by Teresa Genaro
In 2004, the same year that Pennsylvania-bred Smarty Jones just missed winning the Triple Crown, the Pennsylvania racing and breeding industries received a financial boost from Act 71, which would infuse them with 12% of revenue from casinos based at racetracks.
The prospect of increased revenue made the future look bright: bigger purses would improve the quality of racing; field size would increase and with it, pari-mutuel handle; the commonwealth’s breeding industry would attract better sires and mares; jobs would be sustained and created.
For the Pennsylvania breeding industry, that forecast seemed to be right — at least at first.
Both the size of the Pennsylvania-bred foal crop and the number of mares bred to Pennsylvania stallions showed strong gains after slots came to the Commonwealth. But both have suffered in recent years.
As a percentage of the national crop, the Pennsylvania-bred foal crop roughly doubled in size from 2003, before slots were introduced here, to 2010, when it hit an estimated 5.5 percent of the North American total. But in 2011, that number fell to 4.6 percent, a decline in gross numbers of nearly 25 percent. In all, 1150 foals were born in Pennsylvania that year.
And for mares bred by in-state stallions, the figures are even more dramatic. After rising to 3.8 percent of all mares bred in North America, Pennsylvania stallions’ share has dropped to 3.0 percent. In gross numbers, that’s a decline from more than 1,700 in 2009 to 1,089 in 2012 — nearly 38 percent, according to Jockey Club figures.
And on the racetrack? Field size has remained flat even as the average purse-per-race more than doubled, and gross annual purses more than tripled, to more than $127 million. Wagering on Pennsylvania races is up — but wagering by Pennsylvanians themselves is down.
So, nearly 10 years into the casino era in Pennsylvania horse racing, is it good news or bad news?[pullquote]“Are you doing this,” Solomon asked, “to create commerce or not?”[/pullquote]
That depends on whom you’re talking to. But despite what would appear to be discouraging numbers, optimism is present among several elements of Pennsylvania racing and breeding industries.
The issues facing Pennsylvania are not necessarily unlike those facing other racing and breeding jurisdictions, the national economic downturn and increasing threats by government to curtail casino subsidies among them. But some of the issues do seem to be unique to Pennsylvania, and arguably in conflict with the decisions made by nearby racing states.
Dr. William Solomon, V.M.D., is the founder and owner of Pin Oak Lane Farm in New Freedom, Pennsylvania, which stands a handful of stallions, including Rockport Harbor, currently in second place on The Blood-Horse’s Northeast sire list by earnings and first in Pennsylvania.
For him, the issues facing the industry begin with the philosophy behind investing casino money in racing and breeding.
“Are you doing this,” he asked, referring to the state government, “to create commerce or not?”
If the answer to that question is yes, he posits, then the state is doing it wrong.
While acknowledging that Pennsylvania-bred yearlings sell well, he pointed out that those horses constitute a small fraction — often less than 20 percent — of the horses bred in the commonwealth each year.
“If you’ve got a good Pennsylvania-bred, you can make a lot of money,” he said. But, he cautioned, making money in the business—racing or breeding–isn’t easy, given the costs of breeding and keeping horses, and the long-term business model that is inherent in breeding, when the results of decisions are years away.
And, he said, the racing program in the state doesn’t help. Noting that Louisiana, West Virginia, and New York—all states whose racing and breeding programs, like Pennsylvania’s, receive significant casino money–all have substantial programs for state-breds, he observed that Pennsylvania has nothing comparable in terms of races restricted to state-bred or state-sired horses.
That’s particularly true at Parx Racing, the state’s most prominent racetrack. The preponderance of open company races there, along with the casino revenue-infused high purses, leads to out-of-state shippers bringing their good horses to run in Pennsylvania, said Solomon.[pullquote]The relatively more robust state-bred racing program “shows our commitment to Pennsylvania racing,” Mostoller noted.[/pullquote]
The three states Solomon flags, Louisiana, West Virginia, and New York, have all seen significant rises in the percentage of in-state starts made by state-breds since the addition of gaming revenue. In all three, Jockey Club figures indicate, state-breds made at least 78 percent of their starts at home in 2010. Pennsylvania-breds, on the other hand, make only about two-thirds of their starts in the Commonwealth, which has remained consistent over the last two decades.
And when you’ve got a stand-out shipper, he went on, fewer horses enter races, resulting in short fields and drop in pari-mutuel wagering. Notably, while handle on the live product has increased since slots were introduced, the amount wagered by Pennsylvanians themselves has declined, state figures show. The gains in handle stem from out-of-state wagering on the Pennsylvania racing product.
“It didn’t take long,” said Solomon, “for breeders to realize that the average Pennsylvania-bred horse is not really welcome.”
The consequence, he said, is that fewer mares are bred, the foal crop is down, and the industry as a whole is shrinking—which he suggested is antithetical to what the commonwealth’s government should be doing.
“If casino money going to racetracks is an agriculture initiative—to sell more hay and straw, to provide jobs for truck drivers and farriers—then create volume,” he said. “If it’s about Pennsylvania horses winning the Kentucky Derby or the Pennsylvania Derby, then it’s about giving all the money to the best horses, and it ultimately comes down to: should the average guy be allowed to participate in racing and breeding?”
Solomon’s argument would seem to apply largely to Parx, as opposed to Penn National or Presque Isle Downs, according to Todd Mostoller, executive director of the Pennsylvania affiliate of the National Horsemen’s Benevolent and Protective Association, which represents horsemen at those latter tracks.
Parx horsemen are affiliated with the Pennsylvania Thoroughbred Horsemen’s Association, which did not respond to an interview request.
At Penn National, he said, nearly a quarter of all purses, more than $7 million, goes to Pennsylvania-restricted races. “It shows our commitment to Pennsylvania racing,” he added.
He suggested that the declining foal crop in Pennsylvania is less about the racing program than it is about the commonwealth government’s repeated attempts to divert money from the Race Horse Development Fund (RHDF), created by Act 71 to support purses and breeding, to the General Fund, along with the national recession.
“It’s difficult to make a financial commitment based on a business model that’s been hit more than a couple of times,” he said. “It’s a major, multi-year commitment to breed a horse. The instability of the Racehorse Development Fund leads to a lack of investment.”
Still, Mostoller is optimistic about the state of the industry.
“Obviously, I’m concerned a little bit,” he said. “Given the economic conditions from 2009 on, everyone is going to be affected, but Pennsylvania is less affected than other states.”
Perhaps so. The in-state industry’s rapid rise following the introduction of slots has to some extent cushioned from the worst effects of recent years. According to The Jockey Club, the 2013 national foal crop is estimated to be 22,500, the same as 2012 and down from 29,556 in 2009 and 34,800 in 2004. The 2013 number is a 24% drop in foals since 2009.
The latest numbers available for Pennsylvania are for 2011. From 2009 to 2011, the national foal crop declined by nearly 22%. For that same period, the number of Pennsylvania-bred foals declined by 25%. Despite the recent drop, however, the Pennsylvania numbers are stronger than they were before slots.
Like Mostoller, Carl McEntee, director of bloodstock services at Northview Stallion Station, points to the economy as the main reason for Pennsylvania’s breeding woes. Among the stallions Northview stands are Smarty Jones, Jump Start, and E Dubai; joining them for the 2014 breeding season will be El Padrino, winner of the 2012 Grade 2 Risen Star.
“Lower end stallions dropped out of the marketplace,” he acknowledged, then went on, “but that’s a global phenomenon, not just an indicator of the Pennsylvania market.”[pullquote]We had to learn how to explain the benefits of racing, and once we could explain that because of Act 71 there are nearly 40,000 jobs directly or indirectly involved in the racing business, it was a really good point to get across,” said Northview Stallion Station’s Carl McEntee.[/pullquote]
In addition, he said, when casino money began to stream to Pennsylvania breeders, Kentucky farms offered discounted stud fees to get Pennsylvania mares, leading to fewer mares being bred in Pennsylvania.
“Think of those factors, plus the economy,” he said. “Now, we’re coming back out of that. We saw solid increases across both our farms, in Maryland and Pennsylvania, this year.”
He too noted the problem of the government repeatedly trying to divert money from the Race Horse Development Fund and thinks that the industry has recently learned a lot about the importance of participating in the political process.
“Our industry didn’t have a presence in [commonwealth capital] Harrisburg,” he said. “We had to learn how to explain the benefits of racing, and once we could explain that because of Act 71 there are nearly 40,000 jobs directly or indirectly involved in the racing business, it was a really good point to get across.”
And while he believes in a strong racing program for PA-breds, he also recognized the value of Parx’s owners’ bonuses.
“Parx rewards people for owning Pennsylvania-breds,” he said, “with a 40% owners’ bonus. There are lower bonuses at Presque Isle and Penn National, but more restricted races, so it kind of levels out.
“When I’m selling a Pennsylvania-bred, I can tell owners that they can run for nearly the entire purse at Parx: 60% to the winner, plus the 40% bonus.”
Pin Oak’s Solomon seems less convinced, about both a rosy future for breeding and the relationship between the industry and the state.
“Many would say that we should cut race days and increase purses,” he said. “At which time the state will say, ‘This is ridiculous—this was supposed to stimulate the economy and the economy is contracting.’”[pullquote]“I really hope it continues to grow and get good,” said Ed Stanco, who bred Princess of Sylmar. “It’s needed in a lot of places. It’s a lot of jobs at stake.”[/pullquote]
Such a move would provide fodder, he suggested, for those who support decreasing the amount of money that goes to the RHDF.
“Numbers are numbers,” he went on. “Is handle going up? No. Are breeding numbers going up? No. Is racing healthy? No.
“Certain trainers and some leading owners are making lots of money, but not small trainers, owners, and breeders.”
The fundamental question, he said, is what is in the best interest of the state’s economy. “Where,” he asked, “are we going to sell the most agricultural services and products?”
Last weekend at Saratoga, a Pennsylvania-bred filly won the Grade 1 Coaching Club American Oaks. Princess of Sylmar was foaled and raised at Betsy and Ronnie Houghton’s Sylmar Farm in southeastern Pennsylvania; she is the first horse ever bred by owner Ed Stanco, and the second Pennsylvania-bred filly in three years to win the Kentucky Oaks. Plum Pretty won the race in 2011, and Stanco hopes that his filly will help to rejuvenate the industry in his home state.
“I really hope it continues to grow and get good,” he said, standing in the winner’s circle. “I hope this will help. It’s needed in a lot of places. It’s a lot of jobs at stake.”