IN THE MATTER OF THE RACING COMMISSION ACT, S.O. 2000, c.20;
AND IN THE MATTER OF THE APPLICATION FOR
LIVE AND INTERTRACK 2005 RACE DATES SUDBURY DOWNS RACEWAY
On October 28, 2004, Chair Lynda Tanaka, and Commissioners Jane Garthson and George Kelly convened to hear the race date applications for the 2005 racing season.
Executive Director John Blakney and Director of Racing Terry Stone appeared for the Administration.
The Ontario Racing Commission, after reviewing the written submissions from the applicant and others, declines to approve the application from Macranald Enterprises Inc. for 2005 race dates for Sudbury Downs Raceway.
Dated at Toronto this 8th day of November, 2004.
BY ORDER OF THE COMMISSION
John Blakney
Executive Director
REASONS FOR DECISION
A panel of the Commission composed of the Chair and Commissioners George Kelly and Jane Garthson held a hearing pursuant to the decision of the Governing Board of the Commission set out in the Notice to the Industry dated October 22, 2004, concerning the application for race dates for Sudbury Downs Raceway. The issue to be determined is:
"Should the application for race dates be approved, given the reduction in the dates proposed?"
Sudbury Downs applied for 54 race days for the 2005 season commencing Saturday May 7 and ending Saturday October 29, 2005. The track would race Wednesdays and Saturdays and three Sundays in the period, being the Sundays of three long holiday weekends in July, August and September. This application represents a reduction from 66 days in 2004, and a further reduction from the 71 days raced in 2003 and 74 days raced in 2002. The track puts forward this reduction as a:
"different approach that we believe offers an opportunity to grow the interest and the participation of the public and lead to substantial growth for the harness racing industry in Northern Ontario" (see page 11, exhibit 1).
In oral presentation, the track put forward the proposition that the new approach was due to the fact that "we have to do something to get people to the track".
The Northern Horseman's Association ("NHA") submitted that racing should start Saturday April 9th, 2005 and continue with the Wednesday/Saturday timetable until December 3rd when Wednesday night racing would stop and Saturday night racing continue. The calendar also included racing on July 3rd and 31st but not on September 4th. This proposed calendar also includes racing on Christmas Eve and New Year's Eve. No other track is proposing to race on Christmas Eve, though several applied for New Year's Eve racing presumably to capture the celebrations market.
Sudbury Downs' application would reduce the number of live race dates to the level not seen since 1999 and would be one date less than 1998, despite the growth in purses, and teletheatres and simulcast revenues since then, as well as the slots opening in 2000. To put this figure in perspective, in 1998 handle per day was at or over $10,000 on eight occasions that year and never over $14,000 per day. In contrast in 2003, the handle was at or more than $15,000 per day, 24 days out of 71 and in the range of $10,000 to $15,000 per day on 27 days. Therefore, of the 71 days, on 51 days the handle exceeded the 1998 handle.
Submissions on the race dates application in writing were received from the NHA, the Ontario Harness Horse Association, A. and J. Villeneuve Stables, Jason and Chantell Robertson, Troy Rossignol, Vince Quevillon and family, Phil Belanger, France Charterand, Paul MacLean, Robert Bodkin, Paul St. Anand, and from Albert Vaillancort and Gerry Lamoureux as Executive Directors of the Ontario Harness Horse Association. The direction as to the race date applications circulated last summer by the Commission indicated that those providing written comments on an application in the time frame provided under the process would, if a hearing were held, be limited in their submissions to the matters addressed in the written comments. The racetrack operator would have an opportunity to provide further evidence and to reply to the submissions.
Mr. Ken LeDrew appeared before the Commission on behalf of Sudbury Downs at the hearing and made lengthy submissions from a written text which he provided to the panel and which was marked as Exhibit 1. His presentation was supported by a series of schedules numbered A1 to A8, and B to H, marked as Exhibit 1A.
Also appearing to make oral submission were Cheryl Danyluk, Troy Rossignol, Andre Villeneuve, Phil Belanger and Robert Bodkin. Ms. Danyluk on behalf of NHA expressed the view that it was unfair that the track operator could file additional materials with us in response to the written submissions. This was the first scheduled opportunity for the track to do so. What was potentially unfair was that the track did not make copies available to the horsemen of those responding materials. Copies were provided after the track's oral submissions had been made. In view of our disposition, we do not believe further steps are necessary to cure this procedural issue. We state again, however, the importance of the tracks and horsemen disclosing to each other in advance of the Commission hearing any documents they propose to rely on.
We find that Sudbury Downs has not satisfactorily justified the reduction of live race dates. In coming to this conclusion we are conscious of the mandate of the Commission under its statute and the limitations on the Commission in terms of dealing with race date applications. In our view however it would not be in the best interests of racing or in the public interest to approve the application as presented.
In 2003 Sudbury Downs proposed to race 66 days. The horsemen paid $75,000 to Sudbury Downs to race one more day in November and four more days in December. The additional cost borne by the track for the grandstand per night was $5,600. The figures provided in Exhibit 1A indicate clearly that these five days of racing were responsible for generating in excess of $150,000 of handle, probably in excess of $100,000 over what would have been received as handle if the track had not had live racing, based on the projected figure for 2004 when no December racing is proposed. We have been provided with the specific per diem handle information on a chart, and in each of the last five days of 2003 racing, the handle is in excess of $10,000 and in all cases, at or more than the handle received for a significant number of days in the period between April 9th, 2003 and May 31st, 2003.
The track is not racing in December 2004, and is forecasting its handle will be at or more than $10,000 per day for three of the last five days of racing, all of which will be in November, 2004. The history of the December handle in the previous years is mixed with some years showing little handle recovery over $10,000 per day and in other years showing the majority of the days having handles at or more than $10,000 per day. December 31st has traditionally been a day where the handle is at or more than $10,000 per day.
According to Mr. LeDrew, the difference between the $5,600 and the $15,000 per night charged to the NHA apparently reflects the cost of the backstretch for the extended period, even though the track would have collected stall rent for an additional month as well as an entry fee for every horse brought onto the backstretch to train or race on those additional days. The backstretch costs that were taken into account included fixed as well as variable costs. It was clear to the panel that, fairly assessed, the track probably recovered more than its variable costs from the NHA, whether or not we take into account the additional handle generated on those extra five days. What is not clear is why the track is refusing to continue racing, taking advantage of the Christmas party opportunities and cross-selling to the slots, based on these figures even without the help of NHA.
Mr. LeDrew was unable to answer directly or specifically questions put by the panel with respect to the slot machines and the program at his track and indicated in response to one question from the panel that he would not provide the information if he knew it. He later reconsidered and provided some information on the topic.
In addition, the answers given did not give us comfort as to the representation of the numbers. For instance, Mr. LeDrew said that live racing resulted in a "nominal" increase in slot revenue. He resisted suggestions that this description was inconsistent with the significant increase in simulcast revenue shown by the figures for live racing and simulcast racing in his own schedules, as compared to those months when the track is closed.
The theory put forward, as we understand it, from Sudbury Downs is that by racing fewer days they will be able to increase the purses and thereby attract a better quality of horses to Sudbury Downs. The track blames the low quality of horses racing at Sudbury Downs for the handle, which both parties want to see improve. The track's proposal to increase the handle is to create fewer opportunities for live racing in the hope of creating a better demand for racing among the racing public and thereby improving the handle. In addition, the track relies on the theory that by increasing the purses they will attract a better quality of horses and thereby attract better handle. The theory is that the local horsemen will be no worse off and should be better off with a reduced number of days.
In our view, the issues related to improving the attractiveness of live racing as an entertainment and the track as a venue, and improving the attractiveness of racing by having better horses on the Sudbury Downs race track are multifaceted. To some extent the factors are not within the control of either the track or the horsemen. There are, however, certain items that are within the control of the track and the horsemen, which need to be addressed. We do, however, have a fundamental issue with the concept that by increasing purses you will therefore necessarily increase handle. The history within the rest of the province indicates that we must approach this proposition with caution.
In his submission to us in Exhibit 1, Mr. LeDrew blames the loss of quality horses on the expansion of the slot program to include Rideau Carlton, Grand River Raceway and Flamboro Downs, which came on stream after Sudbury Downs did. In Exhibit 1 at page 9, he indicates that prior to the opening of the slots programs at those tracks, there was no shortage of horse inventory, and in better classes, they experienced some growth. With the unveiling of slots at these other tracks, the purses increased there and Northern Ontario no longer had the same attraction. There is no reference to the fact that at these other tracks there is no hub rail as there is at Sudbury Downs currently though the Governing Board's decision set out in the Notice of October 22, 2004 indicates that as part of the improvements for 2005 the old hub rail should be removed. There is also no reference to the problems of the reputation of the track conditions as having stones on it, something that would discourage an owner or trainer from bringing a better quality of horse to this track. Until that issue is resolved and the reputation for a questionable racing surface is changed, higher purses may well not be the total answer. In addition, in terms of enhancing live harness racing, there is evidence at other tracks that increasing the purses does not necessarily mean that local horsemen will experience the same or increased income from those purses because the higher purses attract horses from further afield.
We also do not understand why the track would race fewer days when the access road has been substantially improved by the road authorities in the past year. It seems to us that holding the line on the number of race days and continuing the promotional efforts and improvements to the backstretch, the racing surface and the front side would provide a better comparison to the outcome of 2004 season and give better guidance as to what has to be changed in the future to make a more attractive product for fans and bettors alike.
We also note that while the track wants to do something to get people to the track and while they acknowledge that the best period for handle and racing weather is during the tourist season of July and August, there is no intensification of live racing opportunities with the exception of three Sundays in the summer.
Sudbury Downs is in a special position. It has no present horseracing competition within two hours driving time. It has a teletheatre network across all of Northern Ontario. It is, therefore, in a different market situation than many of the other tracks. Businesses in the community that supply and support the track and the horsemen may be adversely affected when the live racing facility is closed. The slots program was intended to enhance live racing and that phrase should be considered in the broad context of the public interest, of the entire industry and of the economic well being of the people of Ontario.
The figures provided in the material by the track indicate the handle for simulcast is increased when there is live racing. Live racing attracts people to the facility to wager, to enjoy the food and beverage services and to play the slots. By reducing the days, the track is losing those opportunities and limiting the opportunities of the horsemen and the supporting businesses.
The track in response says that racing fewer days will mean larger purses. In our view, live racing is not merely a purse distribution scheme.
In the result, we refuse to approve the application by Sudbury for 54 days of live racing and encourage it to file an amended application which is more consistent with the direction given in previous Commission decisions and more consistent with the slots programs aims and objectives.
We also recognize that over the years the relationships between horsemen and track have been strained and, in many instances, outright antagonistic and adversarial. Public perception of an industry divided and dealing with each other in offensive and angry terms is not conducive to industry growth. We call on both the horsemen and the track to cooperate with a level of discourse that is civil, respectful, truthful and courteous to each other.
The racetrack is required to provide a copy of any amended application to the horsemen at the same time as it submits its application to the Commission and to provide proof to the Commission that the NHA has been given a copy of the application. NHA is required to provide any comments within 10 days of receipt of the copy of the amended application.
DATED this 8th day of November, 2004.
______________________________
Lynda Tanaka
Chair