The following letter was written by Jeffrey A. Cannizzo, Exec. Director of the NY Thoroughbred Breeders, Inc. It originally appeared in the August issue of NY Breeder magazine.
Following the release in July of the New York State Franchise Oversight Board's 2011 annual report, I began to read that members of the Board were expressing the need to review whether racing has “actually benefited” from the enhanced purse structure funded by Genting's Resorts World casino at Aqueduct.
I interpret this as a desire on the part of the Oversight Board to see evidence that the 6.5% share of VLT revenue that NYRA allocates to purses is having the desired positive bottom-line effect on the state's thoroughbred industry. I suggest that the Board might be asking a slightly different question, namely “Are the increased purses actually stimulating the job-creating, job-sustaining and tax-paying complex of activities, goods and services that make up the world of breeding and racing, and therefore are they making a positive contribution to the economy of the state?”
The short answer is a resounding “yes,” but the longer answer needs to be spelled out.
Racing first. Most people have read about the dramatic bottom-line success of the NYRA race meets since the new purse structure kicked in. Total handle on the Aqueduct winter/spring meet was up 22.6% compared to 2011, while the Belmont spring/summer meet, which could also measure success by its influx of new horseman from out-of-state and high quality of competition, showed a 9.4% increase in handle over last year. The well-documented correlation between increased purses, increased field size, and increased handle is therefore playing out perfectly according to script. As the new purse structure kicks in this year at Saratoga, historically New York's most lucrative race meet, NYRA will most likely set records for pari-mutuel wagering both on and off the track. I believe the verdict is in: the business of New York racing, considered in isolation, has benefitted from the higher purses.
But New York racing does not exist in isolation, and I would like to focus next on the positive effects of the new VLT-fueled purse structure on New York racing's closest partner: New York's breeding industry, whose fortunes – make no mistake – rise and fall with NYRA's.
In a nut-shell, the recent explosion of economic activity in the breeding sector is directly attributable to NYRA's VLT-fueled purses, and this growth in the breeding industry is translating into concrete benefits for the state.
After a decade of decline during which the selection of a VLT operator was stuck in political limbo, the selection of Genting instantly produced positive results for breeders. Let me begin with the 2011 two-year-old sales – the first major horse auctions to take place in the sure knowledge that Resorts World would be opening its doors for business later in the year.
With the assurance that revenue would soon begin to flow to increase purses at the racetrack and incentive awards for breeders from the New York Breeding & Development Fund (the Fund), New York-bred two-year-olds were nearly twice as valuable in 2011 as they were the year before, generating $9,578,600 in gross sales, compared with $5,082,300 in 2010. The results of the 2011 Fasig-Tipton New York-bred yearling sale in August were even more dramatic: total sales increased over the previous year by a staggering 83%. It was not the nature of the New York-bred that had changed in a year, but his value in the eyes of prospective owners, whose eyes were firmly fixed on the horse's earning potential at the New York racetracks.
Next came the breeding boom of 2012. Once NYRA officials announced a 36% purse hike for the 2012 Aqueduct winter/spring meet, and the Fund followed suit with a VLT-fueled 50% across-the-board increase in breeders' awards for 2012, the economic engine of the breeding industry began to work in overdrive.
Stallion owners announced they were bringing high quality individuals to stand at stud in New York. Many Kentucky operations initiated partnerships with New York farms with a view to bringing their mares here to foal. The anticipated influx of mares into the state led to the reopening of major commercial breeding operations and purchase of New York farm properties that had long been on the market.
The preliminary reports from the Fund on the 2012 foal crop offer early confirmation that the breeding industry has been revitalized virtually overnight. Mares flocked to state to foal, and as of May 31 nearly 40% more thoroughbred foals had been born in New York than by the same date last year.
Let's turn now to the all-important trickle-down effect of increased purses on the state.
Along with influx of upwards of 500 new mares into New York this year comes an increased demand for goods (hay, bedding, feed, equipment) and services (vet, farrier, sales prep, boarding, transportation, stud fees), along with increased capital expenditure (barns, fences, tractors, etc.). According to the Economic Equine Study done by Deloitte in 2005, horse owners in the state spend $2.4 billion annually in goods and services, while New York State collects over $120 million annually from the equine industry in taxes. Most important the breeding industry offers New York State what it needs most: jobs, jobs and more jobs, with each mare creating or sustaining four direct or indirect jobs.
Flash back two years. The 2010 breeding season was a disaster. After ten years of political wrangling over a VLT operator, with no end in sight, the foal crop of 2011 fell off dramatically to its lowest level in a more than a decade (1,450), with only 725 foals on the ground through the first five months of 2011. In 2012, with VLT revenue driving the engine, 1,011 foals were born in New York in the same time frame. And growth is stimulating more growth. Fasig-Tipton has recently added a new fall mixed sale to take place in Saratoga in response to “feedback from several clients in New York State.” The marketplace for New York-breds is booming.
So if the Franchise Oversight Board chooses to review the effects of VLT-fueled purse hikes, I believe it will find that is not merely racing that is “actually benefitting.” Profits are coming to the state from the increased pari-mutuel tax revenue generated by the higher purses. A revitalized breeding industry is putting farmland back into service and agricultural service providers back to work across the state. Last but not least, with the Saratoga purses attracting the best our sport has to offer, tourists will be supporting the local economies of upstate New York like never before. If this isn't the kind of economic development we seek for the Empire State, I don't know what is.
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