Tracks run short on horses, long on worries

By Robert Connelly | July 20, 2014 at 12:01a.m.

BY ROBERT CONNELLY

rconnelly@vindy.com

AUSTINTOWN

James Gagliano, Jockey Club president and CEO, wants to know: “Where have all the horses gone?”

“The foal [young horse] crop has dropped from approximately 38,000 in 2004 to 22,000 in 2014,” he told the American Horse Council in a June 24 speech.

“Field sizes should continue to decline if other factors remain the same. Races that averaged 8.28 horses in 2004 will have fewer than seven in 2014.”

In fact, even as the finishing touches are made to Hollywood Gaming at Mahoning Valley Race Course, the Austintown racino, those in the horse business across the county worry about declining numbers of horses.

Representatives of Mountaineer Casino, Racetrack and Resort in New Cumberland, W. Va.; Penn National and Hollywood Gaming at Mahoning Valley Race Course; the Jockey Club, which runs the national breed registry for North America and was established in 1894; and local owners and trainers are gauging the

situation.

“It’s always a concern,” said Mark Loewe, vice president of Ohio racing operations for the Austintown facility’s parent company, Penn National.

A resurgence in Ohio racing started in June 2012 when Gov. John Kasich signed a bill authorizing racinos and video lottery terminals in the state, among other things, in a gaming-related bill. That opened the door for Dayton’s new racino and Hollywood Gaming here, both Penn

National-owned racinos opening later this year.

“The hope is that with the Ohio VLT [video lottery terminal] legislation, it’s going to create a greater need for horses in Ohio, so that the Ohio foal crops should start seeing an increase,” Loewe said. “There definitely has been an increase in the mares bred on the standard side; I haven’t seen the thoroughbred numbers yet.”

Standard mares are used for harness track, such as the new track being built in Dayton. Loewe splits his time between Dayton and Austintown.

Money and breeding

Mountaineer is working with the West Virginia Racing Commission to reduce its number of race days, specifically due to declining numbers of horses and new competition from the Austintown race course.

“It’s been talked about in the industry for years and when the economy changed, there was less money to put into breeding, so it’s been declining,” said Rosemary Williams, senior director of racing at Mountaineer.

But Tim Hamm, president of the Ohio Horsemen’s

Benevolent and Protective Association, is optimistic. He said WinStar Farm, based in Versailles, Ky., reached out last year and he partnered with it to breed 10 mares. WinStar’s Super Saver won the 2011 Kentucky Derby, and Drosselmeyer won the 2010 Belmont Stakes and the 2011 Breeders’ Cup Classic, a $5 million prize.

“When people like that want to participate in the Ohio [breeding] program, you know things are going in the right direction,” Hamm said. He has 100 horses in a facility in Ellsworth.

The Jockey Club, though, is so concerned about the issue that it commissioned and conducted an analysis of current and future thoroughbred racing in North America with the consulting firm McKinsey & Co., titled, “Driving Sustainable Growth for Thoroughbred Racing and Breeding.”

That study, done in 2011, had many facts and figures based upon conversations with fans, owners, industry stakeholders, regulators. It also had a regression analysis

on more than 600,000 races over 11 years. Some of the most jarring statistics:

Race days at tracks are down 14 percent since 2000, going from 7,214 to 6,175

Reductions are projected of 9 percent in the foal crop, 27 percent in tracks, and 25 percent in state revenue.

Owners’ losses are likely to increase 50 percent by 2020.

In the three years since that study was done, Loewe said no dramatic changes have occurred.

“What you’ll see is a shift in foals being born in different

states depending on gaming legislation which is enhancing purses ... With the increased purses, more people are going to want to breed their horses in Ohio, but what I think you’re going to see is the increase will be at the mercy of another state,” Loewe said. “Indiana may go down, Pennsylvania may go down.”

Gagliano pointed to some positive signs since the study was done, such as auction sales of horses rising with 27.7 percent higher revenue in 2013 than 2012, wagering on U.S. races increasing slightly in 2013, and ratings for the Belmont Stakes higher than the last Triple Crown attempt in 2008. The Triple Crown is when a single horse wins all three major thoroughbred races in a single year: The Kentucky Derby, The Preakness, and The Belmont Stakes.

Industry concerns

Industry concerns, fewer horses and new competition from Austintown led Mountaineer officials and the Mountaineer Horsemen’s Benevolent and Protective Association in May to agree on a proposed cutting of race days. That reduction is for 14 days in December, the end of the racing calendar.

Mountaineer is about 50 miles south of Youngstown and averages 7.5 horses a race this year while running nine or 10 races a day.

“Whenever they get ready to open a new casino anywhere, it affects us,” said John Baird, president of Mountaineer Horsemen’s Benevolent and Protective Association. “This year a lot of our problems stem from the state Legislature.”

“We were hit with a 10 percent reduction in purse. It was legislated, and the added competition and the fact that the foal crop is going down ... There was a lot that went into” the decision to cut those days, Williams said.

Both Baird and Williams refer to West Virginia

Senate Bill 2003, passed May 21 and signed by Gov. Earl Ray Tomblin on

May 30. West Virginia now takes 10 percent of all purse money to fund care of abused women and children.

Baird said this year, Mountaineer is projected to have about $22 million in purse money, divided over 210 race days, but 196 if the race days are cut. He added the track will be “lucky to do $15 million” next year.

“Something needs to be done for next year,” he said.

Loewe said, “If the purses start to diminish, people are going to look at other venues

to race for better money and Ohio’s purses increasing could have an impact on it. West Virginia as a state needs money.”

This is on top of Mountaineer’s posting negative results for its first-quarter financial report in May.

According to MTR Gaming Group, Mountaineer’s parent company, its net revenues for the first quarter declined 6.6 percent from last year, from $49.2 million in 2013 to $45.9 million this year. Within those numbers, revenue from video-lottery terminals or slot

machines and table games

decreased by $3.1 million and $300,000, respectively, compared with a year ago.

Penn National also has been linked to a proposed

racino in Mahoning Township, Pa., to be called Lawrence Downs and Casino Resort. It would be at U.S. Route 422 and Pa. Route 551 in Lawrence County, Pa., about 20 miles from Austintown’s track. Its developer is Endeka Entertainment, according to the Pennsylvania Gaming Control Board website. Eric Schippers, senior vice president of public affairs with Penn National, said, “Endeka and Penn National are continuing to have discussions with the [Pennsylvania Gaming Control Board] regarding securing the final financing package for this proposed project.”

Racino deal

Ohio’s horsemen made a deal with Austintown’s racino

that the first year, 80 percent of the stables “have to go to people that have been stabled consistently in Ohio over the past few years ... [which will] allow the Ohio guys to get their feet in the door and prosper as well,” Hamm said. Each year after this year, that percentage decreases.

Hamm also said the circuit deal between Cleveland’s Thistledown Racino and Austintown has been finalized. Ohio horsemen will be able to race for 50 weeks every year for the period of a 10-year contract between Thistledown and Austintown. That breaks down to 25 weeks at one facility, a week off, and then another 25 weeks at the other facility, and then another week off before the cycle restarts.

“We thought the 10-year security was a big deal,” Hamm said. “We needed a stable contract that outlines the horsesmen’s needs, the track’s needs, and a time frame of lining out the schedule.”

Expensive sport

Local horse owner Rembrandt Wright has two horse trainers, Mark and Rachael Maddox, in Garrettsville, in Portage County off of U.S. Route 422. Wright, his wife and the Maddoxes have been partners for 15 years and have seen the shortage in horses over the years — as well as a lack of horses in the state due to a previous lack of interest.

“This training facility is full, and there are very few around because there has not been a big need for racing here in Ohio. You know any racing training center that was available has long been shut down,” Mark Maddox said.

Their barn has 44 horses now, of which about 19 are owned by Wright and his wife. Some were bred in the state, others purchased, and others that Wright acquired from his friends in the industry who gave up on horses while chasing bigger wins and higher earnings.

“Keeping a horse in training on the light end will be $1,500 a month,” Wright said of the expenses in the sport.

Gagliano also spoke of a study, commissioned by the same McKinsey & Co. team, that will be presented at a conference in August. “The survey reported the average annual cost to maintain a horse in training in North America is about $40,000 and in some cases can exceed

more than $50,000.”

Wright and the Maddoxes race his horses at Mountaineer, Presque Isle Downs and Casino in Erie, Pa., and Thistledown. Wright said he used to be the head of Mountaineer’s horsemen’s association and weighed in on the recent proposal to cut race days.

“There’s no purse money. It was either cutting the purses drastically or cutting the days — and with the Austintown track opening it gives a place for the horsemen to go ... [Mountaineer] needs something else,” Wright said.

Wright said he bred two of his horses last year because of the new track opening in the Valley.

Mark Maddox said, “There are a lot of small horsemen dotted throughout this three-, four-county area right here that will be [at Austintown] consistently. We’re trying to take advantage of it because since we have not had much of a breed program or an incentive to race in Ohio ... now it makes it worth it.”

“I’m sure there will be some of our owners and trainers running there, too; it just makes sense for them. It gives them more opportunity,” Mountaineer’s Williams said of the Austintown track.

Gagliano ended his American Horse Council speech by pointing out seven things the racing industry still needs to do. One of those is contracting race days. “Fewer races will make for better races. And a reduction in race days will lead not only to better quality racing and more appealing wagering opportunities for fans but also increased profits for both tracks and horsemen,” he said.

Watching developments

Watching this unfold is Youngstown businessman and owner of the Youngstown Phantoms Bruce Zoldan, a member of the horse consortium Team Valor. That consortium’s Animal Kingdom won the Kentucky Derby in 2011, and its Went the Day Well finished fourth in the 2012 Kentucky Derby.

He said of his horses, “We would certainly be able to transport them and have them run here at Mahoning Valley.” He did say he would not stable them, but there will be 56 stalls at Hollywood Gaming for horses racing on any given day.

Of Ohio’s resurgence in the sport after VLT legislation in the state a few years ago, Zoldan said: “I do think there will be some people who maybe vacationed from the business for awhile and say, ‘I have a barn, let’s try this again’ ... This will be a pretty easy trip for [area horsemen], and I expect to see some renewed interest.”