California's Racing Struggles Aired
by Jack Shinar
Date Posted: 7/22/2005 4:07:59 AM
Last Updated: 7/23/2005 1:39:36 PM

Calling Churchill Downs' recent sale of Hollywood Park a "shot across the bow," California state Senator Dean Florez heard industry leaders plea for help in racing's struggle for survival in the Golden State.

Florez -- chairman of the California legislature's influential Governmental Organization committee –- came to Del Mar July 21 to listen to industry leaders talk about the future of horseracing in the state.

"That was very important to us," said Florez, talking about the sale of Hollywood Park to Bay Meadows Land Company for about $250 million. He told about 50 people who attended the informational session at Del Mar's simulcast center, "It was a kind of unifying point for Republicans and Democrats alike. I need a master plan for gaming that also includes Indian tribes and card clubs. How do we all work together to make it better?"

Industry reps had plenty to tell Florez, a Democrat who represents the Fresno area, and fellow state Senator Nell Soto of Pomona. Many but not all of those who addressed the committee complained that California racing isn't competing on a level playing field with Indian casinos or other states with legalized slot machines.

"We're just no longer competitive with states that have alternative forms of gaming," said Ron Charles, president of California racing for Magna Entertainment Corp. Charles was among several speakers who called for the legislature to consider slot machines, video lottery terminals, or a slice of the state's revenue from the Indian casinos, which enjoy a monopoly on Las Vegas-style gaming in California.

The state's horse population is being raided by buyers who move the horses to states that provide "slots subsidies," Charles said.

He also complained that "offshore bookmakers are the single greatest threat to our declining handle. They are growing rapidly, and they're taking away our best customers."

Jack Liebau, representing the Bay Meadows Racing Association, agreed, adding, "The major problem we have today is that the show we put on today is not as good as the show we used to have."

He told Florez that the loss of horses has resulted in smaller fields that create less interest among fans -- what California Horse Racing Board commissioner Richard Shapiro called "a domino effect" that is sinking the sport.

"California is desperately disadvantaged today because inferior states with inferior racing are now more competitive" because of slots revenue, Shapiro contended.

But Shapiro said California racing also needs to do a better job of marketing itself and needs to reward on-track patrons with higher payoffs than those betting from home or simulcast locations.

"We do need to look at new types of wagers," Shapiro said. "We have to come up with ways to bet that attracts the novices.

"We have the best racing in the country, no doubt," he told Florez. "Our track operators are trying. But ultimately, we're going to need your assistance."

Rick Baedeker, president of Hollywood Park, added, "Customers don't think poorly of us. They just don't think of us."

Florez suggested that future tribal compacts negotiated by the governor could include a portion for other industries -- such as racingm -- that have been damaged by the casinos.

"We need to improve the economics of the sport to make (a turnaround) happen," said Craig Fravel, executive vice president of the Del Mar Thoroughbred Club. "What none of us want to contemplate ... is when New York gets VLTs and are doing a million dollars a day in purses."

Drew Couto, president of the 9,000-member Thoroughbred Owners of California, noted that those economics have resulted in a 25% reduction in his group's membership from five years ago. He added that illegal rebaters have increased from 1% of the total handle to 13% in three years and are part of racing's "flawed formula" for dealing with off-track wagering. Couto said he was not asking the state to bail out racing, but instead to give "due consideration" of the effects of Indian gaming compacts on other industries.

Couto also said he was encouraged by response of several tribes to racing's plight and was hopeful for future negotiations.

Ed Halpern, executive director of the California Thoroughbred Trainers, said it is easy to see why ownership is in decline. At $85 per day plus other expenses, it costs on average about $45,000 a year to keep a Thoroughbred in training on the state's major circuit, he said. That means an owner needs to win $50,000 a year on the horse to break even after racing costs are factored in.

"There aren't many horses in California that make $50,000 a year," he said. As a result, Halpern said, owners are more inclined to compete in racino states such as New Mexico or West Virginia at a fraction of the cost.

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