IN THE MATTER OF THE RACING COMMISSION ACT, S.O. 2000, c.20
AND IN THE MATTER OF 2005 LIVE RACE DATE APPLICATIONS FOR
WESTERN FAIR RACEWAY, NEW HIAWATHA HORSE PARK, WOODSTOCK RACEWAY AND WINDSOR RACEWAY
On October 28, 2004, Vice-Chair Larry Todd, and Commissioners Bernard Brennan and David Gorman convened to hear the race date applications from Western Fair Raceway, New Hiawatha Horse Park, Woodstock Raceway and Windsor Raceway for the 2005 racing season.
Manager Information Services Wendy Hoogeveen, Supervisor of Standardbred Racing Bill Fines and Legal Counsel Tim Snell appeared for the Administration.
The Ontario Racing Commission, after reviewing the written submissions and hearing oral submissions from the applicants and others, declines to approve the applications from Western Fair Association for Western Fair Raceway, 405730 Ontario Ltd. for the New Hiawatha Horse Park, Winrac Development Inc. for Woodstock Raceway and Windsor Raceway Inc. for Windsor Raceway.
The Reasons for Decision are appended hereto.
Dated at Toronto this 9^th^ day of November, 2004.
BY ORDER OF THE COMMISSION
John Blakney
Executive Director
REASONS FOR DECISION
Pursuant to a Notice of Hearing under the hand of the Executive Director dated October 22, 2004, and further to a Notice to the Industry dated October 22, 2004 under the hand of the Chair of the Ontario Racing Commission, a panel consisting of Commissioner Brennan, Commissioner Gorman and Vice Chair Todd convened a public hearing on Thursday, October 28, 2004 with respect to the above-styled associations and their application for 2005 live race dates.
At the hearing, the following parties appeared:
ORC Administration - Wendy Hoogeveen, Manager of Information Services
Tim Snell, Legal Counsel
William Fines, Supervisor of Standardbred Racing
Western Fair Raceway - Gary McRae and Ian Fleming
New Hiawatha Horse Park - Jim Henderson
Woodstock Raceway - John Millson and Pat Soulliere
Windsor Raceway - John Millson and Pat Soulliere
Speaking to each of the applications, as aforesaid, was John Walzak, the Chief Operating Officer of the Ontario Harness Horse Association. Additionally, Richard Jacob from Flamboro Downs assisted the panel with his comments on some of the applications, as aforesaid. Mr. Jacob’s comments were of a general nature and applicable in part to all four of the applications.
This panel also had the benefit of written submissions from each association that had been filed with the Commission as part of its considerations on October 21, 2004 in determining which of the applications for 2005 live and intertrack race dates required a hearing.
BACKGROUND
The Governing Board of the Ontario Racing Commission met on October 21, 2004 to consider the applications for approval of race dates, intertrack and simulcast dates, as well as the Backstretch Improvement Plans for 2005 for all racetracks in Ontario.
The applications by Western Fair Association for Western Fair Raceway, Windsor Raceway Inc. for Windsor Raceway, Winrac Development Inc. for Woodstock Raceway and 405730 Ontario Ltd. for the New Hiawatha Horse Park, were referred to this panel of the Commission for further consideration on October 28, 2004 at 10:00 a.m.
Each of the above Associations had been advised by memo dated October 25, 2004 from the Executive Director of the Commission to the following effect:
“This correspondence will serve to give notice that the Administration has expressed concern to the Board of the Commission regarding the proposed distribution of race dates in Southwest Ontario.
The compression of the overall schedule toward ‘weekend racing’ and additional races per card may have internal operational implications for the organization.
For the industry, the Administration also has concerns about the effects that too many common race dates will have on the driver pools, the use of common race track officials, scheduling for OSS races, and cannibalization of live product.
In presenting to the panel on October 28^th^, you should be prepared to address these areas, as it relates to your application for race dates.”
Despite the above, this panel of the Commission heard very little that would answer and/or alleviate the concerns delineated above by the Executive Director. The presentations of each of the applicant Associations, as above, did not ease concerns regarding “compression” of the racing schedule towards weekend racing, the procedural and staffing issues around common race dates and concentration of race dates in the summer racing months, and the possible over saturation of live product in limited market areas. Nor was the issue of lost winter race dates addressed.
GOVERNING PRINCIPLES
This Commission for many years has left it for the various Associations to consider and design their own application for live race dates. The Commission thereafter in furtherance of its statutory mandate and in particular its prescribed consideration of the public interest then either accepts or rejects the application of the Association. Should the application be rejected, the Commission has always invited the relevant Associations to file a new application, hopefully taking cognizance of the stated concerns and principles raised by the Reasons of the Commission.
In recent years, the Commission when considering race dates has also taken cognizance of the provisions and principles contained in a Letter of Intent dated June 25, 1998 whereby the Ontario Government through the then Chair of the Management Board of Cabinet agreed with the Ontario Horse Racing Industry Association, the various race tracks in the province and a number of other racing stakeholders to the introduction and implementation of slots at race tracks. The opening words of this agreement confirm the unequivocal purpose and intent of the slot programs at racetracks, i.e. “to promote live horse racing in the Province and subsequently benefit the agricultural sector” that underlies the horse racing industry in this province.
This panel additionally takes cognizance of an “Addendum to the Letter of Intent” between the Ontario Horse Racing Industry Association and the Ontario Government in June of 2000 which inter alia noted and stated that the “introduction of slot machines at licensed race track facilities….” was for the purpose of “promoting live horse racing” with the ensuing benefits to the agricultural sector province wide.
Since the slot initiative through the Letter of Intent and the Addendum to the Letter of Intent, as above, we are therefore obliged when considering the public interest to look at whether an application for live race dates has properly taken cognizance of or utilized the opportunity presented by the province’s racetrack slot program. While historically the Commission was on many occasions loathe to reject an association’s application, we must now look at both the strict racing business of an association as well as the association’s participation and revenue streams from their slot business.
Chair Sadinsky in Re: Flamboro Downs Holdings Ltd. [1997] O.R.C.D. No. 5, observed that the public interest included inter alia the views and concerns of racing associations, horse people, breeders, the wagering public, and all product and service providers in the agricultural industry. In considering an association’s application as in many cases before this Commission, the interests of these parties may conflict and compete. The Reasons below must, of necessity, balance these competing interests and perspectives.
DISCUSSION
WESTERN FAIR ASSOCIATION
After having applied for and actually raced 121 live dates in 2004, this licensee now asks for a 99 live race date calendar for 2005. In the recent past, being 2002 and 2003, Western Fair raced a similar 99 live race dates. However, in the mid-1990s and during the pre-slot era, Western Fair did race as many as 121 dates per year.
It is also important to note that Western Fair, in its application, proposes to race two days a week instead of four during the period of January through April, the winter racing season. Additionally, Western Fair is now applying for two days a week in May, June and July which may, in and of itself, lead to some conflicts with smaller Southwestern Ontario race tracks, especially during the months of June and July.
We heard at some length from Mr. McRae, who indicated to us that live racing at Western Fair simply is not financially viable in and of itself. He stated that fundamental changes must be made to the product and that the industry must take innovative and perhaps radical steps in order to restore public support. He said that more dates would not solve the problem but would only dilute the product further. He stressed that Western Fair was seeking to experiment with summer race dates albeit that historically going back some thirty or forty years the majority of Western Fair’s race dates had been centered on the winter racing months. Mr. McRae emphasized that Western Fair’s historical racing period between the months of October and April were a significant expense and were having adverse effects on the financial statement and performance of the Association.
Mr. Walzak, speaking for OHHA, indicated inter alia as follows:
(a) at a minimum, three days racing is required in January, February and perhaps even as early as September;
(b) that the 121 days raced last year were a minimum requirement;
(c) OHHA had no objections to the proposed summer weekend racing date experiment; and
(d) OHHA would assist in a monetary fashion with programs to assist Western Fair in marketing live racing.
In responding to Mr. Walzak, Mr. McRae acknowledged that summer racing was attempted by Western Fair some twelve to fifteen years ago and was “unsuccessful”. In response to questions from the panel, Mr. McRae further acknowledged that the monetary results for the Western Fair Association from live racing in the past two years were the best in the months of November, December and February. With regard to the Western Fair Association’s “Business Plan” with appendices, including a financial analysis by Marcus & Associates Hoare-Dalton, Mr. McRae did acknowledge that the Association’s revenues from their slots were not reflected as an income stream in this submission. Mr. McRae further acknowledged that the Association was currently experiencing some increase in slot revenues and that he expected no reduction in the approximately $7.5 million of annualized slot revenue coming to the Association.
We were advised that the daily purse pool or sum paid to horsepeople on each day of proposed racing would increase to approximately $100,000.00 if the 99 day proposed schedule were approved. The submissions indicated that the daily purse pool would be between $80,000.00 and $85,000.00 should Western Fair race 121 days as it is in 2004. In total then, purses would approximate $10 million under either scenario.
Western Fair Association is a not-for-profit entity incorporated in 1887. Its purpose is to “support the ongoing development of the agricultural industry and to promote its value to the urban community.”
Western Fair Association has a number of varied endeavours other than horse racing. However, we do note that the association’s racing and gaming undertakings in the most recent fiscal period (ending June 30, 2004), generated racing and gaming revenue of nearly $14 million. After considering the Association’s expenses, there can be no issue that a combination of standardbred horse racing with its associated gaming function left the Association with a very significant net income with which to service its long term debt and its other endeavours apart from racing and gaming.
Mr. McRae was kind enough to acknowledge and agree that a number of owners are presently struggling to find racing opportunities for their horses. He further acknowledged that the reduced wintertime racing opportunities at London could and would very probably inundate the entry box at Flamboro Downs and Windsor Raceway, those being the only other January to April winter racing venues in that part of Ontario. We are concerned that both the reduction in live dates at London and the placement of many of those dates on summer weekends will cause some significant hardship in the form of lost winter racing opportunities.
Additionally, we are concerned that the return to 99 race dates in conjunction with the significant increase in slot revenues that took place in 2003 through the increased allocation of slot machines to the Association will cause a distortion to the daily purse pool and the quantum of purses for which each of the various classes of claiming horses or conditioned horses will be competing.
For the aforesaid reasons, we have significant concerns with the application, both in the quantity of dates and the placement of those live racing dates. We should not be taken to be critical of the initiative of the summer racing experiment, but these summer dates in the Association’s application as a whole result in a loss of winter racing opportunities in Southwestern Ontario without any satisfactory alternative. The quantum of the daily purse pool is a further concern in the context of the proposed schedule. Additionally, any efforts to cut back on the quantum of live racing dates, when an association is the recipient of the financial largesse of slot revenue, is something that must be critically scrutinized.
We note that in correspondence between OHHA and Western Fair, a date application of 130 days was proposed by Western Fair in 2005, in return for certain financial commitments from OHHA. In reply, OHHA said that it did not support the proposal. We encourage these two groups to try again to find some common ground.
For the above reasons, we are of the view that the existing application for race dates for this Association is wanting. In our view, further consideration should be made to adding race dates to the Association’s calendar consistent with the historical and significant traditions of Western Fair, whose vision is “creating unique experiences that build positive memories”.
HIAWATHA HORSE PARK
This licensee is applying for 63 live race dates, a number equal to those approved in 2004 and actually raced in 2004. It is noted that this licensee, located in Sarnia, has raced essentially Thursdays and Saturdays for approximately fourteen years. This licensee’s slots opened in 1999 and for the years 2000 and 2001, the Association was able to race 78 and 73 days respectively.
On behalf of the Association, Mr. Henderson filed with us correspondence dated October 27, 2004 (Exhibit 2) directed to the Chair indicating a variation from its formal application seeking 63 days commencing April 23, 2005 and terminating November 26, 2005. In short, Exhibit 2 sought a reduction of four race dates, being Thursdays in November and, in particular, Thursday, November 3rd, November 10th, November 17th and November 24th. Exhibit 2 before us delineated the rationale for Mr. Henderson’s request for 59 race dates as opposed to the originally requested 63. He stated that the requested reduction was in response to Western Fair’s application to operate on Thursdays in November, and that if Western Fair did not operate on those dates, Hiawatha would.
Mr. Henderson stresses to us that he loses money from live racing and simulcasting. Mr. Henderson went on to emphasize many of the issues referenced by Mr. McRae and in particular the apparent reality that the racing business of race tracks, as distinct from their slot business, has not prospered to the extent required to support a growth and perhaps even maintenance of existing live race dates.
Mr. Walzak, speaking for the Ontario Harness Horse Association, stressed that we should not “give up” on live racing since that would send a message that racing is failing and futile. Mr. Walzak sought an additional seven days of live racing for 2005. He noted that his membership found Hiawatha a terrific place to race.
In response, Mr. Henderson confirmed that he had no specific complaint or concern with respect to Western Fair’s application and their choice of racing Thursdays in November. Mr. Henderson indicated that he would make up the lost racing opportunities for November Thursdays with an increased number of races on the other 59 race dates. This Commission in the past has noted that this purported solution of “more races per card” is not the optimum and may only be short-term illusory gain for the best interests of racing. Jamming multiple and multitudinous racing opportunities on one or two race dates is not an acceptable alternative to properly spaced racing opportunities for both the equine athlete, the employees of the various regulators or the trainers and caretakers of horses themselves. The health, well-being and longevity of both the horse and the human participants must be a recognized concern when one considers the “more races per card” phenomenon which seems to be appearing before us with greater and greater regularity of late.
For the above reasons, we find that the current application of The New Hiawatha Horse Park, as amended by Exhibit 2, to be wanting. An application involving 63 live race dates with an appropriate and historically based number of races per card would satisfy our concerns.
WOODSTOCK RACEWAY
This licensee is applying for 19 live race dates down from the 30 applied for and approved for 2004. This application is a de facto return to the level of live racing in 2002 and 2003. The fundamental basis for the application is that the addition of 11 race dates in 2004 resulted in no increase in wagering, but generated a parallel increase in expenses for the additional race dates. Mr. Millson stressed that increasing the number of race dates simply to distribute purse money is not in keeping with good business practices.
It should be noted that within the past month, the licensee has completed the construction of a new twelve race paddock at a significant capital expense. This paddock is a marked improvement to the otherwise relatively rudimentary racing facilities at Woodstock and will be seen as a significant development by all stakeholders to the racing experience at Woodstock Raceway.
Mr. Millson and Mr. Kruba, through his written submissions in correspondence to the Commission dated October 27, 2004, being Exhibit 3 herein, stressed that the thirty days of live racing at Woodstock in 2004 was “an abysmal failure”.
There are, however, other perspectives to consider. Richard Jacob of Flamboro Downs, expressed a very legitimate concern with respect to the distortions in racing that take place when the purse pool paid out for each day of live racing is significantly increased through the reduction of race dates. The evidence before us was that the daily purse pool in Woodstock in 2004 was approximately $70,000.00. However, we were told that this purse pool could go as high as $110,000.00 per day, should the existing application with 19 live race dates be approved.
We were advised by Mr. Jacob that Flamboro Downs, while having no formal objections to the race dates being applied for, did have a concern that quality horses would be absenting themselves from his live racing dates and those of other associations in an exodus to Woodstock if the purse pool rose to $110,000.00 per day.
Mr. Millson attempted to answer this by saying that the licensee was prepared to consider a purse equalization program whereby certain purse monies would be transferred to other venues and other associations who offered greater racing opportunities. However, the application, as presently framed, provides no specifics and no firm undertakings in this regard.
Woodstock’s entire 19-day application is said to have its foundation in good business sense. Mr. Millson stressed that 19 days of racing were required so that the applicant could have “solid financial results for its shareholders”. In this respect, we do note the Association is materially delinquent in the filing of its audited financial statements with this Commission. We were told by Mr. Millson that neither the financial statement for the year ending December 31, 2003 nor the financial statement for December 31, 2002 have as yet been finalized and filed with this Commission as required. We were assured that these financial statements would be finalized “within the next week” and would be filed with the Administration as soon as the applicant’s Board of Directors approved same.
Until the two years of delinquent financial statements for Winrac Development Inc. have been filed with this Commission, we have no way of objectively reviewing whether there is a sound basis in economics for Woodstock’s application for the significant reduction from 30 live race dates to 19. We do note that wagering on live racing to September 30, 2004 was up marginally. Additionally, Mr.Walzak indicated that the Ontario Harness Horse Association currently was not in favour of a purse equalization program whereby purse pool money from Woodstock Raceway could or would be transferred to other live racing venues.
For the reasons above, we therefore are not in a position to approve the existing application for 2005 race dates for Woodstock Raceway. The current application simply generates too many difficulties for which the applicant has provided no satisfactory answers. The existing 19 live race date application is seen as deficient in that it does not build on the significant opportunity to enhance live racing at Woodstock made available through the slot program.
WINDSOR RACEWAY
Windsor Raceway is applying for 121 live race dates in 2005. This is a material reduction from the 153 live dates applied for in 2004 and the 133 live dates actually raced or going to be raced in calendar 2004. Similarly, the application for 121 live dates is part of a disturbing trend in the last number of years which can be demonstrated as follows:
Year Live Race Dates
1999 193
2000 184
2001 161
2002 156
2003 153
2004 133
This trend towards less and less live racing opportunities causes us significant concern especially in the context of the stated rationale for the slot program at racetracks. It should be noted that Windsor Raceway was the first racing venue for slots with their facility opening in December of 1998.
Mr. Millson stressed that since the slots have opened at Windsor, there are now four world-class casinos within ten miles of his racing and slot operation. Mr. Millson also stressed the fact that his former U.S. patron base has virtually disappeared and that he is now a Canadian based operation entirely.
Mr. Kruba, through Exhibit 3 filed in these proceedings, stressed that “business deterioration is likely if more than 121 days of live racing run”. Mr. Kruba, in addition to stressing the fierce competition from nearby casinos tried to draw a parallel between Windsor’s market and that of the Western Fair Association situate in London. The argument was made that OHHA, while “very satisfied” with 121 live days at Western Fair, should be equally happy with 121 live days at Windsor. While pleading fiscal necessity and competitive hardship, we do note the following:
(a) Slot revenues and income are up at Windsor Raceway. Mr. Millson indicated that slot revenues for 2002 and 2003 were approximately $11 million each year with 2004 going to come in at about $13.5 million, an increase of nearly 20%; and
(b) Windsor Raceway, with the temporary concurrence of the Ontario Harness Horse Association, in 2004 altered some of its approved dates to “double card nights” so that there could be 16 races on Wednesdays and Sundays as opposed to an extra night per week of live racing with a more normal 10 or 11 race card. The end result is the equivalent of operating 170 programs with 10 races each.
The licensee in its application for 2005 stresses that “to remain an economically viable venture for years to come”, such a double card race night “with reduced live racing days” must continue. The licensee sees this 2005 application as serving the public interest and the best interests of racing.
Much as with the application of Winrac Development Inc. for Woodstock, we are significantly handicapped in assessing this submission. The financial statements for December 31, 2002 and 2003 are delinquent and have not been filed as required and in a timely fashion with the Administration of the Commission. Mr. Millson indicated that we would have them within ten days of the hearing, but as these Reasons are being written, the materials are not as yet available. In order to balance the interests of the licensee and its purported operational problems against the interests of horsemen wishing live racing opportunities consistent with the expectation set out in the Letter of Intent, we need access to this information.
The licensee’s application essentially calls for “double card” nights of racing on Sunday and Wednesdays from the first week of April through to the end of November with a January, February, March and December schedule of three nights of live racing per week. In those eight months from April to November, Mr. Millson advises that Windsor will race a 16 race card each Sunday and Wednesday with a 6 o’clock post time and the races lasting some five hours to 11 p.m. However, we were told that Mr. Millson has no contractual commitment with any party, including OHHA, that there will be 16 live races on each of the 121 dates for which approval is sought. We were advised that “the budget” called for 15 race cards per race date in the period of January through March and 16 races per day on each of the Wednesdays and Sundays from April to November with 15 races on two of the three days in December and 12 on the third day. This commitment was contingent on the horse population being available and the “revenue stream” being maintained. We were given no particulars of the quantum of either the horse population or the “necessary revenue stream”. This Commission has expressed in other decisions over the years that it does not view “more races per card” as a panacea to be encouraged and set as the standard on a go-forward basis.
The Commission’s memorandum to the applicants of October 25, 2004, as above, underlined this concern.
All participants at Windsor Raceway are required to ship their horses to the track. Windsor Raceway no longer has any permanent stabling. It is not difficult to imagine horses involved in one of the proposed “double card nights” at Windsor being on the road, available for lasix, waiting in a paddock or ship in facility, racing and returning to their home base or training center over a period of 12 to 15 hours, depending on travel distance, lasix schedules and the number of horses the trainer has racing on the card.
The Commission has a mandate to safeguard the health and well being of the racehorse and this will not be ignored.
Double card nights also cause concerns and questions with respect to the ability of the various regulators’ employees to carry out their functions effectively.
This licensee, as well as others, was invited to address that issue, but we received little, if any, assistance in this respect.
Additionally, Windsor is departing significantly from their historical pattern of winter racing when there were four nights of live racing available. This alteration to Windsor’s historical emphasis on live winter dates in the context of the available live dates in the wintertime in Southwestern Ontario is a further significant concern.
The slot initiative of the Provincial Government was not developed so that the promotion of “live horse racing” was only to take place in the most cost efficient racing times of the year, i.e. the non-winter months. Associations take their revenue from their slot operations twelve months a year. The best interests of racing and the public interest require that there be horse racing available on a live basis throughout the year.
Accordingly and for the reasons above, we find the existing application of Windsor Raceway wanting. We accept that the Windsor marketplace has been eroded in recent years. We would respectfully hope that this licensee and their partners in racing could develop a revised race date application that takes cognizance of our concerns, that upholds the goal of advancing live harness racing, gives some acknowledgment to the historical position of Windsor as one of the premier venues of winter racing and that implicitly considers the well being of the horses racing at their facility.
It should and must be noted that the approval of any revised application from both Windsor Raceway Inc. and the related Winrac Development Inc. will be contingent on Mr. Millson’s undertaking on behalf of both Windsor Raceway and Woodstock Raceway to have the delinquent audited financial statements available to us with the revised application.
CONCLUSION
We therefore look forward to the receipt of revised applications after all the Associations herein have the opportunity to consider our views and concerns. We thank all Associations for their detailed and helpful materials and submissions.
The above are the unanimous reasons of this hearing panel.
DATED at Toronto, this 9^th^ day of November 2004.
Larry Todd
Vice Chair