AIN’T NO SUNSHINE IN FLORIDA

by | 11.17.2010 | 12:47am

By Ray Paulick

The Florida Thoroughbred Breeders' and Owners' Association published a slick brochure a few years ago titled “On Course,” heralding all the good things going on with horse racing and breeding in the Sunshine State. But the organization might want to rethink that title if it publishes an updated version in 2010.

With only a few exceptions where revenue from other forms of gambling has helped ease a business down cycle, most racing and breeding states are hurting. But Florida seems to have been stung the worst by a combination of the global economic crisis, a collapsing real estate market, and the decline in the economics and popularity of Thoroughbred racing.

A more accurate name for that updated FTBOA brochure might be “Off Track.”

Consider that:

– The number of mares being bred and Thoroughbred stallions standing in Florida have fallen faster than any other state, dropping by 23.3% and 24.0%, respectively, from 2008 to 2009. Further declines are expected in both categories in 2010.

– Florida's foal crop, historically the second-largest in the United States behind Kentucky, has dropped from a high of 4,511 in 2003 to a projected 2,600 in 2010—a decline of 42%. It is conceivable states like Louisiana or Pennsylvania, with more lucrative breeders' incentive programs, could surpass Florida in foal production in the next few years.

– A number of large stallion operations, including the Sanan family's Padua and Frank Stronach's Adena Springs, have pulled out of Florida.

– Numerous Thoroughbred farms are listed as “for sale” in the Ocala area of Marion County, the self-proclaimed “Horse Capital of the World.”

– The declines in Florida breeding have come after 2004 legislation was passed and a statewide referendum supported a constitutional amendment permitting racetracks in Dade and Broward counties to install slot machines if they got local-option approval. Both Gulfstream Park and Calder in South Florida now have casinos with slot machines.

SEEKING LEGISLATIVE HELP

Help could be on the way. The 2010 legislative session begins today (March 2) in the state capital in Tallahassee, and gambling legislation is high on the list of priorities of legislators and lame-duck Republican Gov. Charlie Crist, who is in the midst of a heated primary battle for a U.S. Senate seat.

The two South Florida racetracks, Florida breeders, and the Florida Horsemen's Benevolent and Protective Association are pushing for a reduction in the slot machine tax rate from 50% to 35%, a move that, according to the FHBPA's Kent Stirling, would nearly double the amount of money going into purses from slot machine revenue.

“Everything is fueled by purses, and things look good to get this tax reduced,” Stirling told the Paulick Report. “That should right things. I don't envision that happening until July 1, but it will certainly help. We're one of a number of states in a crisis right now with purses that don't stand up. If we don't have the purses, you won't breed the horses.”

Stirling said 6.75% of gross revenue from slots currently go to overnight purses, with breeders getting an additional 0.75%. If the tax rate is reduced from 50% to 35%, he said, purses will get an extra 5.25%, and the amount going to breeders would increase to 1.2%.

“The deal we would get for purses will be very good for horsemen,” Stirling said. “We have long-term contracts signed with the racetracks.”

One concern Stirling and others have is whether South Florida can support the number of slots casinos in the region: the Seminole Tribe operates a massive Hard Rock casino not far from Gulfstream Park; there is the Pompano Isle of Capri harness track in Pompano Beach; Mardi Gras (the former Hollywood Dog Track near Gulfstream Park; and other Indian casinos in the region, in addition to Gulfstream and Calder.

Legislation being proposed also may include a provision giving the FTBOA flexibility in how it distributes its breeders' awards program, allow Hialeah Park to operate a slots casino, and create a permit to operate a not-for-profit race meeting in Ocala/Marion County.

But a deal with racetracks is only part of the gaming legislation in the works. Still unresolved is a compact with the Seminoles after a proposal by Crist that was tied to a tax break for pari-mutuel slots was rejected by the legislature. That proposal would have given the Seminoles a full-blown casino monopoly outside of South Florida. The tribe has offered casino games without a compact, something the federal government's National Indian Gaming Commission said is illegal. Earlier this year a House committee rejected Crist's compact unanimously and voted to uncouple pari-mutuel legislation from any deal with the Seminoles.

Crist's proposal, though ultimately thrown out, was unsettling to Peter Berube, who runs Stella Thayer's Tampa Bay Downs, which has seen its business hurt by a second Hard Rock Casino run by the Seminoles not far from the track in Tampa.

“Obviously we are looking for some type of product that's going to even out the uneven field we face with the Seminoles and the slots in South Florida,” Berube said. “I'm at a very serious competitive disadvantage at this time.”

Berube said there is a separate push to allow every one of the state's 22 pari-mutuel facilities outside of South Florida to get a total of 1,500 slot machines. A study showed the state would receive $400 million in taxes (based on a 35% rate) versus the $150 million the state would get from a compact with the Seminoles. “And we feel our numbers were very conservative,” he said of the study done by the Innovation Group.

Berube said he is not betting on a positive result. “I gave up trying to handicap Florida politics a long time ago,” he said. “I am somewhat encouraged by what's going on up there (in Tallahassee) and some of the rhetoric.” A previous attempt by Tampa Bay to get approval for Instant Racing machines, which saved Oaklawn Park, failed to get legislative support.

“Our industry is in tatters here in Florida; it's abysmal what's taking place, especially when you are in proximity to Indian gaming,” said Berube. “I've seen a decline of 22% from 2008 to 2009 in the Tampa area. Statewide it's fallen 14%. Nationally, the numbers are down 11% on pari-mutuel wagering. There's a direct correlation to the Seminoles. We are suffering more. We've been here for 80 years, and it would be a shame for this business to go under.”

Tampa Bay is one of the nation's most progressive tracks, lowering takeout and offering a very good wagering product. Still, he said, the track depends largely on off-season simulcasting, and he's seen that fall by 42% because of the increased competition from the Seminoles.

CRITICS FORM GRASSROOTS MOVEMENT

Richard Hancock, executive vice president of the FTBOA, said he is confident the legislature will approve a tax reduction on South Florida's racetrack slots and give the FTBOA flexibility in its distribution of breeders awards. “One thing I'm not happy with is Tampa Bay Downs,” he said. “They need the same help that the Dade and Broward County tracks got. The pari-mutuels there will get killed if the Seminoles expand any more.”

Hancock has been the FTBOA's top executive for going on 20 years. He's got his supporters, especially those on the organization's board, but he also has an increasingly vocal group of detractors. “We've gone from $3 million to $15 million in incentives,” Hancock said, in defending his work with the FTBOA. “We've been successful and grown the pie quite a bit.”

Detractors say Hancock has not been effective in Tallahassee in getting the message out about the Thoroughbred industry's needs and has facilitated board members in running the organization like a private club that has been unresponsive to rank-and-file breeders.

Among Hancock's loudest critics is Ocala horse insurance agent Gordon Reiss, who helped put together a grassroots organization, the Florida Horseman's Task Force, that began speaking out at FTBOA open house meetings, attended FTBOA board meetings, and traveled to Tallahassee, met with legislators, and organized breeders to call on their representatives to educate them about the Thoroughbred industry. Reiss said the group helped get House Speaker Larry Cretul, an Ocala Republican, to speak at a recent meeting of the Florida Thoroughbred Farm Managers.

“Legislators had no clue about the impact on the horse industry of Indian casinos,” Reiss said. “They saw horse farms as playgrounds for millionaires. Our meetings with them have made a difference.”

Reiss and others, including Bob Monahan, Bebe Luxon and Dr. Ignacio Leon, told the Paulick Report the FTBOA lacks transparency in much of what it does, communicates poorly with members (despite owning a daily publication, Wire to Wire, and the monthly Florida Horse magazine), and has questionable procedures for board elections. Hancock was accused by the group of keeping the board in the dark on issues like the Instant Racing legislation and making important decisions without consulting the board.

Hancock said Reiss is upset in part because he failed to win election to the board.

He does acknowledge, however, that the grassroots movement has been beneficial. “They actually were of some help in letting people in Tallahassee know how desperate things are down here,” Hancock said. “All the stories they told the legislators about horses and people moving to places like Pennsylvania or New York. I have to say it was helpful in getting the attention of the Pari-Mutuel Committee in the House.”

“The loss of 3,000 mares has taken $75 million to $100 million out of the local economy,” Reiss said. “Land values have dropped considerably, and the bank credit squeeze has hurt. Purses are terrible, and there is a lack of leadership. It got to the point where we couldn't depend on the FTBOA and felt a grassroots movement was necessary.”

 

Copyright © 2010, The Paulick Report

 

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