Tuesday, July 31, 2012
Limitations of the OHRIA Report
To be honest, within hours of comprehending fully the OHRIA report, I was so furious my heart was beating fast and I was pacing my house. This was the much-awaited "industry" response to OLG's announcement of the sudden ending of the hugely successful Slots At Racing partnership, which contributes over $1.1 billion annually to Ontario's coffers, money need for schools, hospitals, roads and bridges. Unfortunately, though the report defends the Ontario Horse racing industry reasonable well, the proposed solutions represent a centralizing power grab that sacrifices almost all of the small tracks in Ontario in pursuit of big city revenues, while ignoring the crucial "feeder" aspect of B tracks that makes our racing world class.
The severest limitation of the OHRIA report is that it does not call OLG to task for its obvious efforts on behalf of Toronto developers (who want to turn the family-oriented Ontario Place into a Vegas-operated casino) and Las Vegas mega-corporations. By sacrificing rural and smalltown slots, OLG is hoping to mask over its own casino mismanagement problems and set the stage for development of a sports book without horse racing partners. In essence, the OHRIA report does not defend the Ontario taxpayer from a boneheaded and severely costly decision that proposes to take billions of dollars currently spent in Ontario every year, and send them off to American interests. It also does not discuss the illegality of OLG's actions and the possible need for a lawsuit and/or direction action against OLG and the current Ontario Government.
By proposing a 41% reduction in racetracks (17 to 10), a 45% reduction in purses and then asking for a $200 million annual subsidy (eg minus 40% from SAR levels), the OHRIA response proposes turning Ontario horse racing into a heavily-subsidized (and thus hugely vulnerable to further cuts) industry, whereas the partnership model is serving everyone very well.
OHRIA's plan is defeatist and in the end calls for enough purse money to keep 7 to 10 racetracks operating, with the money for purses flowing through OHRIA:
First, it is proposed that a new fund, the Ontario Development Fund, should be created primarily to support overnight purses and live racing days. This fund would replace current slot revenue. The Fund would be administered by OHRIA that will determine how the funds should be allocated.
The problem here is that OHRIA doesn't deal with these facts:
- the OLG and the Ontario Government have canceled Slots At Racing yet have no firm plans in place to generate the $1.1 billion annually from another viable source
- the proposed OHRIA "solutions" do not address the FACT that it is deeply and profoundly misguided to end the most successful private-public partnership in Ontario's history. It will be much more beneficial to Ontario taxpayers to strengthen and improve the Slots At Racing program rather than eliminate it.
- the planned OLG / Ontario Government switch from working with 17 mostly rural and smalltown municipalities to a giant casino program run by one or two Las Vegas firms is enormously detrimental to Ontario citizens and taxpayers.
In this proposal, OHRIA is also looking to be the arbiter of who gets race days and how many they get:
Based on a demand approach, a sensible number of race dates in the future for the new model would be 167 Thoroughbred dates(down from 243 in 2012),600 Standardbred dates (down from 1252 in 2012) and 30 Quarter Horse dates (down from 45 in 2012). Total race dates under the new model would be 797, down from 1,540 in 2012.
As for Standardbred race dates, we anticipate that there will be three levels of racing. viz. Premier, Signature and Grassroots. OHRIA should make the decision as to how the dates should be allocated to the standardbred tracks that survive. Depending on the number of and the specific racetracks, a possible allocation would be 200 Premier dates, 300 Signature dates and 100 Grassroots dates. Horse supply will also be an important consideration.
I would ask, WHY is it sensible to cut race dates in Ontario by 50%??? I would also ask WHY is OHRIA more equipped to allocate race dates than the current ORC?
Finally, though it is admirable that OHRIA is seeking $210 million annually (70% of current funding) from the Ontario Government as a way to retain 55% of race dates, the problem is that the approach confirms the Government's view that this is a subsidy and now seeks to tie this amount to the number of race dates, which is a beautiful formula for the Government to propose even further reductions of race dates in the future, as a way to decrease the "subsidy".
OHRIA's plan calls for massive concentration of power in their hands and near-total dependency on a range of Government programs and departments:
However, given the significant contribution that government will make to the Development Fund and the HIP, it should have representation on the Board of OHRIA. With up to three
government appointed Board members, government will have a direct voice in the decisions of OHRIA and will be in a position to assist the industry in dealing with broad policy issues, objectives and public interest considerations.
The Board will be in a position to decide on all economic industry issues and disputes among its stakeholders including the fixing of race dates and starting times, the allocation, structure and administration of the Development Fund and HIP, the oversight of the expenditure of funds generated by the reduction of the tax on pari-mutuel wagering instituted in 1996, the branding of horse racing and the development of a comprehensive industry marketing strategy.
In addition, OHRIA would be responsible for developing industrywide benefit plans for individuals and education, training, research, accreditation and horse-ownership programs.
Also, do the authors actually believe that a centralized bureau can write more realistic race conditions that the local track stewards? And do they also believe that horsepeople can just bring their racehorses to any track in Ontario that offers the appropriate conditions? This paragraph is very puzzling to me:
The racetracks could create a central race secretariat that would write the condition sheets, accept entries and position horses in their proper class. This would result in a sensible distribution of the available horse population. Such a secretariat could utilize an 800 telephone number and the internet to accept entries. The Alliance could also negotiate single service contracts such as tote, video patrol, satellite fees, race program production, etc. Costs would be shared by Alliance members.
That sounds like a recipe for disaster...
While surely genuine, the OHRIA response serves to legitimize OLG's draconian, illegal and short-sighted maneuvering. I realize we are all on the same team, and do appreciate the effort of the OHRIA to comer up with some sort of coherent response, but the effort falls flat. The bottom line to me is the $1.1 billion our industry provides directly to the Ontario taxpayers (including over $600 million from WEG alone) every year, via SAR. I want to grow this contribution from provincial horsemen because Ontario's 2012 deficit is projected at $15 billion. I would also like to see the portion for local communities increase, in addition to an increase for the province. I am proposing a 10 year contract renewal including a 5 year transition from the current split, which is 75% Province / 20% Horsemen / 5% Local Community, to a new 80/12/8 division, bolstering the communities that will host SAR and the new sports books. Here is a link to new proposal for growing Slots At Racing partnership in Ontario, with a new Community Slots at Racetracks (CSAR) partnership.
Slots At Racing needs to be preserved and expanded because it rivals LCBO as the two most successful public-private partnerships in Ontario history. Our participation in this plan provides massive benefits to the Ontario taxpayer and to local communities. The OLG and the Ontario Government are trying to cut the horse racing industry out of slots and sports book revenue, when ANYBODY who knows anything about gambling will tell you it makes the most sense to keep the slots and the sports book near the horsemen, as that helps to limit problems and ensure things run smoothly. OLG loses money at their casinos, yet Slots At racing is massively profitable. The Ontario taxpayer cannot afford either the OLG operating more casinos or, even worse, one or two big Las Vegas companies getting all that money currently staying in Ontario.
By strengthening the existing program and tilting the partnership toward directly providing funds for local communities, we will come out of this with a better province and stronger towns. The Community Slots At Racing agreement proposes increasing the local share by 60% (from 5% to 8% over 4 years), which means the money flowing into municipal coffers will grow from the current $80 million (proposed to go to zero by the OLG) to $130 million or higher by 2016. In addition, I am soliciting support from horsemen to agree to have our own share reduced from 20% to 12% over 5 years, in exchange for re-opening Fort Erie, Windsor and Sarnia slots and for capital investments allocations from both parties. The basic premise is that local communities and the province's taxpayers all guaranteed a larger share of the pie, and for horsemen, there remain two large opportunities to grow the overall pool.
The first opportunity for horsemen is to continue to promote Ontario's world-class racing and breeding product, and building a wider, more knowledgeable fan base. The second opportunity involves two aspects. The obvious one is that the more people horsemen can get out to big race nights, the more slots revenue for everybody to benefit from. The elephant in the room is the sports book, and it will benefit Ontario much more if two books are operated, one by the not-for-profit Woodbine Entertainment Group (WEG, owner of Woodbine and Mohawk racetracks) and the other by Great Canadian Casinos (GCC, owner of Georgian Downs and Flamboro Downs).
Let's get a Community Slots At Racetracks agreement done by Autumn 2012, to provide a solid underpinning for the industry. After the foundation is restored and strengthened, then we will move on to the task of getting sports books for Mohawk, Woodbine, Fort Erie, Windsor, Western Fair, Flamboro, Georgian Downs and Rideau Carleton. These 8 tracks have the potential locations to contribute another 2 to 3 billion annually to Ontario's coffers, and websites to be run by WEG and GCC could add a similar amount on top of the on-track contributions.
In summary, let us strengthen the existing horsemen-government partnership and create Community Slots At Racing, improving upon and expanding a program which already provides $1.2 billion to provincial and local community coffers. Then we can present our plans to contribute another $4-6 billion annually via operation of the Ontario sports book. This 5 to 7 billion per year will go a long way towards balancing Ontario's budget, which is currently running a $15 billion deficit (that is scheduled to get bigger if Slots At Racing's revenue is canceled via closure).
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