Less than two years into its slots-at-racetracks initiative, Indiana is in conflict and debate over its Thoroughbred racing and breeding programs, and how to strike a balance between them.
The conflict, not without political overtones, stretches from small breeding farms to the statehouse. It has drawn a line in the sand between the open racing program and the Indiana-bred racing program. And it has raised the question of which parties should ultimately decide purse structure, condition books, and how breed development money is spent.
A “quality of racing” initiative remains under consideration by the Indiana Horse Racing Commission and, if approved, won’t take effect until 2011. But the IHRC already has endorsed related changes, such as 25% purse bonuses for Indiana-bred horses that finish in the top three spots in open company in high-level races, and limits on the number of races a track can card for races with claiming prices of $7,500 or less.
IHRC executive director Joe Gorajec said the “premise is pretty simple.” He said it comes down to rewarding quality with more money.
“It’s about the breeding of horses of quality that can compete successfully in the region, not just solely in Indiana,” Gorajec said. “Better horses should run for more money.”
Members of the Indiana Thoroughbred Owners and Breeders Association have a different view. They support a strong open program, but not at the expense of state-bred purses.
Ed Martin Jr., an Indiana TOBA board member who helped author the Indiana-bred program when pari-mutuel racing began in the state in the mid-1990s, said the problem took root about eight years ago when Indiana Downs, the second track in the state, opened and the purse pool was diluted. At that time, purses earned revenue from a tax on riverboat casino admissions.
Between 1996 and 2006, the purse for an Indiana-bred maiden special weight event went from about $30,000 to $13,000. When slots revenue was realized last year, purses at Indiana Downs and Hoosier Park increased, and this year they will be even higher.
An open maiden special weight event will run for $32,000 at Indiana Downs, according to its first condition book. The comparable state-bred event will go for $22,000, which doesn’t satisfy breeders.
“(The program is) fixed now because we have slots,” Martin said. “This increases the return-on-investment potential for Indiana-bred horses. State-bred programs are there to create value. The program would be fine if they’d just leave it alone.”
Martin said he and Indiana TOBA president Herb Likens met with Republican Sen. Luke Kenley, who said he would contact IHRC officials and recommend they set Indiana-bred purses higher than those for comparable open events.
“I am not against a supplement to an open purse—I encourage it,” Martin said of the new 25% open-company supplement for state-bred horses. “But I do oppose an open-race supplement if a restricted race of the same class and condition is less than an open race without the supplement.
“Our goal is to have the purses restored before opening day (April 16 at Indiana Downs).”
IHRC staff will be making recommendations based on a report by Gorajec on or before April 1. Industry stakeholders will be able to submit comments on or before May 1, and draft recommendations will be made to the racing commission on or before June 1.
Gorajec said he anticipates the IHRC will take up the issue and hold a public meeting in late July. Even if the commission approves the recommendations, they wouldn’t impact 2010 meets.
The changes made for this year—state-bred supplements and target levels for bottom-level races—were designed to serve as a “transition,” Gorajec said.
“We want to begin to change the mindset of horsemen in Indiana and better bridge the state-bred program to the open program,” Gorajec said. “Indiana-bred horses should take advantage of the entire program. There also should be better purses for better horses. If Indiana-breds are successful in open races, they would earn significantly more than they would (in a restricted race).”
A “Quality of Racing” report prepared by Gorajec explains the rationale. Few changes were made to the Standardbred and Quarter Horse breed development programs because of their structure; for instance, in regard to breed development funds paid for stakes in 2009, the Standardbred industry spent 57%, Quarter Horses 19.8% (40% in 2010), and Thoroughbreds 15.4%.
The report cites two state-bred allowance events for non-winners of four races lifetime at Hoosier Park in the fall of 2008. Of 20 total horses, 11 were racing for a $5,000 claiming price by the end of 2009.
The horses at that time had earned a combined $930,000 in purses and owner, breeder, and stallion owner awards, the report indicates.
Of that amount, “over a quarter-million dollars was generated by state-sanctioned riverboat and/or slot machine subsidies,” the report states. “The disparity between the quality of these horses and their earnings is unacceptable. What is most disconcerting is the pervasiveness of these low-caliber horses in supposedly high-caliber races.”
The report says IHRC staff isn’t suggesting there are no quality Indiana-bred runners, and acknowledges a percentage of horses in any state-bred program end up racing at lower levels. It says the question is whether the IHRC “will determine that the status quo best serves the public interest.”
Restricted programs run the gamut in the United States. State-bred purses in New Jersey traditionally have been much higher than purses for comparable open events; in New York, purses for restricted races are a few thousand dollars less than those for open races; and in Pennsylvania, there aren’t many restricted overnight events, but all races—even $5,000 claimers—carry bonuses of up to 40% for state-bred runners that hit the board.
As usual, politics colors issues
During the March 14 Indiana TOBA annual meeting, Martin outlined political developments since last year. He suggested the battle lines were drawn in 2009.
“We knew what we had in store for us this year—what I called the planned assault on Thoroughbred breed development,” Martin said.
Last year, the tracks, which each paid a $250 million licensing fee to get slots, wanted to reduce the share purses get from slots revenue from 15% to 10%, at least temporarily. They were rebuffed, and also couldn’t gain tax relief from lawmakers.
Earlier this year, a Senate bill included language from the governor’s office removing provisions for breed development committees from statute, Martin said. In effect, the committees would have no input on how breed development funds were spent. The bill died earlier in March.
“We had a meeting with legislators and told them breed development committees offer dialogue and time to think through changes to the programs. These decisions should be made by breeders and owners with experience.”
Most recently, the House of Representatives passed a resolution supporting breeder, owner, and stallion owner awards and protecting recommendations by breed development groups.
“It’s not law, but it does send a message to regulators that the legislature believes the program should be written by experts, not bureaucrats,” Martin said.
Where does the $5,000 horse fit in?
The 2010 Indiana Downs meet will be a sort of proving ground for the class initiative even though Indiana Downs began upgrading its condition book last year.
According to the IHRC report, 33.2% of races at Indiana Downs in 2009 were open claiming races with a tag of $7,500 or less, already close to the IHRC goal of 30% for this year. It was a different story at Hoosier Park, where 47.4% of the races were open claiming races with a tag of $7,500 or less in 2009.
The 2010 IHRC target for the number of stakes, allowance events, and claiming races with a tag of $25,000 or more is 20%. Last year, Indiana Downs came in at 18% and Hoosier Park at 12%.
The issue got a full airing at a Jan. 29 IHRC meeting that lasted several hours. Trainer Kim Hammond, who races in Indiana, questioned limits on the number of races for $5,000 claimers. She also said it would be difficult because racing secretaries sometimes need races to fill programs.
“If you limit the number of $5,000 claiming horses, essentially what’s going to happen is that those horses are going to run for $6,250 because they have to have somewhere to run,” Hammond told the commission at the meeting. “So what I’m saying is, are we going to come back in a year and say the $6,250 horses are the low-end horses now?
“We have to have somewhere to run the low-end horses. Every horse can’t run in allowance (company). We need time to be able to better our horses, to be able to get more owners interested. The money that they are offering in Indiana is going to draw owners. We need time to upgrade our horses, but we also have to have a place to run the $5,000 horse.”
The impact of slots revenue on horse racing has varied from state to state. For instance Mountaineer Casino, Racetrack & Resort over a period of several years increased its minimum claiming price from $2,500 to $5,000, though some argue the $5,000 claimers are really $3,500 claimers in disguise.
In Kentucky, Turfway Park, squeezed by competition from tracks with gaming, offered a high number of $5,000 claiming races during its current winter/spring meet, and couldn’t have filled complete programs without them. In general, however, a good $5,000 horse in Kentucky can run well for double that price elsewhere.
Martin and some racetrack officials noted lower-level claiming races with full fields generally attract larger exotics pools.
Hoosier Park president Jeff Smith told the IHRC the track supports efforts to improve the quality of racing, but he noted the guidelines come at a time when the tracks, both in financial straits, have just realized slots revenue.
Quality, revenue must be balanced
“The guidelines naturally require more high-quality races, more expensive races, (and) the translation is fewer races and most likely smaller fields,” Smith said. “Those have a negative implication on the economics of the racetrack. Just reducing the number of races will affect our revenues anywhere from $200,000 to $400,000 probably at a time when we are in financial extremis.
“We can offer a very competitive purse schedule, and we can throw that up in the condition book, but who shows up at the entry box remains to be seen until the day you take entries. If you offer better quality races, and you just don’t get the races filled for one reason or another, whether it be competition from other tracks trying to get those same horses or whatever, that all should be taken into consideration.”
Jon Schuster, general manager at Indiana Downs, also weighed in on the changes. He said no one is trying to eliminate $5,000 claimers; still, the racing program needs balance.
Of the horsemen stabled at Indiana Downs last year, 93% had open stock, he said.
“We had one of the best meets in the country last year,” Schuster said. “We were up when most were down. I don’t know if we will get that this year or not. I don’t know if we were lucky, but I would like to think that it’s because we did push the quality issue. We had decent field sizes and had a good number of races each day. And we did that with the 644 stalls we have.”
Indiana Downs is located less than 90 minutes from Kentucky racetracks and training centers, and last year successfully lured horses from those facilities.
“I think it is time to make some changes in these programs,” Schuster said. “The other breeds have done a little bit more. This is the time because if we don’t start—I’ve heard the argument of three years, five years, or seven years—with the whole quality thing of both open and breed development, it’s going to perpetuate itself and encourage people to continue breeding horses that are going to arrive at (the bottom level) more often.
“There are nice stallions coming into the state. People are moving up, but I do think it needs to be hastened along just a little bit.”
Debate figures to linger
At the Jan. 29 IHRC meeting, commissioner Alan Armstrong said Gorajec isn’t being a “dictator” and wants input. He said there is broad agreement that quality should be a goal.
“We’ve all said, ‘Hey, quality is good,’ ” Armstrong said. “We wouldn’t have Lucas Oil Stadium, I guarantee you, if the (Indianapolis) Colts kept going 1 and 15. The government is spending money. They want something in return. And it usually is quality.
“Joe is saying the quality is not there. He wants to work with the stakeholders to get it where it should and could be. I would love to see our horses go down to Kentucky and bring back Kentucky money, and Illinois and Ohio (money). That’s what I would like to see. Shouldn’t that be a goal here, or do you just want to regurgitate our own money?”
Dr. Crystal Chapple, a veterinarian and longtime Thoroughbred breeder in Indiana, gets agitated when she hears suggestions that Indiana-bred horses aren’t of quality. Chapple bred the 6-year-old Indiana-bred gelding Unreachable Star, a great example of how the local program should work.
Owned by Kentucky Rep. David Osborne, Unreachable Star debuted in 2007 and raced evenly in two $30,000 maiden-claiming races at Turfway. In his fourth start, he broke his maiden in an Indiana-bred maiden allowance test at Indiana Downs.
In 2008, he competed well in open allowance company at Presque Isle Downs in Pennsylvania, and later that year won his first stakes, a state-bred event, at Hoosier Park. The three-time stakes winner, in his next-to-last start of 2009, crushed an open allowance field by eight lengths at Churchill Downs.
Unreachable Star, by Unloosened out of Starsovertheriver, has 10 wins in 36 starts for earnings of $314,577.
“I thought we had a real chance for improvement with slots,” Chapple said. “I stuck it out after the second racetrack was built (and purses fell), and in the middle of all that I bred an (Indiana) champion.
“We lobbied to get slots, and we told people if we kept the program the way it was, the program would do nothing but improve. The potential was there. Now, the bureaucrats are trying to destroy it.
“We’re the reason the legislature passed (racetrack slots)—for the economic impact of agriculture in this state. The slots are doing what they wanted them to do.”
Kentucky carefully watching developments
Racetrack slots became law in the spring of 2007, and it took a few years to get the program rolling. Last year was the first full year with slots, and about $10 million was paid in Thoroughbred breed development purses and awards.
The 2010 amount was expected to increase to $12 million, so the Thoroughbred Breed Development Committee planned accordingly. However, the IHRC opted to spend no more than $10 million, meaning $2 million will sit in reserve.
Indiana TOBA members argue the prospect of higher purses for state-bred races led to an influx of stallions and mares, some from neighboring Kentucky, the last few years. State-bred purses that pale in comparison to comparable open events will stymie momentum, they claim.
According to statistics from The Jockey Club, the Indiana-registered Thoroughbred foal crop has grown steadily since 2006, when it stood at 327. In 2007, the year the slots bill passed, the foal crop numbered 337, but a year later, it had jumped 43% to 482.
The first condition book for the Indiana Downs meet is regarded as both curse and blessing.
In a letter to the Indiana TOBA board, breeder Darrell Lackey said the state-bred purse distribution “is a slap in the face to anyone who has tried to be part of the Indiana breed development program.” On the other hand, the open program is viewed as very attractive.
An open entry-level allowance purse is set at $36,000, and the purse for a “non-winners of two other than” allowance test is $40,000. Those pots are creeping closer and closer to purses for comparable races at Churchill Downs, whose spring meet overlaps the Indiana Downs meet.
An open $16,000-$14,000 claiming race will go for $22,000. And when the turf season gets under way in early May, Indiana Downs will card many mid-level races that appeal to Kentucky trainers who can’t run that stock on the grass at Churchill.
One Kentucky trainer who viewed the Indiana Downs condition book said he expects to see further erosion of the “middle” this spring at Churchill, which last year had to cut back to four-day race weeks to maintain decent-sized fields given the increase in regional competition.
Last year, when total handle was up almost 20%, Indiana Downs paid $8.9 million in purses over 62 days for an average of $145,000 a day. That figure is expected to increase in 2010.
The track will offer 10 open stakes worth a total of $875,000, and eight Indiana-bred stakes worth a total of $560,000.