Purse Cut Pain at Calder
by Jim Freer
Date Posted: 11/24/2010 8:44:46 PM
Last Updated: 11/25/2010 10:46:20 AM

Calder Casino & Race Course’s decision to cut average daily overnight purses by 10% through the end of its 2010-2011 meet is not sitting well with the Florida Horsemen’s Benevolent and Protective Association.
 
And Calder’s situation provides an example of how slot machines can help soften the economic problems, but not solve them, at U.S. Thoroughbred tracks.
 
Calder began its reduction in overnight purses, from $182,000 to $165,000, on Nov. 22.  In an announcement Nov. 19, the Miami Gardens, Fla., track also cancelled the $100,000 Kenny Noe Jr. Handicap (gr. III) that was scheduled for Dec. 4 and moved two other stakes from December to the first weekend of 2011.
 
Without providing numbers, Calder’s announcement cited “lower than expected handle trends over the past four weeks” as the reason for the changes.  A Blood-Horse review of Equibase Co. charts shows Calder’s average daily all-sources handle was about $1.74 million during the last of those weeks.
 
John Marshall, Calder vice president of racing and general manager, said Nov. 20 that Calder made the purse and stakes changes to prevent a possible 2010 overpayment in its purse account.  He said that Calder and its parent Churchill Downs Inc. have a policy of  releasing handle figures only in quarterly reports to the Securities and Exchange Commission.
 
The Florida HBPA agreed to the decision on stakes but was disappointed that Calder also made the change on overnight purses, Kent Stirling, that organization’s executive director, said Nov. 19.
 
“We thought we had an agreement, and we were not expecting the purse cuts,” he said. “The decision to cut purses was made by Churchill Downs Incorporated.”
 
Marshall said the decision to cut overnight purses was made at Calder in conjunction with CDI.  He said they reached that decision after Calder’s handle remained lower than expected since late October “due to competition  from several other tracks.”
 
Marshall would not name those tracks. But several times this summer, he noted that Calder has felt the impact of increased competition from Monmouth Park--which this year held three-day and later two-day race meets with large purses.
 
Since October, Calder and other tracks around the country have competed for simulcast business with the strong meets at Keeneland and later Churchill Downs, including the Nov. 5-6 Breeders’  Cup at Churchill.
 
In that aftermath, and with Monmouth running until Nov.. 21, a Blood-Horse review of Equibase Co. charts shows that Calder had daily all-sources handle of about $1.725 million for 10 race days between Nov. 11 and Nov. 22.  Handle numbers for the comparable period in 2009 were not readily available.
 
Marshall said this year’s mid-November numbers were lower than what Calder anticipated, but would not say by how much.
 
 “Live handle, on betting on races here and simulcast has not been the issue,” he said.  “There has been pressure from out-of-state locations and in ITW (other Florida pari-mutuels) betting on Calder.”
 
The purse cut that began Nov. 22 reverses a 10% increase that Calder put in place on June 17, using revenues from Las Vegas-style slot machines at the casino it opened Jan. 22.
 
But Marshall said Calder feels it is not able to keep overnight purses at a $182,000 overnight average due to the recent decline in handle.
 

“We are not in an overpayment (purses) now,” he said. “We made the changes so that there will not be an overpayment at the end of this year.”
 
Stirling and other directors of the Florida HPBA  meet with Marshall and other Calder officials each week on the purse account and other Calder operational and financial matters.
 
“We knew that we were hitting a rough patch in the purse account,” Stirling said, adding that the Florida HBPA had hoped the stakes adjustment would resolve the issue.
 
But he noted that the stakes changes will push some big purse expenses into Calder’s 2011 calendar year, and create the prospect of dealing with an overpayment early in its 2011-2012 season that will open in late April.
 
In addition, Calder has decided that it will end its current Tropical Meet on Tuesday, Jan. 4 rather than on Monday Jan. 3 as originally scheduled.  Gulfstream Park will open its season on Jan. 5 and race through April 24.
 
Marshall said Calder expects to avoid starting 2011-2012 with the prospect of an overpayment because “we will be starting with the full impact of a casino open for more than a year,  and a lower slots tax rate.”
 
A state law that took effect on July 1, 2010, reduced the state tax rate from 50%  to 35% on slot machine revenue at Calder, Gulfstream, and the three other southeast Florida pari-mutuels that have casinos.  At Calder, 35% of the slots tax savings at the lower rate go into race purses.
 
“We will have a vibrant beginning for the meet, and in 2011 we hope to have overnight purses comparable to 2007,” Marshall said, without providing the 2007 numbers.
 
Calder has been one of numerous tracks dealing with declining handle since 2008.
 
Amid that year’s multi-state dispute between several tracks and horsemen’s groups, Calder was prominent among tracks that for several months had blackouts of some incoming signals and had several tracks not taking its signal.  Also since 2008, the recession has impacted handle at Calder and other tracks.
 
According to CDI’s reports to the SEC, its measure for “total handle” showed Calder falling from $922 million in 2007 to $650 million in 2008 and then rebounding slightly to $673 million in 2009.
 
CDI  has told Blood-Horse that its measurement of Calder total handle is a combination of live on-track; export; import; proxy when Calder is host (wagering at other Florida sites on out-of-state races); and Gulfstream wagering on Tampa Bay Downs when Calder is host.  CDI’s reports to the SEC do not provide a breakdown of those components.
 
For the nine months ended Sept. 30, 2010, CDI reported Calder total handle of $395 million--an 11% decline from $442 million for the same period in 2009.
 
This November’s decline in all-sources handle, different from what CDI reports to the SEC, includes Calder’s annual Florida Million.
 
That Saturday program on Nov. 13, with eight stakes for Florida-breds, had all-sources handle of just over $2.7 million on 12 Calder races, according to a review of Equibase data.  In 2009, the Florida Million day had all-sources handle of just over $4.9 million for 12 races.  The clear weather and race cards were similar at Calder both days.
 
Marshall said: “A big difference this year was the out of state challenges. Right after the Florida Million, we decided that we would have to engineer some type of change.”
Starting Dec. 4, Calder will have at least one graded stakes each Saturday except Christmas Day.  Marshall expects that the out-of-state competition will not be as strong as in October and November.
 
But Tampa Bay Downs will open its meet on Dec. 11 and compete with Calder for simulcast business.   Tampa Bay, as always, will distribute imported signals to and receive ITW revenues from several Florida Greyhound tracks for which Calder is host for most of the year.
 
Another Calder fourth quarter change that started Nov. 15 was adding Monday racing for a five-day Thursday-through-Monday schedule.
 
By paying $165,000 in average overnight purses over five days, Calder is paying out $825,000 a week. When it paid an average of $182,000 over four days, it paid $728,000 a week.
 
Marshall said the move to five days was not a factor in the purse cuts.
 
“In our purse management, we project what we would pay out in purses compared with revenues generated over the course of a year,” he said.
 
Stirling, noting the national trend to fewer race days, said he will suggest that Calder run four days from late November through the end of its next season.  Marshall said Calder would consider that suggestion, based partly on how many trainers and owners agree with it.
 

Slots play at Calder’s casino peaked in May at average daily pre-tax revenue (win per unit) of $159, according to the Florida Division of Pari-Mutuel Wagering.  Since then, it has declined gradually to $139 per day in October and $143 per day for the first half of November.
 
Slots numbers at the other pari-mutuel casinos showed a similar downturn during the slower period of the year for tourism and some other South Florida businesses.
 
“We are learning that there is not a correlation between our racing season and our slots revenue,” Marshall said. “We think our slots business will start picking up again in November.”
 
Largely due to slots revenues, Calder’s overall purses for its 10-week Tropical Meet should be about 20% higher this year than in 2009, he said.
 

After the changes announced Nov. 19, here is Calder’s stakes schedule for the remainder of its 2010-2011 meet.
 
*Saturday, Dec. 4--My Charmer Handicap (gr. IIIT); Tropical Turf Handicap (gr. IIIT).
 
*Saturday, Dec. 11--Fred W. Hooper Handicap (gr. III).
 
*Saturday, Dec. 18--W.L. McKnight Handicap (gr. IIT).
 
*Saturday, Jan. 1--Tropical Park Derby (gr. IIIT); Stage Door Betty Handicap (gr. III): Tropical Park Oaks.
 
*Sunday Jan. 2--La Prevoyante Handicap (gr. IIIT).
 
The La Prevoyante was originally scheduled for Dec. 11 and the Stage Door Betty was originally scheduled for Dec. 18.



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