The Last Resort

Ideas for an Industry Funded Race Horse Retirement System

Dorothée Ostle

Jon Hansen

December 2004

When the Race is All Over

Breeding - for some stallions and mares Retraining - for some Adoption - for some And “the rest”??? About 3,000 TB in need[1]

[1] Estimate from Thoroughbred Retirement Foundation

What’s Happening to “The Rest”?

Anything from adoption to slaughter Whatever option owner happens to know and care

about Breed registries maintain lists of endorsed

(private-initiative) retirement, retraining and adoption organizations

But information not always readily available

Current System Structurally Unsound When their racing career ends, 3000 TB per year (13.4%)

are in need because stakeholders negligent of moral and financial responsibility

Dependent on private initiative of horse lovers to address the problem and account for the ones in need

Dependent on donations from horse lovers About 20 years ago, various retirement, retraining and adoption

organizations were started Almost entirely run by volunteers, funded by donations Some of them endorsed, but not financed, by breed registries

Current System Financially Unsound Individuals from inside and outside this industry

give generously to support the second careers of many ex-race horses.

Their donations are greatly appreciated and will always be needed. Unfortunately, they don’t meet the needs for caring for all the horses in need.

It is high noon for the industry to assume responsibility and fill the financial needs.

Consequences

Industry is increasingly vulnerable to animal welfare issues

Industry is perceived as irresponsible Industry is not in control of what is happening Industry is missing an important chance for image

improvement

Public Concern is Rising

Outcry of “Ferdinand” and others Recent rally “Remember Ferdinand” by the

National Horse Protection Coalition at the Breeders’ Cup World Championships at Lone Star Park

The Greyhound Example

Accountability – from first to last bark Systematic, controlled and well-organized

adoption program implemented – after public pressure from Animal Rights groups

The EU Car Example EU imposed an “old car disposal fee” on manufacturers

for each new car sold – against the fierce resistance from the industry

Every car accounted for from assembly to disassembly Permanent de-registration requires proof of lawful

disposal New business opportunities – certified car recycling

companies thriving

The Arizona Example State Legislature passed a 5% surcharge on all fines levied

by the ADOR Arizona estimates between $2000 and $3000 collectable Nationally this would provide up to $50,932 Arizona Owners volunteered a $1 per start[1]

Nationally, from 489,503 starts in 2003, this would contribute $489,503

[1] Source: Arizona HBPA , all but two owners volunteered [2] Source: The Jockey Club, 2004 Fact Book

Our suggestions go even further than AZ...

The whole industry, nationwide, should take responsibility for the ex-racehorses in need

Every part of the industry should contribute its financial share to the funding

… and result in an Industry-funded Racehorse Retirement System

With more second career options for QH & SB racehorse retirees, this idea will be explained in detail for the TB

It can be immediately applied to the QH and SB racehorse breeds

Racing Industry - Shared Responsibility from Foaling to Retirement

All enjoy the efforts of this grand animal, it’s time to give back:

Breeders – Sire fee, Registration fee Owners – Tattoo fee, Start fee, Claiming fee, Win

participation Other Stakeholders – Fine surcharge Bettors/Racetracks – Uncashed tickets, Price/Takeout

increase Racino – Contribution

Legal Framework Pro-active (like AZ):

Initiate legislative/regulatory action Industry-wide commitment to common goals and

strategies to achieve these goalsOR

Reactive (like Greyhounds):

Imposed legislative/regulatory action Influential pressure groups outside racing industry

Need for Addressing this Issue

Approximately 34,000 TB (compared to 11,000 SB & 150,000 QH) [1] were foaled in each of the last four years

Of those TB registered with the Jockey Club about 66% make it to the racetrack

Of those retiring from the racetracks an estimated 3000 TBs (13.4%) are in need per year [2]

[1] Source: Individual Breed Registries from The Jockey Club online Fact Book

[2] Estimate from Thoroughbred Retirement Foundation

Costs for Caring for a Retiree [1]

$5 to $8 / day for a sound horse on good pasture $10-12 / day for a horse in need of vet care 3000 per year—assume 30% in need of vet care 2100 x $6.50 x 365 = $4,982,250 900 x $11 x 365 = $3,613,500 Total estimated $$ needed for 3000 Thoroughbreds = $ 8,595,750 / year

[1] Source: Estimates from The Thoroughbred Retirement Foundation

The Breeders

A $50 Sire Fee for each mare bred could be paid to the fund

With approximately 50,000 mares bred per year this would result in $ 2,500,000

The Breeders (cont.)

$ 40 additional registration fee Approximately 34,000 TB foals a year x $40 =

$1,360,000

The Owners

A $30 additional Tattoo FeeAround 11,000 horses make it to the track as

2year olds per year = $330,000Tattoo also proof of eligibility for future

benefits for horse

The Owners (cont.)

A $25 fee for Claims Estimated rate of .2593 claims per race In 2003, 53,503 races x .2593 = 13,873 claims x $25 = $346,825 Win participation of 0.5% Using 55% as the nationwide average of purse money that

goes to the winner, and 2003 gross purses $1,055,496,849, the 0.5% contribution to the fund would be = $2,902,616

Other Stakeholders

Trainers, jockeys, etc…5% surcharge on all fines levied by the

respective Racing CommissionNationwide, this would amount to

approximately $ 50,932

The Bettors

Uncashed tickets: “Outs” could become “Ins” for the fund

We realize that moneys from uncashed tickets are already allocated in most jurisdictions, how about 2% for the horses? This would contribute

$570,239 to the fund.

The Bettors (cont.)

We realize that bettors have become increasingly price sensitive[1]

However, we are convinced that a 0.2% rise in takeout nationwide would have no significant effect on handle, which is currently $15,180,000,000

Using a 20% blended takeout, the 0.2% rise would contribute $6,072,000 to the fund

[1] “The NYRA takeout cut…proved that bettors – even those who don’t bet tens of millions of dollars a year – are price sensitive”. LaMarra, Tom, “Pricing Wars”, The Blood-Horse, 6 March, 2004, pg 1416, Quote by Bill Nader.

Racetracks

Instead of rising the takeout, the 0.2% contribution to the fund could also come from the racetracks

Or bettors on one hand and racetracks on the other hand could share the contribution and each pay 0.1% to the fund

Unchanged amount = $ 6,072,000

Racino Contribution

In 2003, racinos in Delaware, Iowa, Louisiana, New Mexico, West Virginia generated $1.8 billion

Contribution of 0.25% would result in $4,670,250 When other jurisdictions legalize racinos even

more money would be available

Summary of Revenues Sire fees----------------------------$ 2,857,100 Registration fees------------------$ 1,360,000 $30 Tattoo fee---------------------$ 330,000 .50% Win --------------------------$ 2,902,616 $25 per Claim----------------------$ 346,825 $1 per Start-------------------------$ 489,503 5% Fine Surcharge----------------$ 50,932 2% Uncashed Tickets-------------$ 570,239 .2% of Takeout--------------------$ 6,072,000 Racino contribution---------------$ 4,670,250 Total revenues---------------------$19,649,465

Summary of Expenses Equine related cost (one year/3000 horses)

Non-vet care 70% of horses $4,982,250 Vet care 30% of horses $3,613,500

Total equine cost $8,595,750 Overhead cost 15% $1,289,362

Including marketing cost for second career horses Total expenses $9,885,112 Minus revenues sold/adopted horses $1,477,500

Total Expenses $8,407,612

5-Year Business Plan Sound only if racinos and bettors/racetracks contribute Sound for 6 years if program allows for rearward

eligibility Sound for around 12 years if first two years used for

accumulation of capital and no rearward eligibility Problem is the accumulation of horses, mainly “pasture

ornaments” and those in need of vet care In Year 6 the total cost will reach around

$30 million!!!

What about the Private Retirement Organizations?

They are an integral part of the idea Utilize their up-and-running facilities for

rehabilitation, retraining, and retirement Utilize their established network for sales and

adoption Payments from the fund will improve their

financial situation and provide a steady source of basic funding

Can we do without donations? No, especially if contributions from racinos and

bettors/racetracks are not available Donations will always have to be an integral part of the

funding structure: If program offers rearward eligibility, industry fund will

only be able to complement, not replace donations Even if program does not offer rearward eligibility,

industry funding will not be sufficient after around 12 years, unless contributions would increase substantially

Can we generate more donations?

From the bettors – maybe they will donate if we encourage them

Provide links to racehorse retirement information and to donations

On every ADW web site On every track web site

Business Opportunities - like EU Car Disassembly

A new agribusiness industry with jobs for “soured” stakeholders

Job creation as people are needed to re-train the horses and care for them

Second careers for trainers, grooms, pros and amateurs of show disciplines,…

Industry funding will secure quality life for both the animal ex-athletes and their caretakers

How could the idea work in practice? Eligibility of Horses

Only racehorses would be eligible – tattoo as proof of eligibility

All breeder fees for horse must have been paid Payment of all other fees related to horse (claiming fee,

win contribution etc) to be recorded on foal papers and/or in database

The industry’s retirement agency (to be created) would be responsible for distribution of the funds depending on the individual needs of the horses

How could it work in practice? Admission Procedure

Not mandatory for all horses retired from the racetrack Option for only the needy horses retired from the

racetrack, whose owners have no other use for them Owner signs eligible horse over to industry retirement

agency Accountability for all horses through exit papers from

racetracks – require destination declaration

How could it work in practice? Organizational Structure

Industry retirement agency would implement regional/local offices utilizing existing networks, for example track vet, HBPA

Track vet at regional office would classify signed over horses depending on their second career potential

Regional office would utilize the existing, already endorsed (private-initiative) retirement organizations for placement of horses accordingly and

Try to expand list and certify all endorsed organizations for special tasks – rehabilitation, discipline-specific retraining, adoption, pasture-retirement

How could it work in practice? Financial Structure

Endorsed and certified organizations would be compensated for each horse in accordance with their service provided

Retrained horses could be advertised, presented and sold, the profit (sale price minus sales expenses) is part of the calculated revenue for the fund

Conclusion

This idea is do-able – if all parts of the industry are willing to assume their collective responsibility

Arizona is a first step in the right direction

All positions allow adjustments, however, balance of contribution from each group essential

Act - rather than be forced to react