21 December 2008

Solutions For Saving Fort Erie Racing

I went to the Save Fort Erie Racetrack Rally today just a little over an hour after it started. Unfortunately, I missed the meat of it. I was told MPP Kim Craitor and Mayor Doug Martin made speeches. Nothing new though. Only that they are working on solutions to save racing at Fort Erie.

I think everybody involved in thoroughbred racing in Ontario knows, from the trained monkey execs at Woodbine right down to the owners, trainers, and breeders, how devastating Fort Erie's closing would be on the industry.

If you want to call Woodbine an A track, Ontario needs a B track. If, like most Americans, you want to call Woodbine a B track, Ontario needs a C track.

Owners, trainers, and breeders need an out in Ontario for horses who just can't cut it at Woodbine, whether the reason is that the horse does not like polytrack, or that the horse isn't fast enough, has lost a few steps, is out of form, or is on the sore side and has problems competing against classier competition, Fort Erie is needed to fill the void.

Otherwise, the only out an owner has is to go to the trouble of either selling the horse for probably peanuts (which will drive down the dismal thoroughbred market even more), or finding an outfit at a US dirt track, and go to the expense of shipping and racing there. Of course, many owners like to see their horses run live, and many do show up at Fort Erie even though they have to trek 100 miles to get there. Most of these owners won't trek 300 plus miles though, and they will lose more interest in the sport.


SOLUTIONS


NORDIC SELLS

They've basically conceded that they have no business running a race track. How can they lose money, when tracks like Beulah and River Downs can run more than Fort Erie, have comparable handle, and have $4 million less going into their pockets from slots than what Fort Erie is receiving (Ohio doesn't have slots)?

Unfortunately, Nordic has always wanted more for the joint than what it is worth. What is a company that loses $3 million a year worth anyway? The asset they have is the land, and if the track closes the land is also worth next to nothing.

Either Woodbine (who I hear is not interested in buying The Fort) or another party, would give the track an opportunity to be around for a long long time.



THE OLG GIVES THE TRACK AND THE HORSEMEN 7.5% EACH EXTRA FROM THE CASINO PROFITS

This is the ideal solution for the owner (Nordic), and the horsemen. Fort Erie could use a boost in purses. Compared to Woodbine, they run for peanuts. $3 million extra in purses would make the backstretch economy run much smoother, it would attract bigger fields, and it could attract more betting.

The $3 million for Nordic is exactly what they are trying to extort get from the government right now in order to keep racing going.

The problem with this idea is that other tracks will bitch, including Woodbine most likely.

Fort Erie can make the case that they are the only other thoroughbred track in Ontario, and they also happen to be a border town. Their existence, as pointed out above is important in keeping the thoroughbred horse industry in Canada at a status quo. Not to mention how devastating Fort Erie's closure would be to the town of Fort Erie.


THE OLG GIVES NORDIC A $3 MILLION A YEAR BAIL OUT LOAN

The most popular term these days seems to be "bail out." Now that the Canadian government has announced that the Auto Industry is getting a $4 billion aid package, a $3 million aid package for Fort Erie shouldn't seem out of the question.

Here is how my plan would work:

The OLG loans Nordic $3 million a year for five years. This keeps Fort Erie's cash flow even. After, the five years, Nordic has to start paying off the loan $1 million a year.

Nordic must put on at least 70 racing days a year.

Nordic has 5 years to turn the track into a profitable business.

In the meantime, they can sell the track, but the new owner has to take over the liability to the OLG.

After 5 years, if the $1 million pay back gets defaulted at any time, the track becomes OLG property.

In essence, that would mean Nordic would get $15 million as a sales price from the OLG if they decide to walk in 5 years.

Would Nordic agree to this? It is better than just having the property sit there. And they would have an even cash flow, so they wouldn't have to go into their pockets. Of course, if they have an option to keep the slots open and rake in their 10% without running a race, they will choose that until the cows come home.

Would the OLG agree to this? Again, it is to their best interest, if they have to close the casino without racing. That is the big issue, and it is still unclear as to whether they can stay open or not.

Could Nordic turn the place profitable in 5 years? I know I could make them profitable in one year. Maybe they need to hire me:)

17 comments:

Anonymous said...

Option 3 sounds pretty sensible. Does Nordic want more than $15 Million for the property?

mj said...

First I think you should send the 3rd proposal to the OLG and Nordic and then I think you should apply for the job at the Fort for Nordic :)

Anonymous said...

I too have great idease which could turn this track around in one year. I have been saying it for years. Day racing Sunday, Monday and Tuesday for all the retired guys, and install lights for night racing on Friday and Saturday nights so families can go. How great would it be to go for dinner and watch live racing on a beautiful summer night. Plus the nights do not interfere with Woodbine, rather they COMPLIMENT each other. Let's face it, Woodbine needs Fort Erie as much as Fort Erie needs Woodbine, even if the big wigs in TO don't admit it.

Anonymous said...

Just run in it with basic economics. The purses will be what the handle makes them. The dates will be whatever the horse population requires. Mondays and tuesdays mid-June to mid-Oct, $1500 bottom claiming (all they're worth) main track and turf options for horses in the $10 $20 range should be viable. With internet capabilities, that should create $100,000/day in purses. Acceptable for horses who, in reality, have few realistic alternatives.

Cangamble said...

Anon 8:19, installing lights is both costly and may not fly because of harness racing conflicts. They will scream bloody murder over Ontario competition.
Monday and Tuesday are optimum days for Fort Erie because of lack of competition. Sunday is a bit of drag. Sure, they get a bigger live crowd but Fort Erie bettors don't bet that much. A Wednesday twilight card makes more sense, if they can get away with it without lights.

Anon 8:31, Purses are not the problem. Fort Erie has enough to go over 70 days with their share of slots and betting. They have over 8 million a year to distribute (80 days equal 100,000 a day).
The problem is apparently the track loses money on their cut from concessions, betting and slots. I find it impossible that they do, but that is why they are talking about closing down.

Anonymous said...

FE needs to attract betting. Their handles on and off are pitiful. The off-track handle they do generate is at a give-away % as low as 1%. I may be wrong but I also believe that the cost of operating a stable in Canada cost more than to do the same on this side of the Peace Bridge. The competitive purses at FL and PID doesn't help either. The slots were at the cost of the OLGC and Nordic was a landlord. When things were good Nordic reaped Loonie after Loonie and other than rework the main track which from what I understand wasn't exactly a success story they stuck nothing into the place. Then they wonder why nobody goes. My suggestion, the OLGC should buy them out and auction it off the same way they did with the harness tracks in Quebec with the caveat that the new owner commit $X to redevelopment and the OLGC commit to incentives. I am surprised that the Ontario Ministry of Agriculture hasn't chimed in as yet.

Cangamble said...

Anon, they definitely don't maximize their handle potential, but they are still generating over $4 million from it to add to the horsemen account for purses.

That is a different issue, and there are a number of ways to get handle higher. But it isn't the issue right now.

As for selling the place, I think that is a great idea, but I doubt Nordic would go the auction route.

Anonymous said...

No More Nordic!!

It is my understanding that Nordic is and has been the problem. In past years they have received monies and put nothing back into the track. They will not install lights, in the past they would not agree to 100 days of racing with govn't assistance. Hence,under this ownership racing has been allowed to deteriorate and suffer for years, with shorter meets, drop of purses people have just moved on to the U.S. and some to Woodbine.

It is safe to say Nordic did not buy Fort Erie for the racing. It is my understanding the original purchase deal stated there had to be racing in order to have the slots. However,I believe that requirement has now expired along with any deal that Nordic had for the 300M Nascar project. So yes, what is the property worth? With the downturn in the economy without racing(and I don't think the slots would do well on a standalone basis)-I wouldn't think too much.
The govn't created/enabled the demise of Fort Erie racing by allowing this purchase. A towns future, and a piece of Canadian History should not be dependent upon the allowed foreign ownership of one person!

I think the extortion of money by Nordic should be stopped. Call his bluff, without racing and no slots. What does he have? Maybe he needs some cold cash now. Cash is hard to get these days. Banks aren't lending, notes are being called in etc. Bigger companies than Nordic have and are going down. We do not know how/if he is extended on projects elsewhere! Maybe some millions would look good to him now!

The horseracing people and the govn't have been played like a fine instrument by a very shrewd businessman. Required to have horseracing he has made sure the industry and the govn't pick up the tap for it.

I think a 100 day meet is required in order for horsemen to live in this town, buy homes, support local business etc. Anything less, will not be able to sustain a livelihood for those involved in racing, you will just have ship- ins taking the money out of the town and down the highway.

I know that Woodbine is willing to help, they have said they would take over "The Prince of Wales" race, aren't they sweet!

I know we have the immediate 2009 racing season of the utmost importance, but I hope the powers to be are looking at a longterm solution to sustain this track and most importantly revitalize this once beautiful unique racetrack.

If the govn't agrees to put more money into Fort Erie Racing, they should be looking at a stake of ownership in it and immediately appointing a managing team(perhaps headed by yourself?)
I think there should be a long term plan to buy this track and get Nordic out, otherwise, I am sad to say he will just continue to let it die with our tax money.

Through public awareness and pressure alot can be accomplished.

Cangamble said...

Anon 12:02, I'm not sure if you know the magnitude of how large Nordic's parent company is.
Read this post and the links.
Nordic is a pimple on its owner's butt, if even that.
What I think is that he doesn't want negative cash flow at this time, in other words, he doesn't want to have to write any checks for anything he owns if possible, since he is most probably leveraged to the tee with many of his projects and holdings.

Anonymous said...

Thank you for the insight on Nordic's parent, you are correct I had no idea of the magnitude.

It would appear then this owner would have no problem sitting on non-operating vacant property for years.

But how many times can an influx of money be given? I've heard Nordic received money from the govn't and from the HPBA in past years, which totally went to Nordic's bottom line.

Does anyone know what Nordic would sell for? I've read he wants too much for a sale, but I'm not sure what too much is when you have the entire town's prosperity at risk.

It appears he has us between a rock and a hard place.

CFNMguy said...

Here is a comment from an off-track customer. I and many others don't bet anything at Fort Erie because the takeout is so high. Try reducing the takeout to help the current customer and maybe attract some new ones. Then again, the customer is the last thing that anybody thinks of in the horse racing industry and they wonder why they are failing!

Cangamble said...

CFNM, you are right about the takeout being too high, but that is a problem that can be dealt with once Fort Erie has a life again.
Then the issue of growth can be tackled.

Anonymous said...

Goodbye Fort Erie.

it's been a slice.

Anonymous said...

I think it is clear that the Fort Erie racing has been nothing more than a pawn in a financial game between Nordic and the province. Nordic has made the most recent move and has put the province in "check" by announcing the lay-offs.
For Nordic the end game has nothing to do with racing and everything to do with the multi-million support from the province for their residential condo project.
The province's interest is keeping Fort Erie as a viable community but not to the extent of going into commercial partnership with Nordic, what a precedent that would set!
As a racer I see our task as extracting the race track from this ongoing "chess game".
How can this be done? Is there someway Nordic could be convinced (forced?) to lease the track operations to say HPBA with the initial financial support of, say, OLG.
This way Nordic would be able to maintain their slots revenue and continue their moves with the province on their commercial project.
Nordic professes to be losing millions on the horseracing each year. The general consensus of horse people seems to be that the track should be able to support itself and with a net net lease for, say, 10 years it could certainly be put to the test.

Cangamble said...

Anon 9:30. I do believe the layoffs had to be announced when they did legally according to the Ontario labour laws. It was just convenient for Nordic as it gave the issue of the track's closure on the government's front burner.
The condo project will never happen, and never was going to happen. It isn't feasible. Nordic knows it. Sure, if the government paid for it, they would go with it. But I doubt Nordic had any intention to put a dollar into it.
Your leasing idea isn't a bad one. I thought about it after I wrote this post. Let Nordic have the slots and their share of the revenue, but let another management team in to try to make the racing operation profitable.

Anonymous said...

Problem with the $3MM/yr loan for 5 years with option to walk away is that it nets Nordic 0, not $15MM, if they have a negative cash flow of $3MM/yr.

Cangamble said...

Anon 10:33, it is still like getting 15 million for the place. They still get their slots money.
It gives them a chance to make the place profitable and therefore more salable down the road, while not having to have a negative cash flow in the meantime.

What good is the track if not operable if looking to sell it?

And there is no way the slots will be operational after 6 months of no racing. So you just have land, and you have to still pay property tax on it.