It Is Easy To Have Zero Respect For McGuinty and Duncan

The Ontario Liberal government and the OLG is plowing ahead in their efforts to kill off Ontario's horse racing industry. Notices were sent out to at least 3 more tracks (and perhaps all the remaining tracks) on Friday, which stated that site holder agreements between racetracks and the OLG will end March 31, 2013.

So unless things change, tracks and other entrepreneurs/businesses will now get to compete for the right to house slot machines. The OLG will be looking at who will give them the best deals (making the OLG the most money) in each municipality. The biggest change is that slots will not be operated by the OLG anymore, so the only expense the OLG will now have is the cost of buying machines (the way I understand it), which they will lease out to the new private casino operators, or make it part of the deals.

What the OLG is hoping for is a bigger cut from the $1.7 billion in gross revenues that slots produces a year. Part of the problem with the OLG operations was due to paying for too many employees and upgrading casinos, and these expenses were mounting each year at an accelerated level. And of course, there is the issue of $345 million that was being earned by tracks and Horsemen for having slots compete with parimutuel betting at the racetracks. Lets be clear, that $345 million isn't going to be cut to zero, because anyone who operates slots is going to take the risk if a healthy profit can be realized as many risks are involved.

For example, dealing with a government that seems to be able to do what they want when they want is sure to scare off any potential partners. The other big thing is that the government has stated they will get into internet betting this year, which means that slot players will have the ability to lose money from home. This is sure to cannibalize slots wherever they are physically located. I believe the government will probably settle on giving out $150-$200 million (based on past years total revenues) in potential profit to the new private slot operators in total, I think any number lower than that is unrealistic. Tracks may be able to live with that, but will they get the chance?

Distrusting the Ontario Liberal government as I do, I am sure that they know they have offers on the table right now in many cases that they find acceptable right now (most likely friends or friends of friends that are going to get favors from the McGuinty gang). The way the government has acted so far, tells me that there are quite a few dirty deals looming, as the Drummond Report which came out barely a month ago stated to review the racetrack slots deals on an individual basis....and this obviously has not happened:

Recommendation 11-11: Review and rationalize the current provincial financial support provided to the horse racing industry so that the industry is more appropriately sustained by the wagering revenues it generates rather than through subsidies or their preferential treatments.

Recommendation 17-4: Re-evaluate, on a value-for-money basis, the practice of providing a portion of net slot revenues to the horse racing and breeding industry and municipalities in order to substantially reduce and better target that support.

But then again, the Drummond Report also recommended closing a Niagara Casino (didn't happen), closing an OLG office (didn't happen), and cut out all day kindergarten (didn't happen).

As for all day kindergarten, to me, it shows that the government isn't really serious about reducing the deficit. All day kindergarten costs Ontario taxpayers (yes, it is paid for out of tax dollars, unlike the slots revenues which is after tax monies lost by casino gamblers) $300 million a year. It is simply glorified day care. I remember half day kindergarten and the only thing I learned was not to eat paste, and the only thing I remember is getting a mat to have a 15 or 20 minute nap each morning. All day kindergarten is a luxury that saves parents day care money. It was an easy thing to cut, regardless of what they do regarding horse racing.

The freeze on public sector workers is OK, but not nearly enough. If the government was really going to get tough, they would cut the pay of 95% of the 79,000 on the Sunshine List (those who make over $100,000) in times when the government can't afford them. My reason is pretty simple, most of the people on this list couldn't get anything close to the same type of money and benefits if they were in the private sector. This is simply the government's ineptness in allowing salaries to get out of hand. Cut their pay 5%-10%, other than doctors whose pay I wouldn't touch, nobody would quit their jobs if this was done. If a government was serious about balancing the budget, this would be a no brainer.

Instead, the Liberal government went on a propaganda campaign, rivaling that of Hitler's Germany, pitting all day kindergarten and health care against the horse racing industry.

Calling the revenues the tracks and Horsemen received subsidies was the first big lie. To quickly refute it, if the government does end up privatizing the casinos, is the money that the new operators (in some cases it will be racetracks) make a subsidy? Of course not. It is money made due to a business deal with the government. It isn't tax dollars, as Goebbels Duncan tried to make it, but after-tax-dollars, that the government was sharing with their business partners.

The Biggest Reason Why McGuinty and Duncan Can't Be Trusted

Where is the job and community impact report on what happens to those who make their living or most of their living in the horse racing industry or the communities that have horse racing?

You'd figure that a government about to kill an industry would know how much unemployment it would cause, how many people are exactly in the industry, how much impact potential job losses would have on businesses within the communities affected, etc. This does not to even appear to be the case in any shape or form.

Goebbels Duncan recently spewed out:

'the employment figures showing 60,000 people are employed directly or indirectly by horse racing are "grossly exaggerated," and that "nobody" buys that number.'

I'll admit that I find that number to be high, unless one is talking about things like restaurants that may lose 15-20% of their business, as well as similar types of scenarios, however it appears that the Liberal government themselves put out reports in 2004 as well as 2008 which pegged the number of those employed directly or indirectly to be upwards of 55,000 people.

How can a move to cut this many potential jobs without at least an attempt at due diligence? Of course that propaganda machine spins it another way, McGuinty and Duncan, are promising the creation of 2,100 to 3,000 jobs from this "modernization" plan, but fail to address the destruction this plan will cause.

How much due diligence was put in on their new plan? I have zero faith that it was very much.

OPSEU is demanding answers from McGuinty regarding the rumours that Ontario Place will potentially house a casino.

It seems that within only a few months since getting elected, McGuinty as done a complete about face regarding gambling in Ontario, not enough time to have a concrete plan, making their decisions regarding the horse racing industry appear very hasty.

CAN MCGUINTY BE STOPPED?

A referendum on new casinos in Toronto or anywhere close to a track would be a death knell for McGuinty's casino plans. In almost every instance, if not all instances, the people would vote against it, especially if a racino already exists.
McGuinty has stated that the law that makes it MANDATORY to have a referendum (public vote) that was in the OLG Act of 1999 has expired. It may be true, it may not be. As we've seen, everything McGuinty or Duncan needs to be fact checked...I wouldn't trust them if they said that the earth revolved around the sun.

According to this article, a referendum is still needed unless the Ontario government has changed the rules. If a referendum is required, it could put the tracks in a powerful position if they acted together, as they would be the only places (outside the non track casinos that exist right now) that can legally house slots and casino gambling. The tracks can dictate a similar type of deal that the government has ripped up.

If a mandatory referendum isn't required. It is time to put pressure on Hudak and Horwath to make it required again. Both were recently quoted saying they believed it should be required:
"Both Horwath and Hudak say the province should re-implement mandatory referendums for new casinos."

I don't know what the hurdles are that are required in making a referendum mandatory again, if they aren't mandatory now, but the way things are going, either playing the card against McGuinty which trades off allowing him to open a Toronto casino without much of a hassle or playing hardball and preventing a Toronto casino from opening altogether seems to be the only good options available to the racing industry in Ontario right now.

I'm all for privatization of the casinos. But I also think that they belong at racetracks and I think that a deal where tracks and Horsemen wind up with 60-75% of what they used to get would be the fair thing to do.

Fate Of Ontario Horse Racing Is In Andrea Horwath's Hands

Ontario Premier Daulton McGuinty's budget needs to be voted on because the Liberals have a minority government. Tim Hudak's leader of the Progressive Conservative Party has already stated he will vote no. This leaves the NDP and their leader Andrea Horwath the ability of either passing the budget or voting against the budget which would trigger a provincial election. She is also in a position to negotiate some changes in the budget, a budget which includes the ending of the slots deal with racetracks in Ontario.

Unfortunately, politics isn't about doing what is right. It is mostly about who will give you the most donations in the future, paying back those who donated in the past, and making decisions based on the current status of one's party with an eye towards more power and seats in the future. Oh, and the odd dirty deal where some money slide under the table to the politician.

The NDP really gained during the fall election, winning 17 seats. They still came in third. They would not be expected to even come close to a majority if they forced another election. Popularity for the Liberal Party has dropped significantly since the election, which means that the PC could possibly win with a majority. They would definitely beat the Liberals now that the Liberals have alienated the horse racing industry couple with the public's knowledge regarding ORNGE. But a PC victory isn't good for the NDP's objectives, as they are to the left of the Liberal Party, which is left to the PC Party. However, putting the PC's in charge might be a decent gamble for the NDP going forward, banking on the PC's to screw up so that the NDP would have a shot of winning the following Provincial election (but I don't think they thinking like that).

The other factor to consider is the cost of the election. Both the PC's and the NDP are still in the hole from the fall election. This definitely is something that will hold Horwath back from causing an election within the next two months.

Horwath has been inundated with calls from the racetrack community since stating she will listen to the public regarding whether to vote yay or nay for the budget. But I'm pretty sure the decision has been as long as she can make it look like she won something through negotiations with the Liberals prior to the vote.

It would be great if one of the concessions would be a continuation of the racetrack slots deal until at least 2015. Though this is unlikely because the Liberals seem to have their heart set on mindlessly destroying the horse racing industry in Ontario. I'll get to that in my next post.

Fort Erie Racetrack Beyond 2012

There will be a horse racing season at Fort Erie this year. Beyond that, the prospects are not very good without outside help.

Grossly unfair as it was, slots from the track will be pulled at the end next month, barring a very unlikely decision reversal by the OLG. The OLG has assured that the expected payments of what would have been if the slots were in place, would still be paid to the track this year. However, as it is right now, next year, Fort Erie is on its own.

Fort Erie is in big trouble if it has to fend for itself. From various sources and using extrapolation, a ballpark figure on what it costs to run a track for a season can be guesstimated. For the past three seasons (including 2012), thanks to the negotiations of the EDTC with the government, Fort Erie was able to receive $5.6 million instead of the $2.9 million they were only supposed to get a year from slot operations. Purse accounts received $2.9 million from slots as well, which represents 10% of the slots revenues at Fort Erie.

The Town of Fort Erie also pitched in as well from part of their municipality share of slots to try to keep the track at a break even level, as did the HBPA.

Fort Erie does give out around $100,000 a day in purses, which means that around $4 million must be generated by wagering. This also means that the track makes around $3.5-$4 million from wagering.

Nordic Gaming, the company that owns the track, leased it out to the EDTC the past 3 years, and in return received $100,000 in 2010, and $600,000 last year and this year.

In total, if Fort Erie to run a 75 day season in 2012, it appears to need more than $10 million to operate. Though the EDTC does not pay staff inside the casino, I imagine they will be able to cut some jobs that might be related to the casino from outside of it.

WHY IS HORSE RACING NEEDED AT FORT ERIE

In Ontario right now there are two thoroughbred tracks. Woodbine is home to large purses, and owners who pay big bucks to keep horses in training. Fort Erie is Woodbine's minor league affiliate. If a horse can't compete on polytrack or can't compete for $10,000 claiming or greater, they generally wind up at Fort Erie. Sometimes horses are given up on too early, or improve enough, and the might wind up back at Woodbine, and there are quite a few horses that toggle between the two tracks.

The existence of a B track is very important to most Ontario owners and breeders. The owners need an out that is simple. If the out for an owner of a horse who isn't cutting it at Woodbine is to ship to the US (which requires finding and trusting a new outfit miles and miles away in most cases), or trying to quickly get rid of the horse (which could, unfortunately, mean sell for meat), the owner will quickly become disillusioned, and most small owners and partnerships will either drastically reduce exposure or get out of the game completely.

This is not good news for breeders who need as many owners in the game to keep the demand for horses as high as possible. Many small owners also breed, without a B track, they will disappear as well.

From Woodbine's standpoint, with fewer owners and fewer horses, they will have a very difficult time filling races over as the years go on, and that is going to be very bad when it comes to their betting handle.

Woodbine is trying to become a recognized A track but will resemble Penn National instead.

Could Woodbine run a bunch of $5,000 claimers? Even if they wanted to, I doubt it. At $80-$100 in day pay rates, owners are not about to hang onto those horses even if they could get stalls at Woodbine. And those who might be able to pay Fort Erie rates ($45-$60 a day) while racing off a farm or training center, will quickly learn that they will be at a serious disadvantage running against horses dropping from $12,500 who have been training at Woodbine.

How about Ajax taking over as the B track location? They did build a five eighth oval, but unless they can house around 500 horses minimum in their backstretch (which they can't right now), it just won't work, for reasons cited above. There would be too much of a disadvantage and overall hassle if too many owners need to ship from anything but a racetrack.

Fort Erie is the perfect locale for a B track and it just doesn't make much sense not to have it around.

THE OPTIONS FOR RACING AT FORT ERIE BEYOND 2012 (outside of closing the track down altogether)

1. If nothing else changes, a shortened season with maybe 35-40 race dates might be in the cards. If expenses to run the tracks can be cut down to around $4-$5 million this is a definite possibility. But a shortened season means even fewer outfits will be attracted to stable at Fort Erie, and also may not be enough of an out for the Woodbine based owners and outfits. This will probably create shorter fields at both Woodbine and Fort Erie.

2. A new owner willing to gamble (or Nordic willing gamble...unlikely) that they can make a go of it by cutting expenses and focusing on horse racing handle, that they can make Fort Erie close to profitable. This is a long shot on the surface, and it might be appealing to someone with lots of money to lose who just wants to own a racetrack.

3. The OLG and Ontario government has stated that they are looking to privatize slots in the short term. However, Fort Erie wasn't even given the opportunity because of its proximity to the Niagara Casinos. The fact that Fort Erie is a different municipality than Niagara makes this move by the OLG even more unpalatable. I'm not a lawyer, but the move by the OLG has anti-trust written all over it, and if the OLG goes the privatization route at racetracks, I believe that Fort Erie should be given the opportunity to run their own slots. At this time, the OLG hasn't even hinted at what the new cut would be (they used to get 75% of slots revenues, but had to cover all the casino expenses. They receive 20% of gross revenues at the Caesar's at Windsor which the OLG does not operate and pay casino expenses, and Caesar's operators lost money even with that deal last year).
Depending on Fort Erie's ability to get back slots and what the new deal would be makes this scenario a possibility that has some hope.

4. An actual government subsidy to keep Fort Erie alive. The loss of slots jobs will be devastating enough to all businesses in the Fort Erie area, but loss of the track will turn Fort Erie into a ghost town. Whether this gives the Ontario government reason to step in, in light of their mandate to reduce the deficit, is up in the air, and something I wouldn't bank on. Small help from the HBPA will most likely happen if needed.

5. Woodbine's future is also unclear. They are perceived to know more than what they are saying, but that might just be a perception. Do they know what the new cut will be, do they know they are getting expanded casino gambling? Or will they get a much lighter cut than they are getting right now, and with the OLG getting into internet gambling soon, how much cannibalization will there be on current and future casino customers?

Whether they realize the importance of a B track now or not, they eventually will. And if no other option keeps Fort Erie alive next year, they might just step in and lease the track or even buy it back and operate it knowing they will most likely lose some money.

One thing track closures do for Woodbine is it increase their "home market" for HPI where they don't have to split betting commissions with tracks that close. If Fort Erie goes under, or if Woodbine ends up leasing or owning the track, they wind up with a full market of over 450,000 residents in the Fort Erie home market. A market that really hasn't been advertised probably because it isn't that profitable with a split....but without a split, it would be worth Woodbine's efforts most likely. Bottom line, because there is a lot of overlap in Horsemen operations between Woodbine and Fort Erie and factoring in more betting revenues, it might not be that difficult for Woodbine to run a break even operation at Fort Erie in an effort to maintain Ontario's current level of thoroughbred racing and breeding and horse ownership.

6. In a worst case scenario, Fort Erie revenues will now be totally dependent on what it makes on customers betting horses. The EDTC has not shown that they understand the Horseplayer yet. They did drop takeout on the Pick 4 last year to 17.3% (something that increased handle on that bet), but their total handle dropped 17%, which was much higher than the industry drop in 2010.

There has been a shift in the mentality of the Horseplayer lately. They've become more informed. Many are cognizant of track takeout. Takeout on doubles and exactors at Fort Erie is over 26%. There are most likely many who will not even look at Fort Erie because of that. Then there is the churn factor and its psychological effects. Slots works because they have a payout of around 90-93%. Players last, and even think they are winning when they are not...or at least think they are close to winning. The longer they last, the more they want to come back, the more likely they are to go more and expose more friends and family to their game. The same is true of horse racing, and even if it means paying out an extra $2 or $3 a day, that money will wind up back in the windows.

At 26%, whether the player knows it or not, they have no chance of even thinking the game is somewhat beatable.

Fort Erie must reduce takeout on exactors and doubles to 21% absolutely tops (Woodbine charges 20.5% for these two wagers). If that is something that Fort Erie management can't rationalize on its own, how about bringing in rolling doubles to make up for any deficit they think they might overcome (though I strongly believe that without having to resort to expanding the wagering menu, just dropping the exactor and double takeout will have a very positive effect on both handle and bottom line for the Fort Erie track).

Barring a bad reduction in field size, on track handle should rise just because slots are no longer available at The Fort.

The reality is almost $30 million was lost by "gamblers" at the slots in Fort Erie last year. Though Horseplayers and slot players are generally not the same person, there is some overlap and couple that with the racetrack now being the only game in town (OK, Fort Erie does have a Bingo Hall), it can be expected that at least some of the $30 million will now be lost betting on ponies. How much is the big question. But it doesn't have to be a huge percentage to fill in the gap that slots is leaving.

The $30 million lost on the one armed bandits means that over $300 million was churned by slot players. In order to bring in $8 million extra to the track and the purse accounts, that means that around $45 million more needs to be churned on
track, and this includes simulcast wagering too. Believe it or not, I don't think that something like this is totally impossible. Even if they can capture another $20 million churn, it would help prospects for next year immensely.

But attracting churn means lowering the takeout, and paying real odds on simulcast races despite whatever takeout the other tracks have (it really pisses off players when they get less than the real payoff is).

Fort Erie needs to get with the mentality that it isn't a crime to let players leave with money in their pockets. They won't get cannibalized by slots when it comes to that money, and a player that leaves with money is a lot more likely to come back.

Are The OLG and Liberal Government Flying By The Seat Of Their Pants?

This modernization plan by the Ontario Liberal government and the OLG is starting to remind me of a Jackie Mason monologue: Do you know whats going on with slots and the racetracks? I don't know but someone else must. Where can I find this someone else? Start with Dalton McGuinty, he seems to know most of what needs to be known. But does he know everything? Not everything, maybe the OLG knows everything. They don't seem to know everything either. I think they thought they knew everything, but they don't know everything anymore. How about Finance Minister Dwight Duncan? He seemed to know everything too, but he doesn't know everything now, except maybe when it comes to donuts.

To make sense of the above, we'll have to look at some real information and real laws that are now coming out of the woodwork.

First, in my previous post, I stated that slots were taken away rather quickly from Fort Erie, Hiawatha and Windsor race tracks because it is the OLG's goal to sell the nearby casinos, so by taking away the slots from the tracks, the bottom line revenues for the casinos would go up making them more attractive to buyers.

Looks like I was wrong as it is illegal for a private company to both own/lease and operate a casino in Ontario according the Criminal Code of Canada, unless exceptions are made. Exceptions are not a gimme when there is a minority government whose popularity has shrunk since getting elected only 5 months ago.

These laws throw a monkey wrench when it comes to the idea that racetracks can have privatized gaming. The racetrack right now owns the property that the OLG is leasing from them. If a racetrack or even another business were to take over the operations on the tracks, that would mean that the OLG is neither leasing, owning or operating the casino. This is against the Criminal Code, unless a loophole exists that they can get away with just leasing gambling equipment to make it a go.

So in Fort Erie's case, lets say that the $30 million in revenues a year caused a break even for the OLG after operating expenses and the amounts paid out to the track, horsemen and municipality. Even if $5 million of that makes its way over to Niagara Falls, that is $5 million more bottom line for the OLG and the operators of the Niagara casinos.

Now by taking away the slots without giving a privatization option to these border tracks, the province and OLG have declared these tracks as nothing but competition. And I'm sure they are hoping the tracks close down completely so that if any gambling is done, it will be on OLG product. It sounds slimy, but heck we are talking about McGuinty here.

The biggest news that came out today is that McGuinty has stated that Municipalities can hold referendums when it comes to introducing new casinos (like in Toronto). Well, according the OLG Act of 1999, a referendum MUST be held. With the recent poll that shows 60% of Torontonians against a new casino, the likelihood of a yes is far from a sure thing. Unless, those bottom dwelling Liberals can pass new legislation regarding a referendum having to be held (and I wouldn't it put it past them).

In fact, the way the laws are written now when it comes to bringing in a new casino, there are quite a few hoops to jump through.

It appears right now that the Liberals and OLG have written a check their asses can't cash. Who knows, maybe they'll decide to leave well enough alone. For the racing industry, its many direct employees, and the many businesses these employees support or help support, one can only hope.

UPDATE: McGuinty has said that the provision to have a mandatory referendum has lapsed. So that means McGuinty has one less hoop to jump through. He can bully a new casino through in Toronto now, and even if the majority of Torontonians want a referendum, politicians can do what they do best and lie or come up with an excuse for not having to do a referendum.

Bottom line, no one has even mentioned what the split will be on the new privatization deal, and this reinforces my belief that there isn't a person who knows everything yet.

CANADIAN POLITICS NOTE

For my American readers who might be confusing Ontario or Canadian Liberal Parties with political liberals in the USA, every political party in Canada is to the Left of the US Democratic Party. The Federal Conservatives and the Ontario Progressive Conservatives are to the right in the Canadian political spectrum, with the Liberal Party on the Left, and the New Democratic Party closer to the Far Left.

Personally, I'm a social liberal (by American standards), while fiscally I'm close to the centre (center in American language).

One final note: Kim Craitor, the Liberal representative for the Niagara Region (including Fort Erie) has had threats against his life and now fears to set foot in Fort Erie. Craitor, took a lot of credit (whether he deserved it or not) when a deal was made to save racing at Fort Erie three years ago, but he was nowhere in sight when an OLG gunslinger came to town last week to take away the keys to the slot machines at the track.

Politicians don't need to have their life jeopardized (besides the fact that one can get jailed for doing the threatening). You get even with them by voting them out.

Lets Recap What The OLG Is Really Doing

The Drummond Report came out recommending that the Ontario government revisits the slots deal it has with racetracks.

It didn't take long for Dalton (Norman Bates) McGuinty and his sidekick Dwight (Have Another Donut) Duncan to start lying about the relationship between racetracks and slots (calling slots revenues tax dollars and stating they were subsidies to the tracks) and then hinting that racetracks may lose all or some of their slots revenues.

In what seems the time it took to read the Drummond Report, border Racinos in Fort Erie, Hiawatha, and Windsor were told that their slots were going to be eliminated by April 30th this year, but that the government will make sure tracks are able to operate and purses accounts will be (close to) maintained for another year as long as these tracks race.

Of course, more lies were used by the collective PR of the OLG and Ontario Liberal Party, stating these Racinos were losing money. Revenues are way down, but the only track that is close to break even is Fort Erie, and it is doubtful that the OLG was losing a dime there.

OK, so the macro reason for the slots closures has to do with the budget, or so they claim. But why close them so quickly? Because the main agenda item is to prop up the revenues for the 4 stand alone casinos (Niagara has two) that are very close to proximity to the 3 Racinos that had the slots taken away. The goal by the government is to sell these casinos (before online gambling erodes these numbers down again), and the reality is that these casinos actually do lose money.

The fact that the government is paying lots of severance to slots employees and lots of money to the three tracks for the lost slots revenues over the next year shows that immediate deficit reduction is what this move is all about, nor is it about changing the ratio of what tracks get to keep on slots revenues.

In fact, the government has made it clear that it wants to privatize all slots and casino operations within the next year or so, which means that the OLG will not have to worry about paying slots employees, maintaining machines, etc. The gaming operator will now take over that function. The question again is what will the new cut be if a track takes over the operation, and what will be the deal with expanded slots as well as online gaming which is expected in the near future.

The government is attempting to get out of paying for the expenses of gambling, and they are looking to sell their assets (by the way, someone should clue in Puppet Progressive Conservative leader Tim Hudak that what he wants is what the government is looking to do).

This isn't really what the Drummond Report said to do, but this is the new direction the government is taking. Let gambling competition run amok, and tax the gambling company as much as it can (without having no gambling companies interested in doing business with an untrustworthy government in Ontario).

Hudak meanwhile, is not getting the big picture. The government is looking to put slots anywhere and everywhere, which means that Fort Erie and the other tracks should have had the opportunity to keep them. But the selling of the casinos is the reason they were taken away abruptly.

I wonder if Fort Erie, Hiawatha, and Windsor have a legal case by having their rights denied to compete to have slots, and the way in which this was done (especially if it turns out that the other tracks will be given the choice to operate slots).

Down the road, once the government decides what their new cut is going to be on slots and how and for what price they will sell the location rights, the rest of the tracks that have slots will make their decision as to whether to operate or not. Once the Niagara Falls casinos as well as those in Windsor and near Sarnia are sold, Fort Erie may have the opportunity to buy the rights to operate slots, unless part of the sale of the casinos will have a clause that no other gambling operations can be put up within a 25 mile radius, for example.

I have to say though, Duncan, McGuinty, and Paul Godfrey make me sick with their lies and misrepresentations. Hudak, if he wasn't so clueless and wasn't so badly managed, could have been the Ontario leader right now, and one thing is for sure, this wouldn't be going down like it is right now. I also believe that there would be no closures either, nor would racing be destined to die at any location in the near future either.

The next stage in the game for the Ontario Liberal Party and OLG is to believe they are entitled to have gamblers gamble with them. It won't work as long as they maintain their Pro-Line odds mentality. See "Is Horse Racing in Ontario the Fall Guy For Government Mismanagement?"

Note: The photo above is circulating on Facebook (where I happened to come across it). McGuinty has pissed off quite a few people. Even I find the message a bit harsh but decided it fit in well with the blog piece.

Do I Hear One Dollar.....

The mystery of how the Ontario government plans to change the revenue sharing arrangement it has with Ontario racetracks was solved to some degree yesterday as the OLG dropped the bomb on the horse racing industry, announcing that the partnership between tracks and government slots would end a year from now.

The exact plan (which tracks are tabled to close, what the new revenue sharing deals will look like, etc.) was not addressed yesterday.

Trying to make the most sense out of what the government plans to do moving forward, it looks like municipalities will be given the power to allocate x amount of gambling product and devices within its borders.

Private companies will then bid for the product.

In the case of a racino, the owner of the track will have the ability to operate the slots. The way it works right now is that the OLG rents the slots room from the tracks. The OLG pays for employees, machines, maintenance, and renovations. This comes out of the 75% of revenues the OLG keeps.

The way it will work in the future (I'm taking an educated guess here) is that tracks will have to pay all the expenses the OLG pays for now. The biggest question is what will the cut be?

Right now, probably the weakest slots facility (other than the stand alone casinos that are losing money) is Fort Erie.

According to OLG statistics for the year ending March 31, 2011, Fort Erie revenues (money lost by customers betting on slots) was $29.8 million. Total payroll for their 225 slots employees was $12 million. Horsemen received $2.98 million to enhance purses. However, the government signed a different 3 year deal, allowing Fort Erie the ability to try to get their house in order, by giving the track $5.35 million in lieu of the $2.98 million they were supposed to receive as the 10% share of slots revenues. The Town of Fort Erie also receives around a million and a half each year as well.

That leaves around $8 million under the current arrangement less maintenance expenses, which probably makes Fort Erie a break even proposition when it is all said and done, from the OLG's perspective.

It can be estimated that Fort Erie racetrack also generated between $9 and $10 million in revenues from gambling and concessions. Around half that money goes to the purse account.

Nordic Gaming, the owner of Fort Erie Racetrack, has claimed that the cost to operate the track is around $8.5 million a year. This is why an enhanced slots deal was needed in the first place. But Nordic was in no position to negotiate such a deal, so a leasing agreement was arranged with the Fort Erie EDTC who successfully got the subsidy from the government. The one distasteful thing about the deal is that Nordic was actually paid over $1.3 million the past three years for just sitting back and watching even though there was no way Nordic was going to see any profit if this deal never occurred.

OK, so why rehash all this? Going forward, there is no more agreement between tracks and horsemen regarding slots (assuming tracks will be given the option to keep slots). What does that mean for Fort Erie? If ownership doesn't change, it is a 99% probability that racing will cease there.

What about slots? Again, we are back to the mystery of what the new revenue sharing arrangement will look like. Average payroll for the province is around 11.0% of total revenues for racinos, payroll percentages increase in a big way (over 30%) when table games are introduced (more employees per table, security, etc.). Maintenance and renovations too have to be factored in, in order to attract outside businesses (or existing racetracks) to bid for casinos.

So lets say the government takes 50% of gross revenues. For Nordic, that would mean that the government would take $14.5 million of the $29 million that gamblers lose. The municipality will still expect 5% or so. However their current payroll is very high (especially compared with other racinos), and if that stays at $12 million, when factoring in maintenance, buying the machines, and renovation expenses, breaking even will be very difficult (especially when online gambling comes into the picture). There is another factor too, much of slots revenue occurs because a track is there, as spouses may split up at the track, with one going to the slots portion and the other staying in the grandstand, as well as the fact that some of those who play slots received some of their play money from revenues generated via horse racing. In other words, expect slots revenues to decrease somewhat.

With all the above factored in, Fort Erie slots and racing looks doomed, and with real estate prices depressed (thanks to those who rely on racing and slots to sell their homes), the price tag for the track as a real estate item will be minuscule.

One dollar, do I hear a dollar. C'mon, someone must want Fort Erie for a buck....

It makes me really scratch my head when it comes to the rationalization that this master plan by the government is really going to raise revenues to the province.

The fact is that the stand alone casinos lose money, and they only relinquish 20% of total revenues to the province. Why would a private business be interested in getting into the casino business in Ontario, especially with online gambling looming.

Most people who want to gamble in Ontario have no problem anyway. Locating slots elsewhere at a lower cut will not wind up gaining more revenues for the government. Nor will putting lottery machines in more places (as far as I'm concerned, they are everywhere already). Having more machines will not lead to Ontario residents losing more money on lotteries.

Table games, outside of major casinos, are not huge net revenue generators because of costs involved.

The only thing I agree with, is that when it comes to online gambling, the Ontario government is losing out some potential offshore revenues. However, in order to get that back, it needs to compete head to head with them, and that means paying out exactly what the offshores payout. This is not what the government does when it comes to Pro Line. And if they partner up with a Betfair, for example, their share of revenues will not be worth the direct addiction they will now be responsible for.

The deal the government has with the tracks right now is a guaranteed money maker, and to me, the government will need to reduce their own split in order to attract others to take over, and when it comes to land based revenues, Ontario residents are losing most likely what they are going to lose no matter how much expansion there is.

In the meantime, the government will devastate jobs, families and rural real estate prices, in their foolish quest to try to get more Ontarians addicted to gambling.

Ontario Liberals Spewing Lies and Half Truths

The Ontario Liberals have now gone over the line in trashing Ontario horse racing and the revenue sharing slots deal that racetracks have at this time.

On the weekend they launched a couple of radio ads.
Text of Ontario Liberal Party Radio Ads

Radio Ad One:
“Did you know that Tim Hudak’s PCs started a secret subsidy for a few, very wealthy racetrack owners? And now in these times of restraint, Tim Hudak says these rich payouts should be protected. He’d cancel full day kindergarden, leaving 50,000 four and five year olds stranded. Are we really going to spend more on horse racing than full day kindergarden? The PCs should do what’s right. Tell Tim Hudak his priorities aren’t your priorities.”

Radio Ad Two:

“Did you know that Tim Hudak’s PCs started a secret subsidy for a few, very wealthy racetrack owners? And now in these times of restraint, Tim Hudak says these rich payouts should be protected. But when it comes to our seniors, he voted against new supports to help them stay in their homes longer. Are we really going to protect horse racing over our parents and grandparents? The PCs should do what’s right. Tell Tim Hudak his priorities aren’t your priorities.”

To actually hear the ads, click here and scroll down.

This is repugnant and slimy politics at its worst. Secret subsidy? For a few wealthy racetrack owners? This is just complete crap. I know politics gets dirty, but resorting to blatant lies to make ones case means that the case might just be very flimsy. I believe that this propaganda campaign launched against horse racing in order to break a deal that has benefited everyone except addicted gamblers is way off base. Also, this is not about tax dollars but after tax dollars earned in a business that governments shouldn't even be in, in the first place.

First off, lets address the secret subsidy for a few wealthy track owners claim. Here are the documented words of David Willmot in 2001 which pretty much explains the origins of the slots deal. Also of note, Woodbine Entertainment is a nonprofit organization (they reinvest their profits), and they account for making close to 50% of the revenues from slots in all of Ontario:

"How we got the slots is that the government was looking around for new sources of revenue, possibly through expanded gaming. Fortunately, we convinced them (and they knew, anyway, from their constituents) that slots in bars and restaurants is a terrible social idea. It is just too “in your face” for the average public. They were also looking at the idea of 44 charity casinos around the Province of Ontario, but reaction from people was the same; “We don’t want 44 charity casinos.” The charity casinos were to be mini-casinos since they were talking about 450 slots and 60tables. That would have been a new intrusion of gaming into many neighborhoods and it was very skeptically looked upon. We took that opportunity to work with government, and we said, “If you put the slots at racetracks, and don’t go with the 44 charity casinos, we can provide you with 70-80 percent of the revenue you were projecting from your total expansion, but we can do so in a socially responsible way in a location where there has been regulated gaming for decades.” We were talking, basically, of destination locations. People have to make a conscious decision to travel to the racetrack to gamble.So, this was a politically safe and socially responsible way for government to expand gaming, and, at the same time, because they were focused on creation and preservation of jobs, to help regenerate a very large agribusiness."

It doesn't sound like a subsidy to me, but a business partnership that benefited both the government and the racing industry. One could even argue that racetracks agreed to receiving too small a percentage.

The reason I state that the percentage may be too small is that this same Ontario government that is now calling the slots agreement a subsidy is venturing out to get into online gambling. They, through the OLG, recently closed an RFP (Request for Proposals) in order to choose a PARTNER that has experience in online gambling.

So lets get the crystal ball out. 2 years from now, the government, still looking at a huge deficit, realizes that there was 1.5 billion in revenue earned from their online sites. However, half a billion stayed with the company that set the whole thing up. How, possibly could the government then call that money a subsidy to the other company? They can't. They would be laughed at. But if you buy into the Liberal propaganda right now, isn't that money they pay the internet company (which will mostly be profits for that company), money that could have gone to all day kindergarten or health care?

This is a disgusting campaign by the Ontario Liberals (it should be noted that Federal Liberal Party has all but marginalized themselves out of the political scene in Canada of late).

It is also seemingly unworkable and if pursued it could get uglier and possibly have illegal ramifications.

Though it is hard to speculate on exactly what these snakes have up their sleeves (OK, snakes don't have arms, but you get my drift), however, I don't see how their plan can work other, than stealing a small percentage of what the current arrangement is.

Logistically, they can't demand that slots stay open, if the track owners get a smaller cut or no cut at all, as the government are only renters.

A government cutting back on spending, isn't about to outlay cash to build new casinos on government property. And a government that is receiving over a billion dollars from slots, isn't about to cut off the source of their revenue....anywhere.

So what are their choices? Partner up with large casino companies (who will wind up receiving a lot more than 20% of revenues) and have them finance new casinos? Doesn't sound like a smart move or one that will increase their bottom line one iota.

Buy out at least some of the tracks? These buyouts generally are at high premiums (they have to be, so it doesn't appear that the government took advantage of a situation that they are creating). Payback from such a buyout will take a decade to recoup. It doesn't fix the current deficit problem at all. The last thing the government needs to do is make bad buys as slot revenues are destined to drop from here on in, if internet slots becomes a reality in the near future.

It may come down to track owners telling the government to get off the property, if the new slots deal is too low. And the government needs to watch itself that they don't put a track into a fire sale position, and then buy out the track. That has lawsuits written all over it. And again, the government is not in a position to close down one slots location as there is no guarantee they will make up the lost revenue at another location.

Finally, the Liberals are shooting themselves in the foot through lies and propaganda. In the internet age, the truth generally wins out. If they keep this nonsense up, they will be the next marginalized political party in Canada.

SAVE ONTARIO HORSE RACING PETITION
An online petition was started on Friday, and it has over 5,000 signatures. If you haven't signed it, what is wrong with you?

The Thoroughblog also touches on the scummy tactics used by the Liberal government. Check out the promises McGuinty made to the horse racing community when he was begging for votes.

Tim Hudak (the Conservative Party leader) and the NDP both promised to keep things status quo with respect to the slots agreement. Now that Ontario has a minority government, it will be very telling if either party backs down on their stance.

Looking At Slots At Tracks In Ontario

Here are some stats.  Except for 2012 race dates, the numbers are from the OLG's website for the dates of April 1, 2010 to March 31, 2011.  The first number is the total revenue (money lost at the casino by gamblers) in millions.  Next are the 2012 race dates for that track, followed by what the track gets in millions, what the horsemen get in millions, followed by what the OLG employees get in millions, and finally, the amount of OLG employees at that track's casino:

·        Ajax 168.6 40 16.9 5.1* 14.7 332

·        Clinton 12.3 19 1.2 1.2 4.4 92

·        Dresden 13.3 23 1.3 1.3 4.6 87

·        Flamboro 120.8 188 12.1 12.1 11.0 223

·        Fort Erie 29.8 81  5.3** 3.0 12.0*** 225***

·        Georgian 127.0 103 12.7 12.7 14.3 328

·        Grand River 43.7 65 4.4 4.4 7.2 161

·        Hanover 22.2 30 2.2 2.2 4.8 97

·        Hiawatha 29.6 44 3.0 3.0  7.4 140

·        Kawartha 65.9 96 6.6 6.6 9.1 177

·        Mohawk 153.6 98 15.4 15.4 11.9 240

·        Rideau-Carleton 142.3 159 14.2 14.2 13.9 268

·        Sudbury 49.4 62 4.9 4.9 8.0 148

·        Western Fair 101.8 123 10.2 10.2 14.4 330

·        Windsor 41.1 88 4.1 4.1 10.5 211

·        Woodbine 588.4 297**** 58.8 58.8 32.7 715

·        Woodstock 24.6 23 2.5 2.5 4.7 91
    * Ajax horsemen do not get 10% of the revenues (why?  Not sure)  ** Fort Erie racetrack receives more than the 10% from slots (that higher amount is a subsidized amount to stay alive)  ***Fort Erie seems to have an exceptionally high slots payroll compared to other tracks (this doesn't appear very efficient), the same is true for the amount employed by the OLG in Fort Erie.  This makes Fort Erie the least profitable track for the government of all racetracks.  ****Woodbine race dates include both thoroughbred and harness.
  
    Now, let me attempt to clear up some misconceptions that seem to be out there.  One question that seems to be out there is who owns the slots:  The building is renovated by the track owner. OLG is provided a "base building" area to build out their slot facility. They do everything from the carpets to the fixtures to the slots to the paint, etc. Think of it as an unfinished basement that they get to move in and finish.


  
 The arrangement between tracks and the OLG with regard to slots is definitely profit sharing.  Even in OLG documents, the OLG refers to the amount tracks and horsemen receive as "revenue" not "subsidies."   The only exception would be the additional amount Fort Erie receives (this is due to run out at the end of this year, and if not renewed, Fort Erie will most likely be toast even if the government were to forget about the Drummond Report suggestions.

     Historically, this slots deal was win win for both tracks and the government.  The government of Ontario was convinced that it could raise their revenues by bringing in one armed bandits into Ontario.  By locating the slots at racetracks took care of a lot of image problems the government would have faced if they were to put slots in stand alone facilities (it would be like building crack houses, a very tough sell).  
      
      Racetrack locations made a lot of sense.  This is where people came to bet anyway.  Tracks for the most part were accepted as legitimate gambling businesses by the people of Ontario.  This was worth something to the tracks, and still is.  So is the lost revenue that slots takes away from the core business of the tracks.  Over the years, horse racing has lost many fans to alternative forms of gambling.  No, they shouldn't be compensated for most of that, however, the government got into the slots business for two reasons, and one was to help the horse racing industry.  Slots took away many horse racing customers, who were still losing their money at the same location they used to, just in a different room.
      
      This actually hurt racing's growth potential even more, as dummy money (slot players are the least sophisticated of all the gamblers) shifted from horses to slots, making it a lot more difficult for core Horseplayers to keep their bankrolls going.  Many left to more price sensitive games like poker, blackjack, sports betting, and exchange wagering.  Now, racetracks and Horsemen are also to blame, as they were making more money bottom line thanks to slots, they forgot about their core business.  They kept track takeout extremely high (Ontario harness tracks have notoriously high WPS takeouts, while Fort Erie has ridiculously high double and exactor takeouts, for example), while tracks also created more high takeout pools.   
      
     There is a question as to why a government should be involved in gambling.  I realize many states and provinces have state and provincial lotteries, but is that really what governments should be doing?  Shouldn't their role be collecting taxes (cigarette taxes, HST, provincial taxes, etc.) and not being directly involved in revenue producing businesses like gambling and alcohol?  

     I'm a firm believer that the slots, the OLG and LCBO should be privatized, but I also believe that they should continue sin taxing these revenues so that they don't lose out in needed revenues to pay for health care, education, police, etc. etc. etc.   
        
     But as former PC Minister John Snobelen points out, the Ontario government is addicted to sin.    In fact, the government is looking for a partner to bring in Online gambling to Ontario.  Funny, the Liberal politicians probably won't refer to their new partner as being subsidized when they wind up taking away "potential" revenues from the government thanks to revenue sharing agreements.  The reality of online sports betting, slots and poker run by the government will be harsh enough when it comes to clobbering slot revenues to tracks even more.  The one good thing that came out of the Drummond Report is a potential wakeup call to the industry:  It is time to compete as a racetrack!  It is time to compete for Ontario's gambling dollars.  Slots are part of the competition. A gambler that loses $200 at the track on average churn has made the track and horsemen $180, while someone who loses $200 playing slots has only made the track and horsemen around $20 on average.

I would definitely vote for Snobelen if he ran for anything.  Check out this short video on the subject of slots and Ontario racetracks.
    
I find the Drummond Report a tad out of touch with reality.  It is almost like Drummond is insulted that convenience stores make money off selling Lotto tickets.   I'm surprised he didn't give a recommendation that cigarettes should be sold at other locations too so as to avoid "subsidies" paid to store owner.  

As for Fort Erie. You can see by the numbers that they are the least efficient track in Ontario. However, if the argument is made that horse racing in Ontario is important, a B track is desperately needed. Every circuit needs a track that serves as an out for horses that can't compete in the big leagues. B tracks keep the breeding industry alive, and keep owners in the game (as it would become too complicated for owners when it comes to horses that can't compete at Woodbine to "HAVE TO" ship their horse to the States to be competitive. It would cause too much of a glut of unwanted horses on the market as well.

Either Fort Erie needs to be subsidized or Ajax (not crazy about bullrings) would need to take over as the B track, or Woodbine would need to race 7 days a week allotting two days to B races.

Fort Erie is too beautiful a track to close down. But if the government is starting to turn its back on the racing industry in any way, this could easily be their last year. On the other hand, we are only talking an extra two or three million a year to keep it operational. Seems like a tiny amount of dough in the big scheme of things, and it would prevent Fort Erie from turning into a ghost town.

An argument could be made, and really should be made, that the one thing unfair about slots is that some locations are much better than others, and perhaps money should be pooled and distributed on the basis of wagering generated. There really should be incentive to get wagering on horse racing up at individual venues.



One more thing. Looking at the comments from Woodbine reps, it appears that they believe Woodbine, despite the fact Woodbine and Mohawk wind up with half the $340 million earned by racetracks in Ontario, is safe from any potential damage the government may do to the horse racing industry in Ontario. I wonder if Woodbine knows whether they will get expanded gambling, or if they have assurances that a Toronto casino will not be built.

The only gripe I have with all that money Woodbine gives out in purse money is the purse monies for major races. It could successfully be argued that half a million to million dollar international races do not pay for themselves from wagering on the racing product. Therefore, quite a lot of slots money is given to outfits that may come to Ontario for a week or even less than that. But on the other hand, the government doesn't seem that concerned that the slots money winds up in the hands of Ontario horsemen. To me, that is really what a realistic report should have focused on. Slot money going back into the economy is good for the people, good for taxes, and therefore good for the government. There should be a major preference to Ontario residents over US outfits as well. I don't think that is the case right now.

UPDATE: Bill Finley lays blame on the lack of growth in harness racing in Ontario on the Horsemen. They rejected a growth plan. He also suggests that a massive takeout drop should be experimented with.

Drummond Report Regarding Horse Racing and Gambling

My quick take on this report and what is feasible:  I don't see cuts in track or horsemen shares in slot revenues.  There looks like there will be more competition though.  Most likely online slots, poker and sports betting.  I highly doubt that we will see new casinos sprouting up except maybe downtown Toronto.  Percentages from slots won't drop but profits most likely will.  The government is asking tracks to focus on their core product and start making money on the betting side (which tracks may start to do as slot revenues drop coupled with the scare they just received from the report).  Tracks may actually now begin to woo Horseplayers and compete with the government...they may be forced to.

The first mention of horse racing is in Chapter 11 (Business Support):

The horse racing industry is another area where subsidies to racetracks and horse people require a review and adjustment to realign with present-day economic and fiscal realities. Ontario has more racetracks than any other jurisdiction in the U.S. or Canada. In addition to revenues from wagering, since the late 1990s the industry has benefited from a provincial tax expenditure (a reduction to the provincial pari-mutuel tax) and a percentage of the Ontario Lottery and Gaming Corporation’s gross slot revenues that together are worth an estimated $400 million in 2011–12. Over the past 12 years, approximately $4 billion has flowed through 17 racetracks to support purses, racetrack capital improvement and operating costs. Ontario’s support is 10 times that of British Columbia, which has six racetracks, and 17 times that of Alberta, with five racetracks. Ontario’s approach is unsustainable and it is time for the industry to rationalize its presence in the gaming marketplace. For more on the horse racing and breeding industry, please see Chapter 17, Government Business Enterprises.

Recommendation 11-11: Review and rationalize the current provincial financial support provided to the horse racing industry so that the industry is more appropriately sustained by the wagering revenues it generates rather than through subsidies or their preferential treatments.

The second mention is in Chapter 17 (Government Business Enterprises):

Ontario Lottery and Gaming (OLG)

The OLG provides significant net income to the province, but operational efficiencies could be explored to improve the company’s margins while continuing to respect social responsibility and meet its conduct and management requirement for the operation of all lottery schemes. For example, a number of questionable business practices should, at a minimum, be reviewed from a value-for-money perspective.

• OLG maintains two head offices, one each in Toronto and Sault Ste. Marie;
• OLG continues to operate Casino Niagara despite the opening of the permanent and considerably larger⁵ Niagara Fallsview Casino Resort in 2004;
• The Slots at Racetracks Initiative, which allows slot machines to be co-located at racetrack facilities only, earmarks a share of revenues generated from slots for racetrack owners and horse breeders. This amounted to $334 million in 2009–10.⁶ Municipalities that play host to a racetrack also receive a share — five per cent of proceeds from the first 450 slot machines at the facility and two per cent for each machine over that. This totalled $78 million in 2009–10,⁷ and
• OLG purchases and provides lottery terminals to point-of-sale locations.

Finally, OLG should continue to seek new and innovative ways to deliver gaming in Ontario to increase its revenues. These include expanding existing business lines, creating new business lines (as it is doing for Internet gambling), and leveraging further private-sector involvement. In all such ventures, the OLG must remain mindful of its mandate to promote responsible gaming.

Recommendation 17-3: Improve the Ontario Lottery and Gaming Corporation’s efficiency through, at a minimum, the following measures:

• Close one of the two head offices;
• Close one of the two casinos in Niagara Falls;
• Allow slot machine operations at sites that are not co-located with horse racing venues; and
• Stop subsidizing the purchase and provision of lottery terminals to point-of-sale locations and begin to introduce other points of sale for lotteries.

Recommendation 17-4: Re-evaluate, on a value-for-money basis, the practice of providing a portion of net slot revenues to the horse racing and breeding industry and municipalities in order to substantially reduce and better target that support.

Recommendation 17-5: Consider directing the Ontario Lottery and Gaming Corporation to expand its existing business lines, develop new gaming opportunities and make effective use of private-sector involvement.

Getting Rid Of Slot Subsidy To Ontario Tracks: Not Very Likely

Dwight Duncan, Ontario's Finance Minister, scared the bejeevers out of Ontario's racing industry yesterday by stating that the government is going to reevaluate the $345 million subsidy that tracks and horsemen receive from slots operations.

We'll find out more details tomorrow when Duncan goes into more detail about what Don Drummond recommended.  Duncan has already stated that he will not get rid of all day kindergarten, which means that none of the recommendations are carved in stone.  The one having to do with getting rid of the horse racing subsidy seems unfeasible to me.

Right now, tracks receive 10% of slots, while horsemen receive another 10% (two exceptions, are Ajax which has a different split for horsemen, and Fort Erie, which gives more than 10% to the track to keep it alive).  For the most part, the government gets the other 80%, and of course there are expenses to keep the slots going, buying slot machines, and wages (but these are jobs that are kind of nice to have out there).

What are slot revenues really?  That is money lost by mooches, mostly Ontarians, but in border towns like Fort Erie and Windsor, some comes from US mooches.  At Woodbine, since it is close to the airport, they too get their share of international mooches as well.

The slot revenues last year generated at Ontario racetracks (Racinos) was approximately $1.7 billion.

OK, so why can't the government just grab that other $345 million and use it on health care and education?

Where will they earn that money?  Privately owned racetracks will have no incentive to allow slots to operate on racetrack property.  Even a smaller cut will be questioned because of the cannibalization which occurs when people choose slots over betting on horses.  For example, when someone loses $200 at slots under normal churn, the track only gets $20 and the horsemen another $20.   If that same gambler loses $200 on horses under normal churn, the track gets around $90 and the horsemen get $90 too.  Makes you wonder why racetracks haven't gone after slot players more aggressively the past 14 years, but that is another story.

The government isn't likely to give up on $1.4 billion and all the jobs that go with that.  In fact, the shutting of Racinos, even Fort Erie where the government gets the lowest cut, would be ludicrous.  It is way too risky to believe that the money lost at Fort Erie on gambling would go to Niagara Falls, for example.  It is just as likely that it either won't be lost, or perhaps go to Bingo or Buffalo or online to an offshore casino site.  They could also buy more lottery tickets which would be a push for the OLG in that particular circumstance.

What is true in Fort Erie is also true in the Kawarthas.

So what are the alternatives?

Build casinos close by where the Racino is.   A government looking to make cuts and find money isn't about to spend money building casinos.  No chance, except maybe a full scale casino in Toronto.

Close the Racinos or some of them, with the hope that gamblers will go to the non racetrack casinos.  Again, this is too much of a risk.  The government is in no position to risk it.  There is also Goodwill factor where the gambler feels more at home gambling within a certain distance to their residence, and more comfortable going to a racetrack structure to bet (also, when live racing is on, it isn't unusual for one spouse to play the ponies while the other hits the one armed bandits).

Take slots out of Racinos and put them in bars and gas stations.  I for one would probably think of moving out of the province if that happens.  Crime in Ontario isn't very horrible, but I could see a lot more robberies and shootings if slot machines were found everywhere.  The other thing is that there is no way they'll come close to matching the revenues a casino with its allure has going for it.

Sell the slots operations.  Now there is an idea that has some legs.  These slot outlets are still gold mines, though they might not be as lucrative in the future.  I could see the individual racetracks buying them and handing over the government a nice lump sum to help reduce the deficit.  It makes sense too, when considering that a government shouldn't be in the gambling business in the first place.  They should be collecting taxes on those who are in it and that is where the relationship should end.  So selling off the OLG in parts should be a recommendation (but I don't think it is).

Drop the cut from 20% in total to 10% for example.  Besides the fact that some tracks have deals that go for another 5 or 6 years at 20%, when taking cannibalization into account, at 10% in total, many tracks may tell the government forget it, it isn't enough.  The government is not about to face a lockout when it comes to keeping slots open, anywhere.

It is hard to justify losing 60,000 jobs potentially (a number most like inflated) if one wants to have a remote chance of getting elected again.  But the number is really a lot higher when you take into account the business that are propped up in communities that have Racinos.  From mom and pop hardware stores to Walmarts to Tim Horton Donut shops, killing a Racino could mean killing quite a few businesses that aren't even horse racing related.  And killing these jobs would also create a depression in the rural real estate market as well.

The Ontario government has already announced that they are going to start taking wagers on poker, slots and sports online in the near future.  This is going to cannibalize slot revenues and probably racetrack wagering at least a tad anyway.  But if implemented properly, it will probably mean even more revenue for the government.   So I'm definitely not saying that racing shouldn't worry, I just don't see that when the facts on the ground are examined, that this government grab is going to leave the starting gate.

I could be wrong, but I doubt it.  We'll know more tomorrow.

This could either be a not very well thought out recommendation or a devious way to create a compromise in order to get a full scale casino in Toronto without giving Woodbine squat.  BTW, Woodbine and Mohawk receive close to 50% of the $345 million, so making them exempt while killing rural jobs makes no sense either.   At least in the rural communities the majority of the money that is distributed to horsemen goes back in the Ontario economy (this is exactly true with a good percentage of dollars won in purses at Woodbine, again, another story).

Edit:  One more thing.  Are we talking subsidy or talking government tax dollars.  It isn't tax dollars but government business revenues.  People are losing after tax dollars gambling.  They have choices where to spend those after tax dollars.  Take away slots, and they'll spend those dollars elsewhere.  As for slot revenues being a subsidy?  Mostly.  It is more money than racing would receive if it were just relying on horse racing related revenues, but as stated, there is a lot of cannibalization that occurs when a casino is put into a racetrack, and one could argue that since these slot machines are located at a track, it attracts more business than what the government would generate if located elsewhere, so yes, most of the revenue is subsidized revenue, but not nearly all of it.




 

More Competition Heading Woodbine's Way

The OLG is serious about running video slots, poker,  and sports betting online (of course store kiosks will also be used) as well as allowing people to buy lottery tickets online.  There is also lots of talk about bringing a new casino to Toronto.

This will definitely make it easier for mooches to blow their dough quicker.  However, I doubt the big money value players are going to get excited, if the OLG's history of giving horrible odds on Pro-Line is any barometer on how they will handle online poker and sports odds.  The smart players will avoid OLG online like the plague.

Woodbine relies on the mooch player, so I can see cannibalization when the OLG  gets their ducks in a row.  Poker and sports bettors will still be able to last a lot longer (unless the OLG uses an absolutely ridiculous house edge) than the typical Ontario Horseplayer who has to try to overcome an average 21% takeout on each wager.

Yes, new gamblers will be created.  More money will be lost.  But Woodbine stands only to lose, unless the OLG hands over the online business to Woodbine on the merits that they have experience with online gamblers.  Would it be worth part of the revenues the OLG would have to give away?  That is the big question.

The same thing is true when it comes to the proposed new casino.  Expansion of Woodbine's casino would be great for Woodbine, and purses.  However, if it is a location having nothing to do with Woodbine, it will cannibalize Woodbine's income in a big way.  Even if Woodbine is allowed to expand when a new casino (at Ontario Place, for example) is built, I expect Woodbine's bottom line to drop (there will be more cannibalization from both the new casino and from the live racetrack bettor who will lose a lot of potential churn money at the track casino).

From a Horseplayers standpoint though, even the worst case scenario won't be all that much of a loss.  If Woodbine were to drop their handle by 33%, purses would still attract close to the same field size as they do today (take a look at field size for allowance races at Tampa and Fair Grounds).  I don't even think quality would suffer that much, if at all.  Trainers and vets would naturally be forced to drop their outrageous rates, and they would make less money (and this will motivate trainers to race more). 

Trainers will also be limited to how much detail they can put into a horse.  I believe that is good for Horseplayers.  Major vet and hyperbaric chamber use will drop off, creating less head shaking performances, and this will create more confidence in bettors.

The loss of certain US trainers won't be missed either, by local trainers or bettors (who shy away more when super trainers show up in a race).  I think it has be a shame that so much slot money (a tax on the poor) winds up in the hands of US based outfits.  This was not why the slots deal was made in the first place.

I have a feeling that Woodbine's "entitlement" has just hit a brick wall.  It would be wonderful if they focused on their actual core product, horse race betting.  They have great unrealized potential on the thoroughbred side especially.

Their long season is a plus.  Handicappers become familiar with horses, jockeys and trainers.  However, the one thing holding them back is the high takeout.  No long term winners are created.  No buzz is created.  Woodbine, with slot money all these years, should have reduced takeout to Keeneland levels or even lower.  They didn't.  And now they might wind up with a deer in the headlights type of scenario.

Woodbine does have a good reputation relatively when it comes to policing illegal drugs.  I'd like to see them take the initiative and make it mandatory that the public be informed when horses have operations (breathing, etc.) or hyperbaric chamber treatment.  If they want to attract more Horseplayers, pricing matters, but so does transparency.

The tragedy that occurred this week at a Florida farm might cause more regulation when it comes to hyperbaric chambers.  Again, there is no reason that this info shouldn't be available to the betting public.

I'm not for banning their use.  I just want to be able to factor it in before I play a race.  Check out this list of benefits for hyperbaric chambers:


Athletic injuries:

• Desmitis (ligament disease)
• Tendonitis (bowed or diseased tendons)
• Fractures
• Exercised induced pulmonary hemorrhage (Bleeders)

Other diseases for which hyperbaric therapy is indicated include:

• Acute laminitis (Founder)
• Reperfusion diseases (severe muscle damage, crush injuries)
• Colic (intestinal obstruction, colon torsions, volvulus, etc.)
• Enteritis and endotoxemia
• Ileus (loss of intestinal motility)
• Infertility (male and female)
• Rhodococcus pneumonia in foals
• Lyme's disease
• Osteomyelitis (bone infection)
• Compromised wounds
• Sinus infections
• Sudden blood loss
• Myositis (tying up)
• Septic arthritis (joint infections)
• Neurologic disease and trauma
• Severe necrosis (as in snake and spider bites, toxic substances, etc.)
• Neonatal maladjustment syndrome

Check out this quote by Wayne Catalano in 2008:

When asked if he thought hyperbaric oxygen therapy is a miracle, Catalano said, "I think it is ... it's been a big help. We've won five or six races out of the tank."





 

TVG Racing Roundtable On Drugs In Racing

This is a pretty long video, but anyone who has an opinion of drugs in horse racing or has more than a passing concern really should give it a watch:

A lot of talk and disagreement, but the one thing that stands out (and it took a call in at around the one hour mark), and that is the admission that testing for EPO (add DPO and ITPP which were not mentioned) is a rare event, so all the great stats about the minute percentage of positives are meaningless, and yes, there is a problem, and it isn't just perception...it is perception about something that is real.

How to cut down spending on tests?  Simple.  More severe fines and suspensions including criminal charges and the threat of jail time.

Also, I've always had an issue about tainted/contaminated samples. If it is so easy to taint a sample or accidentally give a horse cocaine (contamination from a using groom for example), then why aren't there a lot more overages?

Trainer Ron Ellis came out of this discussion looking like the Court Jester.  Talk of needing Lasix to race horses more often really lands on a deaf ear, especially when considering that in the 60's and early 70's horses were running a more than they are today.


The highlight of the discussion was Ray Paulick quoting a study by HANA.  I have to say that Paulick was dead on with his comments throughout the Roundtable, he may appear out of touch when it comes to the Horseplayer, but after watching the interview, I'm beginning to think that the act is strictly for show.  Or, just maybe, that wasn't Ray Paulick but Kevin Bacon impersonating Paulick.  That would explain a lot.

Horse racing definitely needs more Jack Van Bergs.