to go.

"I’d hate to move my operation, but there comes a time when you just can’t transfer any more expenses onto the owners. I came up with an average expense for a harness horse for one month--$2,000 per month on average. In order to keep the game going in Chicago as it is now, you need to have 1,500 to 2,000 horses in training throughout the year, that’s 800 per week. If it’s costing $2,000 per month and you need at least 1,750 horse, you need $42 million. We race for $25 million. I think that best exemplifies the shape that we’re in. For the whole industry to survive, those numbers are way out of whack. Unfortunately, that $42 million figure keeps going up and up, but the $25 million figure has just stayed stationary the last few years.

"We need to educate the fans and communicate with the fans and not keep them in the dark. You can’t overemphasis that. It would help the perception of the sport a great deal."

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