Submission to Racing and Wagering Western Australia

Response to

Metropolitan Equine Asset Review Taskforce Future Asset Needs for the WA Racing Industry

Michael Reindl BEc GDipEd

A: 5A Third Avenue, Bassendean WA 6054M: 0419 966 256E: mike_reindl@yahoo.com.au

Contents1 EXECUTIVE SUMMARY.....................................................................................4

2 Metropolitan Equine Asset Review Taskforce......................................................6

2.1 Objectives of MRAT.......................................................................................6

2.2 Transition to MEART......................................................................................6

2.3 Release and Presentation of the GHD Report...............................................6

2.4 GHD Report Does Not Meet Taskforce’s Objectives.....................................7

2.5 Gunston Report and Asset Rationalisation....................................................8

3 Minimum Standards for Public Policy...................................................................9

3.1 Key conclusions of the GHD Report were pre-determined and influenced by executive bias..........................................................................................................9

3.1.1 Further Decline of Industry......................................................................9

3.1.2 Stabilisation of Industry.........................................................................10

3.1.3 Industry Growth.....................................................................................10

3.1.4 Biased View of Sustainability leads to Pre–Determined Outcome........10

3.2 The GHD Report analysed evidence in a selective manner to direct the argument in favour of a pre-determined outcome..................................................11

3.2.1 Public Attendance..................................................................................11

3.2.2 Marketing Spend...................................................................................12

3.2.3 Population Growth.................................................................................13

3.3 The GHD Report evaluated options in a manner that led to a pre-determined outcome.................................................................................................................14

3.3.1 Option T1...............................................................................................14

3.3.2 Options T4-T8.......................................................................................14

3.3.3 Evaluation of Shortlisted Options..........................................................15

3.4 The GHD Report did not undertake a cost-benefit analysis of options that did not support a pre-determined outcome..................................................................15

3.4.1 Relative Cost to Outcome......................................................................15

3.4.2 Costing Option T1..................................................................................15

3.5 The GHD Report engaged in selective and unbalanced consultation leading resulting in views opposing a pre-determined outcome were not considered.......16

3.5.1 Wagering providers...............................................................................16

3.5.2 Public Opinion.......................................................................................16

3.5.3 Other Equestrian Activities....................................................................16

4 The Preferred Option.........................................................................................17

4.1 GHD Report Methodology points to Option T1............................................17

4.2 Stabilising the industry may consider other options.....................................17

4.3 Other industry concerns...............................................................................17

4.4 Privatisation of the WATAB..........................................................................18

4.5 ERA Review of Options for the Racing industry...........................................18

1 EXECUTIVE SUMMARYRacing and Wagering Western Australia (RWWA) has recently released a report “Future Asset Needs for the WA Racing Industry” (GHD Report), prepared by consultancy firm GHD, as part of the Metropolitan Equine Asset Review Taskforce (MEART).1

It is unclear as to the purpose of the GHD Report due to a lack of clarity around whether the report is the final report of the MEART, a discussion document within the context of a wider MEART process or an analysis / review process separate to MEART.

The scope defined in the GHD Report differs from the objectives outlined by RWWA when establishing the Metropolitan Racing Asset Taskforce (MRAT) in October 2014.2 Hence, whilst RWWA declared the report “independent”, the scope, assumptions and methodology makes that claim questionable. 3

The GHD Report appears written in a manner where the outcome was predetermined and the authors have gathered evidence and argued to achieve that specific outcome, at the exclusion of other considerations.

The appearance of pre-determination in the GHD Report reduces its usefulness, particularly given weak analysis which is inconsistent with what most would consider the minimum conditions for good public policy.4

Key conclusions of the GHD Report appear pre-determined and influenced by executive bias

The GHD Report appears to analyse evidence in a selective manner to direct the argument in favour of the pre-determined outcome

The GHD Report appears to evaluate options in a manner that leads to the pre-determined outcome

The GHD Report does not include a cost-benefit analysis of options other than the pre-determined outcome

The GHD Report appears to engage in selective and unbalanced consultation with views opposing the pre-determined outcome not considered

The GHD Report considered eight premium thoroughbred options. Provincial thoroughbreds and harness racing only received precursory evaluation as only “Thoroughbred Premium” contained multiple options for consideration.5

The GHD Report reached the conclusion that Option T5 is the optimum asset mix, including asset rationalisation leading to the development of non-metropolitan ghost tracks, wholly supported by off-course gambling revenues, where public attendance is marginally represented (400 people) and facilities are focused solely on broadcasting content.

1 Press Release, Independent Report Identifies Optimal Metropolitan Equine Racing Assets To Serve Future industry Needs (September 2015),RWWA2 Press Release, Metropolitan Asset Racing Taskforce Announced (October 2014), RWWA3 Press Release, Independent Report Identifies Optimal Metropolitan Equine Racing Assets To Serve Future industry Needs (September 2015),RWWA4 Australian National Audit Office, Some Better Practices Principles for Developing Policy Advice (2001), http://www.anao.gov.au, Commonwealth of Australia5 GHD Report, Page 61

The GHD Report commenced with a pessimistic view of racing’s future, contrary to current national and international trends. The report then eliminated viable options on the unsubstantiated assumption the future of the racing industry could only exist in the Peel Region.

The GHD report fails to consider other initiatives such as

Better utilisation of existing assets through increased marketing spend Change to the product mix to meet new market expectations Develop Pinjarra Park as the multi-purpose training and event facility in

preference to Lark Hill

The GHD Report’s bias towards an outcome around the Peel Region and in particular one which involved the development of Lark Hill as an event facility is evidenced by those options progressing to a short list despite not meeting the criteria that the report itself defined.

Had the GHD Report represented a truly “independent” process, using the reports own evaluation criteria (excluding the criteria for location in the Peel Region), the option most likely to address the criteria best, both quantatively (cost) and qualitatively (outcomes) was Option T1 (retention and redevelopment of both Ascot and Belmont).

Also, the GHD Report appears to have not considered and evaluated a number of viable alternatives and the industry should further investigate excluded options before making an informed decision with all facts fairly presented.

The GHD Report unintentionally raises matters with regard to the governance of racing and whether RWWA is still a relevant body in the current wagering and racing environment. It would seem difficult to agree a position on the future asset needs of the industry without greater clarity of those governance issues going forward.

Given RWWA lacks the independence to provide such advice, an alternative body such as the Economic Regulation Authority appears much better placed to undertake such evaluation and provide government with relevant advice.

2 Metropolitan Equine Asset Review Taskforce

2.1 Objectives of MRATRWWA announced the establishment of MRAT in October 2014, indicating the taskforce would consider current and future asset utilisation from an industry and public interest perspective. 6

The taskforce was described as timely and necessary in demonstrating to government, the most effective and efficient manner for deploying and utilising racing’s assets and was intended to include a number of areas of assessment before reporting back to the RWWA board by 31 May 2015:7

The effectiveness of delivering racing and training functions to racing industry participants;

The effectiveness of delivering services and facilities for Club members and the general public for both racing and non-racing events;

Club and industry sustainability issues associated with current metropolitan assets and their interface with inner provincial tracks;

The extent of capital needed to refurbish and modernise existing assets to a standard suitable to meet future requirements;

Identification of optimal and where appropriate alternate locations within the metropolitan area to achieve sustainable outcomes;

The impact if any on nearby provincial and country clubs and how they might contribute to a better model going forward;

The likely source and practicality of securing funding to support racing’s infrastructure needs for the future.

2.2 Transition to MEART RWWA updated the progress of the Taskforce in March 2015, indicating the taskforce had completed an assessment of assets, animal populations and participant locations. 8

The update indicated the process was to include detail of those preliminary findings in a Final MEART Report along with an assessment of the ongoing capability of the current assets and the description of future requirements for each racing code and the optimal mix of facilities. 9

2.3 Release and Presentation of the GHD Report RWWA released the GHD Report on 9 September 2015 and 5 days later invited industry participants to attend a forum at Gloucester Park. 10 11

6 Press Release, Metropolitan Asset Racing Taskforce Announced (October 2014), RWWA7 Press Release, Metropolitan Asset Racing Taskforce Announced (October 2014), RWWA8 Press Release, Metropolitan Equine Asset Review Taskforce Update (March 2015), RWWA9 Press Release, Metropolitan Equine Asset Review Taskforce Update (March 2015),RWWA10 Press Release, Independent Report Identifies Optimal Metropolitan Equine Racing Assets To Serve Future industry Needs (September 2015),RWWA11 Facebook Postings (9 and 14 September 2014), www.facebook.com/racingandwageringwa, RWWA

2.4 GHD Report Does Not Meet Taskforce’s ObjectivesThe GHD Report is unclear whether the report represents the Final MEART report, a component of MEART’s Final Report or a discussion document unrelated to MEART.

The GHD Report describes the scope differently to either of RWWA’s two press releases on the matter.

If assessing the GHD Report against the press release, the following objectives are not achieved.12

The effectiveness of delivering racing and training functions to racing industry participants;

The effectiveness of delivering services and facilities for Club members and the general public for both racing and non-racing events;

Club and industry sustainability issues associated with current metropolitan assets and their interface with inner provincial tracks;

The impact if any on nearby provincial and country clubs and how they might contribute to a better model going forward;

The likely source and practicality of securing funding to support racing’s infrastructure needs for the future.

Further, the GHD Report only partially addresses the following objectives and only to the extent the reports preferred option (Option 5) was costed against the cost of a new facility in the Peel region (Option 7).13

The extent of capital needed to refurbish and modernise existing assets to a standard suitable to meet future requirements;

Identification of optimal and where appropriate alternate locations within the metropolitan area to achieve sustainable outcomes;

Other than the following statement, the GHD Report does not provide evaluation or insight into the ongoing capability of the current assets despite this being described as an intended outcome announced RWWA’s second release.14

Typically most existing assets held by the clubs are over 40 years old and have the capacity to accommodate public attendances far in excess of current attendance numbers. The industry is over capitalised with respect to the extent of public amenity facilities, but under capitalised with respect to condition. These public facilities are in need of periodic renovation to maintain functionality, occupational health and safety, regulatory compliance and user satisfaction.

For these reasons, the GHD Report does not appear to meet the requirements and outcomes set forth by RWWA when it established the taskforce.

2.5 Gunston Report and Asset RationalisationIn 2014, Western Australian Racing Representative Group (WARRG) engaged a consultant Ray Gunston to prepare a report (Gunston Report) to assist in the

12 Press Release, Metropolitan Asset Racing Taskforce Announced (October 2014)RWWA13 GHD Report - Appendix D14 Press Release, Metropolitan Equine Asset Review Taskforce Update (March 2015),RWWA

deliberations of the WA Racing Industry in relation to the potential privatisation of the Western Australian TAB (WATAB).

Gunston concluded that the current distribution from the WATAB was only sufficient to fund the operational aspects of racing and the industry needed to rationalise assets and seek alternative funding sources for infrastructure.15

With little or no capacity to fund infrastructure maintenance and development requirements across the WA Racing Industry from its operational cash flow break-even situation, it is critical that the entire WA Racing Industry be prepared to address the issues of improved efficiency and rationalisation of infrastructure to sustain the WA Racing Industry in an integrated fashion.

The WA Racing Industry must pursue funding alternatives for infrastructure in any potential privatisation process (or even if it does not occur), but to have any success in this it needs to commit to pursuing such efficiency / rationalisation processes.

Unfortunately, the GHD Report does not address the matters related to infrastructure raised in the Gunston Report not does it make mention of the report despite the report being the most recent reference to the state of the industry in WA.

15 Gunston Report, Page 17.

3 Minimum Standards for Public Policy

3.1 Key conclusions of the GHD Report were pre-determined and influenced by executive bias

The GHD Report assumes all future growth in relation to racing revenue shall come from off-course wagering. This leads to the conclusion that racetracks with facilities for public attendances will make way for race tracks designed for broadcast only.

The GHD assumption further leads to the conclusion that centrally located racetracks are not required, as public attendances are not important. However, this is confusing as the authors make public attendances a criterion for assessing options at a later stage in the report.

This assumption reflects a wagering only bias and ignores the social and cultural benefits racing provides to a community. That the GHD Report adopted a wagering only bias is consistent with perceptions of the current role RWWA plays in the industry.16

The Gunston Report also notes this wagering bias. 17

The observation in this regard, reinforced by a number of participants’ commentary, is that RWWA has probably prioritised its attention in recent times to the wagering part of the business to a significantly greater extent than its PRA obligations.

That the GHD Report takes on a predominately wagering focus suggests that a bias from RWWA has influenced the outcome of the report.

3.1.1 Further Decline of IndustryThe GHD Report considered options based on the decline of the racing industry with an assumption the industry is heading towards a scenario where the only future was asset rationalisation, development of non-metropolitan ghost tracks, wholly off-course gambling revenues, marginalised public attendance and facilities focused solely on broadcasting content.

The report presents this scenario as fait accompli without any evaluation of events that have given rise to current trends or options available to race clubs and the industry.

The view represented in the GHD Report is that no matter what action clubs and the industry may take, the number of people attending races will decline to a point where the only options available are ghost tracks or no racetracks. With ghost tracks more favourable as off-course wagering such still requires racing product for betting.18

16 RWWA produces a series of reports tilted “Western Australian Racing Industry Status Reports”, analysing these reports would show that since 2007 racing in WA has become stagnant with zero or negative real growth in the number of race meetings, races, prizemoney and expenditure. In contrast, RWWA has grown the wagering business by 14% per annum and increased the number of thorough bred meetings covered by 78%. As Proportion of the WATAB’s product base, WA racing has gone from 12% of meetings to less than 7% of meetings covered by the WATAB17 Gunston Report, Page 110.18 RWWA have previously presented that buying race product to wager on from other jurisdictions is cheaper than creating race product in WA

3.1.2 Stabilisation of IndustryThe GHD Report ignored the evidence from other parts of Australia, as well as the UK, where that effort with regard to marketing spend and promotion has resulted in a reversal of the declining trend to near record high attendances.

Because the GHD Report fails to evaluate the reason for previous declines and changing global economic circumstances, the report never considered options where the industry stabilises and where with refurbishment, upgrades and minor improvement to existing assets the racing industry is able to meet current and future needs.

It would be suggested that evidence form 2013/14 onwards would show this is the trend currently experienced in NSW, Qld and South Australia.

The Gunston Report highlights racing in WA is for all intent “treading water” with minimal growth or decay.19

One argument would be that that the lack of industry growth in WA is a result of the wagering focus of RWAA mentioned previously.

3.1.3 Industry GrowthMost observers would agree that a growth based scenario where an increased awareness of racing develops a deeper engagement with the sport and results in the need for new facilities to capture increasing demand is unlikely. The scenario however is not improbable and is the scenario that probably best describes the current experience in Victoria.

3.1.4 Biased View of Sustainability leads to Pre–Determined OutcomeBiased by the assumption of industry decline, the GHD Report never addresses how the industry becomes sustainable.

The GHD Report evaluates sustainability on the basis of following the population growth and converting training facilities into broadcast only venues. The definition of sustainability used in the report drives the report to the pre-determined outcome.

3.2 The GHD Report analysed evidence in a selective manner to direct the argument in favour of a pre-determined outcome

The GHD Report supports a negative outlook for the racing industry using data predominantly more than 3 years old. This data also coincided with aspects of economic downturn in 2009 and/or 2011. In compiling the report, there seems little independent collection or evaluation of the data other than that provided by RWWA.20

This again brings into question the extent of independence displayed in the report.

19Gunston Report, Page 62. 20 Disclaimer on Page i of the GHD Report (emphasis added)

GHD has prepared this report on the basis of information provided by Racing and Wagering Western Australia and others who provided information to GHD (including Government authorities)], which GHD has not independently verified or checked beyond the agreed scope of work. GHD does not accept liability in connection with such unverified information, including errors and omissions in the report which were caused by errors or omissions in that information.

The GHD Report creates the impression only data supporting the pre-determined outcome was included and data representing any inconvenient truth was deliberately omitted.

3.2.1 Public AttendanceThe GHD Report argues its negative outlook on national and international trends showing declining racecourse attendances and to support this, the report reproduces a table from the Economic Impact of British Racing 2013 (Deloitte Report) making the comment that as in Australia total attendances at race meetings in Britain have declined over the past decade. 21

The Comment in the GHD Report differs considerably from what the Deloitte Report said.22

Total attendance experienced a gradual decline to 5.7m between 2003 and 2009, but then recovered and increased to a modern era record of 6.15m in 2011. Part of the reason for the recovery was the activities of Racing For Change (now Great British Racing), which worked closely with the racecourses on a large range of initiatives to promote and encourage race going, including new racegoers.

The GHD Report also omits that the Deloitte Report indicated in 2012, that British horseracing attendances were hampered by the second wettest summer on record forcing the cancellation of a significant number of race meetings and the clash between the 2012 London Olympics and a number of feature racing festivals also had an impact on attendance numbers.23

The GHD Report did not seek an update on the information. The Racecourse Association announced updated figures in August 2015 and these should have been available to the GHD Report. 24

The Racecourse Association has announced a significant increase in British racing’s attendances in the first six months of 2015. The overall figure of 2,987,103 is higher even than the amount reached over the same period in 2011, the record year for attendances in British racing. These figures indicate a rise of almost 300,000 on the same period in 2014, which represents a rise of 10%. The average number of racegoers at each fixture sits at 4,184, an 8% increase on 2014 and higher even than the record figures of 2011.

3.2.2 Marketing SpendThe GHD Report further argues the declining state of affairs regarding racing was evident in a table reproduced from Brisbane Race Club’s Strategic Plan 2015-2017 (BRC Plan).

21 Page 20 of the GHD Report22 Deloitte and British Hor5seracing Authority, Economic Impact of British Horse Racing 2013, www.britishhorseracing.com, British Horse Racing Authority23 Deloitte and British Hor5seracing Authority, Economic Impact of British Horse Racing 2013, www.britishhorseracing.com, British Horse Racing Authority24 The Racecourse Association, August 2015 Newsletter, www.britishcourses .org

The GHD Report makes the statement Perth Racing experiences similar trends to Brisbane Race Club (BRC) with average annual attendance declines of between 4 and 6 percent.25 But the GHD Report does not present any annual attendances figures for either Perth Racing or BRC? 26

YearAttendances27

Perth Racing Brisbane Race Club

2010 205,321 226,563

2011 191,224 219,057

2012 200,493 195,212

2013 175,017 195,006

2014 168,657 179,135

What the GHD Report omitted to reproduce from the BRC Plan was the statement:

Clubs are working harder to maintain visitors and spending more to acquire them – we are below trend

What the reproduced table in the original document considered, was that the BRC had the lowest marketing spend per meeting of any club in Australia. The table was intended to highlight that to compete with other clubs, the BRC needs to increase its marketing spend comparatively to other clubs.28

3.2.3 Population GrowthThe GHD Report mentions Perth Racing having commissioned a market sounding and survey report which suggested improved attendances relied on targeting the “Young Explorer” population group. 29

Metrix determined that the greatest opportunity to generate new entrants to racing, increase revenues and encourage ongoing involvement with the industry existed with the “Young Explorers”, working adults aged less than 30 years.

25 Page 31 of GHD Report26 Whilst GHD is correct that both clubs are experiencing declining attendances; however the reasons may be very different.

The BRC was only formed in 2010 by the amalgamation of 2 other clubs and therefore initial attendances were high

In 2011, BRC had a significant crowd boost from an appearance by Black Caviar In 2014, BRC closed Eagle Farm racecourse for refurbishment and racing QLD transferred

some Saturday Premium Race meetings to Ipswich and the Gold Coast. The 2014 figure for Perth Racing includes 4 fewer race meetings and on an attendance per

race meeting had made some recovery above the 2013 level The 2013 figure for Perth Racing is most likely to be associated with the general economic

downturn rather than any specific trend away from racing 27 2013/14 Annual reports for both Perth Racing and Brisbane Race Club28 Perth Racing has the second lowest marketing spend per meeting in Australia and that likewise to the BRC is the most likely reason Perth Racing scores lowly in average attendance, membership and food and beverage spend.29

GHD Report Page 50

The GHD Report then uses this statement as the sole justification for pre-determining that racing’s future was in the greater Peel region on the basis sustainability required racing to “follow the population”. 30

However, whilst population growth in that corridor will occur, the GHD report makes no attempt to analyse the demographics of that growth to determine whether it links back to the “Young Explorer” population group.31 32

Further, the GHD Report makes extensive mention of declines in on-course wagering and food & beverage spend as drivers of sustainability but never assessed whether the population growth in the Peel region would firstly lead to higher attendances or whether those attending had sufficient discretionary spending capabilities to deliver those outcomes.33

3.3 The GHD Report evaluated options in a manner that led to a pre-determined outcome

The GHD Report evaluated eight options and only the “Thoroughbred Premium” contained multiple options for consideration. The report assessed options at two stages with different criteria at each stage. 34

The first stage evaluated cost, sustainability and attendances.35 The second stage evaluated production, population growth and risk.36

3.3.1 Option T1 The GHD Report describes Option T1 as the “Do Nothing” option with Ascot and Belmont retained.37

The GHD Report eliminates Option T1 from consideration evaluating it as not meeting the criteria related to sustainability and attendances.

Most people undertaking a similar analysis however would have considered the status quo as the best baseline for sustainability and attendance.

30 Later in the GHD Report “follow The Population” and the location of facilities becomes a major criteria eliminating all but the preferred option31 ABS statistics show the Peel Region has a 10-20% lower average income than the metropolitan area32 The Keralup Masterplan includes analyse of the demographics of the growth in the region suggests that as the population in the region grows it will become highly characterized by young people (20-39) and older retirees (50-79 year olds). Over 40% of households will be young families with children and over 20% will be single person pensioner households. Most will be employed in the fields of transport, clerical, retail and labouring area but is highly dependent on the further development of industrial area and industry nearby or unemployment could be high. Few will be employed in the fields of Managers, professionals and associate professionals33 Perth Racing’s Annual Reports currently show attendances of around 2000 per meeting with on-course wagering at around $185 per person. The table in the BRC Plan shows Perth Racing’s average F&B per person is around $54. Any future analysis or evaluation needs to utilise these figures as the base.34 GHD Report, Page 6135 GHD Report Page 5836 GHD Report Page 6137 GHD Report Page 56

Had the GHD Report made the assumption that current attendances at Perth Racing were the baseline, Option T1 should have been evaluated as meeting the criteria but the report provides no justification for why it eliminated Option T1.38 39

3.3.2 Options T4-T8 The GHD Report describes Options T4-T8 as options based on “follow the population” referring to the need for development of event facilities in the Peel Region.40

The GHD report evaluates all the Options T4-T7, as meeting the criteria for attendance?

If T1 is the baseline and attendances at Perth Racing are presently averaging 2000 people per meeting; compared to Options T4-T7 which only include provision for 400 public attendees, it is unclear how the GHD Report determined that Options T4-T7 meet the criteria for a positive impact on attendances.41

3.3.3 Evaluation of Shortlisted OptionsUsing the evaluation criteria in the GHD Report only Options T1-T3 should have been shortlisted.42

The second stage of evaluation included criteria to develop premium facilities in the Rockingham/Mandurah areas and given Options T1-T3 do not provide for that, they would have been eliminated at that point leaving no viable option.

3.4 The GHD Report did not undertake a cost-benefit analysis of options that did not support a pre-determined outcome

Other than Appendix D, the GHD report contains no costings in relation to the various options evaluated. And then, Appendix D only costed options T5 (Preferred Option) and Option T8 (New Peel Region facility) 43

3.4.1 Relative Cost to OutcomeThe GHD Report evaluated each of the 8 options for the relative cost to outcome, with Option T3 evaluated as only partially meeting the criteria and Option T5 (evaluated as exceeding the criteria. All other options were evaluated as meeting the criteria.44

38 Given the definitions for sustainability and attendance on Page 58 of the GHD Report, the minimum benchmarks for measuring sustainability would be starters per race and wagering turnover. Perth Racings’ Annual Report show these figures as 11.05 starters and $161,000 per races39 Given the definitions attendance on Page 58 of the GHD Report, the minimum benchmarks for measuring sustainability would be average attendance per meeting, on-course wagering per attendee, F&B per attendee. Perth Racings’ Annual Report show these figures as 1939 attendees, $186 per person and $54 per person40 GHD Report Page 5641 Appendix D costs the options as being public amenities for accommodation of 400 people plus 200 public car bays42 The GHD Report provides no reason why Option T3 was not shortlisted as it partly met, met or exceeded the criteria.43 Option T8, like option T1 was eliminated on the grounds of not contributing to positively to attendance. It is unclear how the GHD Report made this assessment44 GHD Report Page 58

There is no detail as to the manner in which the GHD Report conducted the evaluation or reached the conclusions published given there were costing for only two options.

3.4.2 Costing Option T1Costing Option T1 and assuming that some aspects of the upgrade to Lark Hill (at least 1 new sand track) are required, the cost of option T1 would be $12.5 million less than the Preferred Option (T5). Option T1 would also be achieved without the loss of attendance and the impact on on-course wagering caused by transferring meeting from Perth Racing to the new venue.

Facilities Option T1 Option T5 Option T8$’ millions

On-course Stabling 33.7 33.7Lark Hill Redevelopment 8.0 43.3Keralup Development 227.3Pinjarra and Northam Racecourses 14.8 14.8 14.8Harness Racing 32.8 32.8 32.8Ascot 29.5 29.5 29.5Belmont 24.0GST 14.3 15.4 29.5Estimated Total 157.1 169.5 324.6

3.5 The GHD Report engaged in selective and unbalanced consultation leading resulting in views opposing a pre-determined outcome were not considered

The GHD Report identified a list of primary stakeholders, predominately RWWA, race clubs and industry associations.45

3.5.1 Wagering providersThe GHD Report mentions wagering as major factor for determining the future optimum asset use on the basis off-course wagering would drive future funding.

The GHD Reports also makes representations about corporate bookmaker’s seeking to drive better margins on wagering products and reducing returns to racing in the future.46

However, the only wagering organisation consulted in the GHD Report was RWWA, representing the WATAB. The process for developing the Report did not seek the views of the Bookmakers Association or other wagering providers. Therefore it is unclear how the report reached the conclusions about the attitudes of other wagering providers.

3.5.2 Public OpinionThe GHD report also mentions public attendances are in decline and this impacts on-course revenue from both wagering and food & beverage spends.

45 GHD Report Page 2146 GHD Report Page 19

Yet the only analysis of public attendances was reference to a Perth Racing commissioned sounding and survey and the GHD only makes the reference to justify targeting population growth with a high proportion of under 35’s.47

The GHD Report made no effort to engage public attendees as part of a consultation process.

3.5.3 Other Equestrian ActivitiesBetween October 2014 and March 2015 the taskforce changed from one looking at “racing assets” to one looking at “equine assets”. The reason for the change is unclear but the scope doesn’t seem to have expanded to include other equine activities.

Belmont Park is presently the major selling venue for Magic Millions which uses the facility for three sales per annum. According to the consultation list in the GHD Report, neither Magic Millions nor any other bloodstock agency was consulted

In the north-eastern corridor of the metropolitan area is the State Equestrian Centre, surrounded by the Swan Valley’s equine base. Looking at initiatives such as Racing Victoria’s off-the-track program and international facilities such as Singapore where equestrian pursuits are collocated with racing, the GHD Report may have benefited from consultation with other equestrian (non-racing) bodies.

47 GHD Report Page 49

4 The Preferred Option

4.1 GHD Report Methodology points to Option T1If properly evaluating the options in the GHD Report using the reports own criteria (excluding the requirement to develop a premium event facility in the Peel Region) the preferred option should have been Option T1.

The option is cost effective coming in at $12.5 million less than option T5 The option is sustainable on the basis that the facility is presently being used

at higher rate than any of the proposed facilities The option has a positive impact on attendances as the savings from lower

infrastructure costs can be directed to better marketing outcomes The options provides fewer barriers to participation as both Belmont and

Ascot are centrally located and accessible from the south by the freeway or from the east by Great Eastern Highway

The option is lowest risk in relation to unanticipated costs, environmental impact, disenfranchising of participants, damage to reputation and image. Baselines are established in relation to attendance, on-course wagering, f & b spend and the like, where as a new site these are unknown.

4.2 Stabilising the industry may consider other optionsIf the report had taken the assumption that the racing industry could take measures to stabilise declining attendances and on-course revenue, the options considered may have focused more on the optimisation of existing assets.

Rationalise existing land holdings by disposing of excess land parcels, then redevelop Ascot and Belmont Park through the repurposing of existing buildings.48

Redevelop Pinjarra Park as a major training and event centre with new tracks and increase the number of meeting and allocate prime meetings to better utilise the courses existing public attendance capacity of 5000.49

4.3 Other industry concernsThe GHD Report unintentionally raises matters with regard to the governance of racing and whether RWWA is still a relevant body in the current wagering and racing environment.

When RWWA was formed, the WATAB was the dominate provider of all wagering in Western Australia and Government combined racing and wagering to provide the racing industry security over its major funding source.

48 Revisit the evaluation of Option T1 but with a positive outlook49 If Pinjarra Park was redeveloped as the major track and training facility in the Peel Region, would Lark Hill be required?

However, the interests of wagering and racing may not always be the same and in the context of RWWA may have resulted in a greater focus on wagering than the racing industry itself as previously identified.50

It needs to be understood that the interests of wagering and the interests of the racing industry are not necessarily always aligned and in fact in a number of instances can be in conflict. This is particularly so for example in the context that a racing program that ensures support and exposure for regional racing to underpin the racing industry’s objectives is unlikely to necessarily match a program that optimises wagering revenues.

Nonetheless, circumstances have changed with the WATAB facing ever increasing competition from other wagering providers and the position of dominate wagering provider in WA may not continue into the future.

Racing too may have growth limited if the opportunity to seek arrangements with other wagering providers is not considered. Other wagering providers may provide arrangements that may prove more beneficial than the current one with the WATAB.

4.4 Privatisation of the WATABGovernment has raised the question about considering a sale of the WATAB, similar to what has occurred in other states. 51

To do so would require the disaggregation of RWWA, changes to legislation and new models for funding the industry as suggested by the Gunston Report.52

The disaggregation of the WATAB does not necessarily need to lead to the sale of the asset however, and Government may choose to operate both entities (racing and wagering) separately but under government control to protect the funding of the industry until more detailed arrangements are made.

The Gunston Report also raises this matter as a priority confronting the WA Government regardless of the issue of privatisation.53

In order to reach such a determination on these matters though, government needs to undertake a review of the current operating environment and RWWA lacks the independence to facilitate such a review process.

4.5 ERA Review of Options for the Racing industry The Governance of RWWA provides that the Minister is responsible for agreeing to the organisations Strategic Development Plan and the Minister may make written directions with respect to a Strategic Development Plan. In effect, legislated elements give the Minister the power to determine the policy framework around which racing operates in WA without involvement in the day to day operations of RWWA.54

50 Gunston Report, Page 110.51 Hon Mike Nahan MLA, Our State Budget 2015-16 – Securing Our Economic Future (14 May 2015), www.mediastatements.wa.gov.au, Government of Western Australia52 Gunston Report, Page 9.53 Gunston Report, Page 111.54 Government of Western Australia, Racing and Wagering Western Australia Act 2003 (2014), www.slp.wa.gov.au/legislation/statutes.nsf/default.html, State Law Publisher

The Minister however also must seek the concurrence of the Treasurer, who amongst other options may refer matters to the Economic Regulation Authority for inquiry. As such, the Treasurer may want to consider an inquiry into racing looking into areas such as:

Governance structures for the racing industry Improving WATAB performance (Unencumbered by racing obligations) Funding options for the racing industry with multiple wagering providers Enabling racing clubs to leverage competition in the wagering industry The tax and product fee structure for wagering

Such an inquiry would position the industry and government to make a better informed decision regarding the future operation of the WATAB and the racing industry more generally.