Ohio Racing Needs 'Drastic Changes'

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Ohio horse racing must radically remake itself from top to bottom to survive and grow in a competitive gambling and entertainment environment, two consultants said in a soon-to-be-released proposal.

The plan comes from Bill Murphy and Bob Roberts of Continuous Improvement Solutions (CIS). Murphy has served as general manager of Gulfstream Park and before that was the longtime general manager of Thistledown near Cleveland, Ohio. Roberts was director of communications at Thistledown through last year and previously was the racing writer for the Cleveland Plain Dealer newspaper.

“We believe Ohio racing must scrap its current business plan and start over,” the consultants said in a joint statement. “The possible introduction of video lottery terminals does not guarantee the industry’s future. If anything it throws down the gauntlet and challenges racing to prove it can become a viable partner in the gambling industry.”

CIS, citing Ohio State Racing Commission figures, notes total pari-mutuel handle in Ohio was $628 million in 1998 but $258 million in 2010, a decline of almost 60%. CIS said unless “drastic changes are implemented, Thoroughbred racing in Ohio may cease to exist by 2020.”

The Ohio General Assembly recently approved legislation basically authored by Republican Gov. John Kasich that would allow the state’s seven racetracks to apply for VLT licenses through the Ohio Lottery Commission. Racetrack VLTs would be taxed at 33.5%, the same rate as four full-scale casinos under construction in Cincinnati, Cleveland, Columbus, and Toledo.
 
CIS notes, however, that horse racing at racetrack casinos often is viewed as a drain by facility owners and operators, and because of that racing interests must have a plan.

CIS in its plan makes recommendations, some of which Murphy advocated when he was a racing executive in Ohio: consolidation of the live racing calendar; incentives for horseplayers, including lower pari-mutuel takeout rates; revision of the Ohio code that governs how simulcast revenue is paid to purses; adding a turf course at Thistledown, which had one many years ago; and a plan for racing should VLTs be implemented.

The OSRC has awarded 334 Thoroughbred racing dates for 2011. CIS notes that on 71 dates, two or more tracks offer live races despite declines in the horse population.

The plan suggests 206 days a year, or a 38.3% reduction: Beulah Park near Columbus would race December through mid-March (60 days), Thistledown would race mid-March through June and October and November (95 days), and River Downs near Cincinnati would race July through September (51 days).

“There should be only one of the three tracks racing live at any one time,” CIS said in its proposal. “In order to form, promote, and facilitate such a circuit, horsemen must be able to stable, train, and ship their horses in an orderly and efficient manner. Thus, two barn areas must be open around the calendar.”

Roberts said the circuit plan would stick even if the tracks get VLTs and Beulah Park owner Penn National Gaming Inc. receives approval to move the license to the Dayton area.

Under the full-card simulcast law of 1996, revenue is pooled and paid out according to the number of live racing dates at each track. Thoroughbred revenue goes to harness purses and vice versa, something Thoroughbred interests have fought.

“All purse money earned at Ohio tracks on simulcast wagering should be paid into a state-regulated fund and redistributed by breed,” CIS said. “The track processing the bet would keep the permit-holder portion of the takeout split, but the purse portion would be allocated to support purses for the breed of horse on which the bet was made. The amount each track receives for purses would be based on number of live racing days.”

CIS also said night Thoroughbred racing should be permitted in the state, and each track should be able to simulcast all breeds all day, every day.

CIS said Ohio racing must lower takeout rates “enough so that it becomes the lowest in the region and lures new bettors.” The consultants used Fort Erie Racetrack & Slots in Canada as an example, noting a reduction in the pick four takeout from 26.2% to 14% generated a 59% increase in handle in the first two weeks.

As for racetrack gaming, CIS said VLTs would increase purses, “but since percentages must be negotiated—or determined by Kasich’s office—it is unwise to look upon VLTs as racing’s savior. If the sport doesn’t pay for itself, or at least dramatically improve its financial picture, casino companies, which now control five of the seven tracks and probably will be part of all seven before long, will find ways to eliminate the need for racing in order to have casino-style gambling.”