PRESIDENT POST GAMING COMMISSION ANALYSIS AND MESSAGE

Massachusetts Thoroughbred Horsemen’s
Association, Inc.
189 Squire Road, #251
Revere, Ma. 02151

August 26, 2016

I, like the nearly 500 members of the MassTHA were extremely disappointed with the Massachusetts State Gaming Commission decision under-funding the Middleborough Agricultural Society application for live thoroughbred racing at Brockton. Disappointment was not limited to our membership. As a result of the decision, the current broken racing model proposed by our rival horsemen’s group, and adopted by the Gaming Commission, has been considered by the most tenured, knowledgeable and distinguished horsemen in the state and country.
Many considered this Racing Commission to be at a crossroads. After all, there were two horsemen groups with two distinctly different racing models offered for consideration by the Commission. The traditional model and the broken model.
The traditional model advocated by our association, became traditional because it worked. A racing association (the track) ran a full and meaningful race meet and horsemen’s groups negotiated their percentage of simulcast revenue which was part of the normal purse pool. The horsemen also received their portion of the live handle and that too would become part of the normally assembled purse structure. The racetrack maintained their percentages of both the live and simulcast monies to pay their expenses which included training facilities and stabling for the horses at that meet as well as providing living quarters for stable employees. These exchanges were the cornerstone of the traditional model. On track pari-mutuel and interstate wager revenue generated fair takeout percentages and cycled to horsemen in the form of conventional purses simultaneously providing tracks with monies needed for operations and promotion.
When the track was not operating a live racing schedule simulcasting continued and the split of the revenue stream remained in effect. This allowed horsemen’s purse monies to be escrowed for the upcoming live racing schedule.
The current model embraced by rival horsemen is broken. We have been witness to its dramatic failure since 2014 when live race opportunity was incrementally reduced to three days and now a total of six days of live racing, a year, in the Commonwealth.

We are now firsthand witnesses to the failure of human intentions. In 2015, it was mentally convenient to rely on the bubble of illusions presented by rival horsemen and the track, “let’s run just a few days with larger purses”. This illusion presumed the model would attract the best the industry has to offer, increase live handle and simultaneously replace the traditional racing model which supported numerous and dependent small economies and thousands of jobs and allow at least “some live racing”.
The broken model proponents rationalized that a few days of racing would allow the local horsemen, breeders and farm owners a chance to survive while transitioning to longer term racetrack plans. There is a pocket of time after a proposition is made and the moment it becomes clear it is a complete and utter failure. This pocket is where the bubbles of illusions hold sway over reality. Proponents convince themselves, and others, they know what the outcome will be. The illusion, by replacing a long standing and successful traditional racing model with a Festival model, the entire thoroughbred industry could be supported and thrive. That pocket of time has ended; the bubble has burst.

The Festival proposition and reduction to live racing was not reasonable when presented and is not reasonable now, especially in light of past and recent Festival results. The reality is, rival horsemen and the track have struggled to fill Festival cards and then only after paying bonus monies directly from the Racehorse Development Fund (RHFD), reimbursing out of state horses, owners and trainers, to appear here and race for overstuffed purses. The Festival live handle was abysmal and bonus payments from the RHDF, to appear and race, exceeded the purse contributions from live handle. Millions of dollars from the RHDF, intended for local horsemen have been diverted and misused under the broken model.

In response to this clear and dramatic failure of Festival racing, which was never designed to work in reality, we presented and supported the Brockton application, a model which used a modest purse base and was designed to distribute RHDF monies to local horsemen, breeders and farms, certainly its intended use.
National horsemen groups are in the fight of their long existence to curtail the use of the broken model through out reach and education to many state racing commissions and state legislatures.
In fact, the HBPA and THA National Associations advocate against the adoption or alignment with broken revenue and racing model principals and perceives it a threat to the survival of the thoroughbred industry. Legislation in many states has been proposed to curtail the revenue abuse by racing associations disinterested in its responsibility to contribute to the quality of the thoroughbred product.
The traditional model has slowly been dismantled in favor of quick profits by non-participants in thoroughbred racing. The emergence of Advanced Deposit Wagering Racing, off shore and unregulated out of state wagering companies siphon off money bet by Massachusetts residents, robbing the Commonwealth and the horsemen of equitable contribution without participating in the products expensive overhead and costs to produce.
Tracks want to profit electronically from pari-mutuel wagering and Advanced Deposit Wagering (ADW) without paying the horsemen their due percentages. They have found a way to avoid the labor intensive traditional process of allowing on premises training or conducting live racing for a hundred days. It is more convenient and profitable to dispense with live racing.

This is the reality of the industry and I find it disturbing that the broken model, adopted by rival horsemen, has become the basis and future of thoroughbred racing in Massachusetts in light of the well-established fact and reality, the festival schedule has failed to revive, advance or sustain the thoroughbred industry.
I have received calls and correspondence from many thoroughbred and non- thoroughbred businesses dependent on the economic impact and velocity of money live racing delivers locally and state wide. There was no shortage of opinions or proposed solutions suggested.

In short, thoroughbred related businesses, professionals, breeders and hundreds of horseman and women are lamenting the real effect of the Commission’s decision to restrict Racehorse Development Funds to purses, with the “exception of specific horsemen related expenditures” in the face of the reality that horsemen are suffering greatly.

While sympathetic to the local horsemen’s plight, the Commission’s decision relied heavily on an ever evolving, waffling legal opinion inexplicably distinguishing monies destined for horsemen’s purses. This, despite the reality, our Massachusetts legislature saw fit to approve the use of purse monies (albeit from simulcasting revenue) to fund track operational expenses at Suffolk Downs.
We believe the purse distinction irrelevant and the legal opinion trivial in light of the green light and clear direction contained in 2015 legislation allowing “funding of track operation expenses from money destined for purses”.

We also believe the exercise of discretion by the Commission should not be swayed by fantasy, illusion, conjecture, allegations or disparagement by opponents, but upon the realities of the situation before them. The reality on August 10, 2016 favored the exercise of discretion, upon the Commission’s primary purpose, to advance thoroughbred racing.
If the Brocton application is not the path and the broken model cannot advance live racing, what is the solution?

First the state legislature and the Commission must recognize the broken model and its attendant pitfalls to the future of thoroughbred racing. The attractiveness of less work, less expense and more corporate profit has proved too great a temptation for some race associations, who now promote and legislate for across the board reductions in takeout designated for purse accounts, ADW establishment and license to operate the broken model. Adding a complicit horsemen’s group to the equation unifies the racing association and track into one, effectively nullifying the veto power and power to withhold the horsemen’s simulcast signal simultaneously providing little if any incentive or interest in live racing or promotion of local thoroughbred product. The simulcast signal controlled by the assumed majority of horsemen will continue to be transferred to a racing association that supports reductions in live racing, intrastate and interstate statutory take out and the diversion of dedicated purse money to operational expenses of their race association apparently with the assent of the state legislature.
The mountain of credible evidence presented to the Commission on the perilous state of Massachusetts horsemen and racing requires the regulatory authority (here the Commission) to address the well demonstrated defects in the broken model. Legislative action and a clarifying grant of discretion to a dedicated racing commission may also be necessary to conduit and accommodate reasonable expenditures from the RHDF to return and then advance live racing in the Commonwealth. It may also be necessary to curb the aggressive abandonment of the traditional model and minimize reductions to purse account take out or end abuses such as utilizing RHDF to attract – and then make travel expense payments to – out of state horsemen clearly facilitated in August of 2016 Festival, to the exclusion of local horsemen.

The adoption of 23K was originally designed to close the ever increasing gap between purses and training. The reality is the statute needs further clarification. If legal counsel and the Commission are unsure of its intended use, the legislature must speak. Not based on illusion, but upon realities facing the industry. The reality is; there is a lack of live racing, there is a lack of an interested host racing association and there is a fever brewing to advance the broken model supported by lobbyists for the rival horsemen group.

Until such time as racing commissions and state legislatures recognize the broken model, recognize its failure, to stabilize and protect horsemen responsible for the quantity and quality of the thoroughbred racing product, and acts, to consolidate the fractured pieces of legislation, the ability to float illusions will continue. Sources of statutory and contractual take out should be codified, with escalation clauses if necessary, to close the gap between the costs of training and purses amounts allowing the delivery of a superior local thoroughbred product. Tracks desiring to run full and meaningful race meets will accelerate the ability of breeders to turn out locally bred product, increase and supplement local horsemen and trainer’s income with breeder’s bonus and participation money sustaining local farms and the open space around the farms.

In conclusion, no evidence to date has been provided nor will be provided demonstrating this broken model is worthy of further consideration by the Commission or legislature. Illusions are not a replacement for reality. The reality is; the lack of live racing has a negative effect on the entire industry from top to bottom. The transformation of host racing associations to off track wager and advanced deposit wager venues will continue to siphon funds from the Commonwealth and race purses necessary to operate a successful traditional racing model. The inability of the commission to first recognize and then exercise its broad discretion advancing the traditional model and live thoroughbred racing, conferring the maximum economic benefit to the Commonwealth and its horsemen, needs proactive support and reform from all those involved in the process.
Live racing and the ability to train at a local track is an absolute necessity for the continued success of horsemen, breeders, farms and supporting industries before the expected and predicted desertion of horses to other states having recognized the folly of the broken model.
Finally, the illusion the festival model has any appreciable effect on local horsemen and the economy must be scrutinized and reproved on examination by racing commissions and state legislatures or abandoned.
I also wish to assure our considerable membership, a single decision will not alter the purpose of our horsemen group or its formation, nor our associations primary objective to reestablish the traditional model of sustained live racing, the driving force behind the thoroughbred industry past and future success.
I further suggest no amount of adversity, whether in the form of disparagement, embellishment, legislation, litigation, misinformation or misinterpretation of the enabling statues and regulations will alter our membership’s path to accomplish this most important goal.
MassTHA supports any plan to reestablish full time racing including the long range “horse park” if such a proposal results in the return of live racing under the traditional model.
However, in the interim, meaningful live race meets must resume almost immediately to strengthen the struggling breeders prior to that expenditure. We cannot sacrifice the present for the illusion of a future when the reality facing our existing horsemen, farms, and breeders is extinction.

The intention of our state legislators and plan to move the industry forward did not include abandonment of the existing local industry or those dependent on it.
Without a return to the traditional model of racing, horsemen, the commission and race associations will be witness to the accelerated decline in the number and quality of farms, open spaces, breeding operations and the eventual elimination of live thoroughbred racing cards altogether in the Commonwealth.

Sincerely,
William Lagorio,
President MassTHA

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