07/14/2011 12:37PM

The shrinking value of graded stakes

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Grade inflation is a term typically used in the academic world, but the racing industry has its own version: The number of graded stakes in the sport is not contracting as fast as the number of races, introducing the possibility that competition at the sport’s highest level is being diluted by a glut of graded stakes.

The imbalance is best measured by a ratio comparing the number of graded stakes races assigned by the American Graded Stakes Committee of the Thoroughbred Owners and Breeders Association to the number of races run in the U.S. In 2007, when the committee assigned grades to 474 races out of the 51,304 races run that year, the ratio was 0.92. In 2010, when grades were assigned to 487 races out of 46,379, the ratio jumped to 1.05, a 14 percent increase.

The number of races held in the U.S. is expected to drop for at least the next several years to address declining foal crops and the reluctance of trainers to race their animals more than six times a year. In June, the number of race dates run at U.S. tracks contracted by 9.67 percent, accelerating a decline in race days that began last year. For the first six months of 2011, race dates were down 6.2 percent, following a 7.75 percent decline in 2010.

In order to keep pace with the decline in the races, the Graded Stakes Committee would need to cut nearly 50 graded stakes from the annual schedule, a daunting prospect for a committee that is stocked with breeders who rely on graded stakes to boost the value of their bloodstock. Further complicating the task is that the rest of the committee comprises racing secretaries, many of whom have a vested interest in the number of graded stakes run at their tracks.

The 11-member committee meets annually in November, reviewing every race in the U.S. with a purse of at least $75,000. Under the system, the members review the fields that participated in the race and then determine, by majority vote, whether a race should retain its grade or receive a higher or lower grade.

The committee’s purpose is to provide guidance to buyers at horse auctions by providing measures in the sales catalog to assess the quality of horses’ performances. Many racetracks use graded stakes to promote their races to fans and horsemen, which can lead to raw feelings at some tracks when grades are removed.
Dan Metzger, the executive director of TOBA, acknowledged the racing industry faces a danger from the growing ratio.

“It’s like printing too much money,” Metzger said. “If there’s too much out there, you make it worthless. It lessens the quality, and it misrepresents the value of the horses at sales.”

Still, Metzger said the committee has not decided to reduce the number of graded stakes by any set number this year. Instead, the committee members have become more reluctant to award grades or upgrade races, Metzger said, while also being more receptive to the idea of downgrading races, which should lead to fewer graded stakes.

“I don’t think yet it’s a responsibility for the committee to take a hard, fast number and say this is what we have to get it down to,” Metzger said. “They’ve looked at it, they’ve discussed it, and it’s in the back of their minds, if not in the front of their minds.”

The grades assigned for the 2011 season seem to bear that out, at least tangentially. After the grading session in late 2010, the committee assigned grades to 474 races, down 13 races from 2010. But the majority of the grades that were lost were for races that were no longer eligible for grading because they had not been run in the last two years, reflecting the fact that racetracks themselves were taking the initiative in reducing graded stakes.

Metzger said the committee was relying, in part, on the decisions of racetrack officials to cancel races.
“The markets can take care of a lot of this,” Metzger said.

Some racing officials agree. Martin Panza, the racing secretary at Hollywood Park, said financial realities at racetracks were superseding any decisions made by the graded stakes committee, citing the cancellations over the last several years of some of Hollywood’s longstanding graded stakes races, such as the Cinema, Will Rogers, and Hawthorne. In Panza’s view, racetracks are continually evaluating whether it makes sense to hold a graded stakes race, regardless of whether the graded stakes committee feels the race should remain on the calendar.

“We don’t handle anything on a 4- or 5-horse field,” Panza said. “It doesn’t make any sense to run them if you can’t make any money on them, no matter what the grade is. No one wants that.”

Hollywood Park has aggressively cut race days over the last two years, largely by dropping mid-week race cards during the meet or canceling days in which the track cannot draw enough entries to justify running. Panza said the decline in the number of race days is having the largest effect on Hollywood’s stakes schedule, because “the less number of days we race, the less money is available for purses. It’s as simple as that.”

There is numerical evidence suggesting that tracks are performing the kind of analysis Panza cited and dropping graded stakes from their schedules. Although the graded stakes committee assigned grades to 487 stakes in 2010, tracks held only 451 graded stakes. The 2010 gap was the largest in the last decade – the second-largest gap, 29 stakes, occurred in 2009. Before that, the largest gap between assigned grades and graded stakes run was 19, in 2003.

Andrew Schweigardt, the committee’s executive secretary, said the committee in the near future will probably be less likely to put off downgrading a stakes for a year or two while a track tries to improve the quality of the field. Those grace periods were frequently allowed in the past, Schweigardt said.

With many racetracks shuffling their schedules and dropping race days to deal with declines in horses and wagering, the racing calendar has some obvious targets on it. Perhaps most glaring are two Grade  2 stakes for 2-year-olds, the Matron and the Futurity, that were run at Belmont Park over the July 4 weekend. Both races were not run in 2010 but were resurrected for the 2011 summer meet at Belmont after being held at the Belmont fall meet since 1967. Both had a field of six. The Matron was won by a Maryland-based filly making her second start; the Futurity was won by a maiden shipper from Delaware Park making his second start. No matter what happens to the grades of the races or to the horses in the future, both will be listed as Grade 2 winners in a sales catalog if they or any of their offspring are sold at auction.