02/22/2013 1:53PM

Ontario breeding industry hit hard by loss of slots revenue


It was not long ago that Glenn Sikura’s Hill ‘n’ Dale Farms in Aurora, Ontario was bursting at the seams with mares and foals in the midst of a hectic breeding season.

That scenario is pretty much gone this spring as Ontario’s Thoroughbred breeding industry struggles to stay alive because of a radical decision announced a year ago by the Ontario government, under now-retired Premier Dalton McGuinty, and the Ontario Lottery and Gaming Corporation.

As of March 31, the 20 percent of slot machine revenues allocated to the province’s 17 racetracks that housed Ontario’s slot machines will come to an end, 12 years after the partnership began. While the province’s share totaled about $1 billion per year, the provincial debt and the OLG’s new gaming strategy, including the planned introduction of a new casino in downtown Toronto, led to the decision to end the Slots at Racetracks program, which was met with incredulity by everyone in racing.

The decision to abruptly end the slot revenue means that some $345 million per year is lost to those tracks and, in turn, to breeders and owners.

As much as the partnership has helped horse racing in Ontario thrive, in particular Thoroughbred racing at its marquee track, Woodbine, the sudden end of it has left the industry reeling.

In January, a transition panel assigned by the Ontario Ministry of Agriculture and Food in 2012 to work with the racing industry on sustainability came to a deal with Woodbine Entertainment Group that would allocate funds (exact numbers were not released) that allows racing at Woodbine and Mohawk Raceway to continue for two years.

In addition, the Lottery and Gaming Corporation and WEG came to an agreement on funds for renting space for its large slots operation at the track, but it certainly will not replace the income the industry has lost.

That led to a rash of layoffs at WEG in recent weeks as some 109 jobs were eliminated while the company tries to streamline its business operations. The new-look 2013 Thoroughbred season is expected to run for 133 days, down more than 30 dates from its schedule in recent years. But, the damage to the breeding industry began a year ago.

“The breeders were on the front line. We took the first bullet,” said Sikura, who has bred and sold some of the country’s top racehorses for decades. “We still do not have the stability that we need. All there is now is a two-year solution to a five-year problem, taking into account the breeding cycle of the horse business.”

Beginning with the original announcement a year ago, mare and stallion owners have had to re-evaluate their businesses. From farm to farm across the province, the number of mares foaling for 2013 has dropped significantly, including many that had come in from out of province in recent years.

The lucrative Ontario racing and breeding program has lured dozens of top owners, trainers, and breeders to the province in recent years. This spring, many of those have elected to keep their mares at home.

The one bright light for the industry is that newly elected Ontario Premier Kathleen Wynne has indicated a desire to work with the racing industry to solidify its future.

Sue Leslie, president of the Ontario Horse Racing Industry Association and the Horsemen’s Benevolent and Protective Association, emphasized, however, that time is critical.

“The fact is, we’re in the middle of February, the breeding sheds are opening, our breeders have no reassurance – nor do trainers and owners – that horse racing is going to exist three years from now,” said Leslie in a recent interview. “We know that Woodbine has funding to run racing for two years. That’s what we know. And we know that there are some agreements in principle with some tracks for [slot] lease space. But that is all we know. And that certainly doesn’t give an individual the comfort level that’s needed to go out and buy a mare and breed it to an Ontario sire.”

Ontario has already lost seven of its top 12 sires from 2012, most of whom have left the province, and replacing those stallions will be difficult.

In its recommendations, the Ministry of Agriculture transition panel laid out plans for the industry to be self-sustaining, based on new ways to collect revenue and using its share of parimutuel wagering, which has been on the rise in Ontario for several years.

However, with the likelihood that the Ontario horse population will decline substantially in the next few years, the trickle-down effect will hit the racing side.

“With mare owners pulling back on expenditures as well as their involvement, the field sizes will shrink,” Sikura said. “Yearling prices are down, expenses are up. A year ago, a bale of hay was $5, now it’s $8 or $9. At what point does this business become too ludicrous to pursue, at one point does it truly become the sport of kings?”

At the important Canadian Thoroughbred Horse Society yearling sale in September at Woodbine, as recognition of the impact of the provincial government’s decision had on racing, the average price declined 21 percent from 2011, to $17,382, and total receipts at the sale declined 27 percent, with the number of horses sold dropping 8 percent.

In early February, the Ontario Racing Commission announced that Ontario’s Horse Improvement Program will be allocated $30 million for the Thoroughbred and Standardbred sectors, down from $45 million a year ago.

How this amount will be spread out among races is in discussion at the time of this writing and from there, WEG will be able to construct its purse schedule.

Nick Eaves, president and chief executive officer at WEG, expects the daily average purses for 2013 to be comparable to last year. Eaves said he did not anticipate the purse for the Queen’s Plate, Canada’s most famous race to be held on July 7, to change from its $1 million prize in 2012.

“Certainly we didn’t want to have only a two-year solution, but we did to provide some immediate stability,” Eaves said. “Now that we have a different set of decision-makers running the province, we can continue to work hard on a long-term solution.”

There will still be some 1,200 Thoroughbred foals born in Ontario this year, and for the dedicated and passionate horsepeople, the arrival of a new face in the spring offers anyone a glimmer of hope.

“Our breeding season is under way,” said Bonnie Rowntree, whose Willow Ridge Farm near Georgian Bay is a smaller, boutique operation. “We will be supporting the Ontario sires with [most of our mares]. We are trying to stay positive and hopefully the future of racing in Ontario will stay strong and vibrant. We are just trying to stay the course.”