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KY Panel Continues to Look at Breeders' Fund

Changes in Kentucky breed incentives are being considered.

A panel of the Kentucky Horse Racing Commission looking into possible changes in the state’s breeders’ incentive fund met again Nov. 22 and discussed various options but came to no solid conclusions.

The Kentucky Thoroughbred Breeders’ Incentive Fund Advisory Committee is considering all aspects of the program—from the registration process and fees to who is eligible to receive the incentives—for possible changes with a goal of increasing participation among breeders.

Under legislation passed about five years ago, the breeders’ program is funded through the 6% sales tax on stud fees for Kentucky stallions. The money is divided by breed, with 80% to Thoroughbreds, 13% to Standardbreds, and 7% to other breeds.

According to Jamie Eads, KHRC incentives and development director, of the 17,303 Thoroughbred mares bred in Kentucky in 2010, 8,868 have been registered for the KTBIF. There is a $60 fee due if a mare is registered prior to Aug. 1 of the year bred, and it increases to $750 from Aug. 2 of year bred to Dec. 31 of the following year.

During the meeting, advisory committee members went through a litany of possible reasons why there is not a greater number of Kentucky mares (and their subsequent offspring) registered for the program. Among the most oft-cited reasons for lack of participation are the amounts and deadlines for fee payments, and the requirement that the mare must be kept in the state for the entire gestation period to be eligible for the incentives.

Most of the committee members own horse farms or are involved in farm management and have direct dealings with many of the breeders who own mares bred in Kentucky and other states.

David Hager, who owns Idle Hour Farm near Paris, Ky., said he understands the requirement that mares must remain in the state from time they are bred until the foal is born is designed to help the state’s horse farms. In practice, however, it is having the opposite effect, Hager said.

Hager cited some clients who own farms in other states and send their mares to Kentucky to be bred. Rather than leave the mare at a Kentucky farm and incur unnecessary board costs of the entire gestation period, they either opt not to register for the Kentucky breed incentive program or they breed the mare to a stallion in a state with less-restrictive requirements. Either way, it is inconsistent with the legislature’s intention when it passed the bill, Hager said.

“It has made it so restrictive that it has had the opposite effect,” Hager said.

In discussing possible alternatives to the mare residency requirement, the committee requested Eads and the incentive program staff review the breeding programs in other states and Ontario, Canada, as a way to come up with a viable alternative.

Most of the committee members said they favor extending the $60 fee, or a graduated amount that is higher than $60 but lower than $750, until Dec. 1 of the year in which the mare was bred as a means of getting more buyers of mares at November sales to register their new purchases to the program.

Along with changes in registration deadlines and fees, the committee reached a general consensus on changes in the awards themselves in response to a dwindling amount available to be paid out each year. The incentive funds have declined due to declines in stud fees and the subsequent decrease in taxes that are collected as well as a decline in mares being bred in Kentucky.

Eads said the amount for incentives this year will be about $13 million, down from $15 million in 2007 and 2008. She is also projecting additional decreases in coming years due to industry contraction.

Chief among the changes is lowering the amount paid to the breeders of the Kentucky Derby (gr. I) and Kentucky Oaks (gr. I) winners. Currently, if a KTBIF-registered horse wins either of those races, the breeder is awarded $100,000. While some committee members discussed lowering that award to the $25,000 given to breeders of registered horses that win other grade I races, they seemed to prefer a $50,000 award.

Committee member Headley Bell of Mill Ridge Farm and Nicoma Bloodstock said the Derby and Oaks breeders should receive more than a breeder of any other grade I race “because it is such a special thing.”

Also discussed were major changes in the way the fund rewards breeders of claiming races.

Currently, the breeder of the top-earning claiming horse at each Thoroughbred race meet receives an incentive award of $25,000. However, rather than have only four to six breeders benefit under that format, the committee is exploring how to change the award to have more breeders share in the awards.

Republican Kentucky Sen. Damon Thayer, who at the October advisory committee meeting said he favored doing away with claiming awards, did not attend the Nov. 22 meeting. Thayer introduced the incentive fund legislation.