by Tom LaMarra and Ron Mitchell
Kentucky horse racing and breeding industries are losing ground to other states, and if immediate action is not taken to stem the tide, the state could find itself in jeopardy of losing one of its signature industries, according to a 70-plus-page document document (note: 1.84 MB PDF) released Dec. 15 by the Governor’s Task Force on the Future of Horse Racing.
Among ways to fight this competition, the report in part calls for increased staffing of the Kentucky Horse Racing Commission, alternative sources of revenue to fund purses at racetracks, and construction of a state-owned lab for equine drug testing. Revenue could come from increases in pari-mutuel takeout and taxes charged to racetracks.
The task force was formed in July by Gov. Steve Beshear. Its chairman, KHRC member Tracy Farmer, called the document “an excellent blueprint to begin the process of once again being able to proclaim Kentucky as the Horse Capital of the World.”
In releasing the report, task force members noted the urgency of the situation and said time is of essence. Some of the task force recommendations could be implemented by changing current regulations, while others would require action by the state legislature.
"The threat to the Kentucky horse industry is very real, and it is not long-term," said Keeneland president Nick Nicholson, who served on the task force. "It is imminent."
“The time to act is now, and the time to implement (the recommendations) is now,” said Churchill Downs president Steve Sexton. "Horsemen and the tracks are under pressure from tracks in neighboring states.”
“This is an economic development issue; the urgency is extremely important,” said Bob Vance, secretary of the Public Protection Cabinet, under which the KHRC falls. “It is going to take a long time to get it back if this thing starts eroding.”
There is no direct call for expanded gambling to fund purses and breed development, though the report discusses the threat from other states in which racing is support by casino-style gambling. Lawmakers have said they don’t expect casino gambling to be addressed during the 2009 General Assembly session.
Funding for regulation also could be problematic given state agencies are cutting budgets. An increase in the cigarette tax has been recommended by Beshear, But even that could face strong opposition in the legislature.
The task force said revenue could come from hikes in pari-mutuel takeout and taxes paid by tracks. Neither is considered ideal.
"Ideally, we would not want to increase the takeout, because that ends up being a tax on our customers," Sexton said. "But when you look at the variety of options, there might have to be one, because it is important to have a solid regulatory body in this state."
On the question of increasing the taxes paid by tracks, Sexton said: “We think there are other (funding) choices in there that would be a higher priority to satisfy the needs of the commission.”
A drug-testing lab in the state would lead to quicker test results that have tighter controls and the potential for reduced costs and the ability to organize research activity. In order to help fund establishment of a drug-testing and research lab, which could cost up to $5 million, the task force recommends assessing horse owners of the top three finishers in races with purses in excess of $10,000 to help pay for drug testing.
Kentucky Sen. Damon Thayer, who is involved in the horse industry and has often been a lead advocate for legislation affecting the industry, said he would not be in favor of increasing pari-mutuel takeout or in taxing the tracks to help fund the recommendations. He said he would like to see redistribution of taxes that now go into the state’s General Fund to help fund the racing commission.
Thayer said the report also re-emphasizes his position that if alternative gaming is ever legalized in the state, it should be restricted to racetracks only and not casinos at non-racetrack locations.
The 12-member task force, which has held several public meetings, examined issues such as the economic soundness of the equine industry, the integrity of horse racing, the staffing and budget needs of regulators, and the prospects for locating a world-class equine testing laboratory in Kentucky.
Though Kentucky is facing a budget crunch, the task force has recommended that, to address integrity issues within the sport, 10 new positions be filled including stewards, investigators, and a veterinarian. Such a move would bring Kentucky more in line with other racing states and address recommendations made by the Auditor of Public Accounts, which noted in 2006 the lack of adequate funding and staffing for the KHRC, officials said.
The task force also recommended filling the position of pari-mutuel wagering supervisor and tighter oversight and reporting around the closing of wagering times while requiring all tote companies to be licensed and to provide tote information directly to KHRC.
“I want to express my heartfelt gratitude to the task force,” Beshear said in statement. “I know they worked long and hard grappling with the critical issues facing the horse industry. I look forward to studying their recommendations and developing an action plan for moving this important industry forward.”
The task force report included updates on impending competition from Indiana, which got racetrack slot machines this year, and Maryland, where slots were approved in a November referendum.
The members of the task force were: Farmer, a Thoroughbred breeder and owner; Vance; Robert Beck, a Lexington attorney who chairs the KHRC; Nicholson; Brian Lavin, a Louisville real estate developer; Ron Geary, owner of Ellis Park; Sexton; Dr. Robert Lawrence of the University of Louisville; Joe Costa, president and CEO of The Red Mile/Tattersalls; Ned Bonnie, an equine attorney and KHRC member; attorney Duncan Pitchford; and Ellen Hesen, general counsel for Beshear.