Ontario's ag industry braces for slots fallout

Thursday, March 15, 2012

photo courtesy of New Image Media

photo: Mare and foal on Willow Ridge Farm near Durham, Ontario

by DAVE PINK

The Ontario horse racing industry believes it has been stabbed in the back by the provincial government, and that the damage done will ripple through Ontario’s agricultural sector.

The government’s decision this week to scrap the 14-year-old slots-racetrack agreement — a decision the horse industry says will put the future of racing in jeopardy —  is short-sighted, self-defeating and economically questionable, say rural stakeholders.

“This is going to have an impact on mainstream agriculture and the forage industry,” says Neil Currie, general manager of the Ontario Federation of Agriculture.

“There’s a lot more to this than what the government understands. We think they’ve bought a load of goods from the OLG (the Ontario Lottery and Gaming Commission),” said Currie. “We have some very serious concerns about their methodology.”

Report recommends new direction
The OLG report to the ministry of finance recommends, among other things, a new direction for the province’s slot machine operations — one that would see them more “strategically” located in urban centres and away from the racetracks. The changes will bring in an additional billion dollars in gambling revenue, the OLG contends.

That’s nonsense, say people involved in the racing industry. The proposal has not been well thought out, they say. If anything, these changes could bring on an overall loss of revenue to the province while endangering the 60,000 or so jobs of the people directly and indirectly involved in horse racing.

Currie says the OFA will support the horse industry and encourage the government to abandon the OLG’s recommended course of action.

Other agricultural organizations are also stepping up to oppose the move.

Ag groups oppose changes
“We’re trying to quantify what the impact would be, but there is certainly going to be an impact,” says Dave Buttenham, of the Ontario Agribusiness Association. “It could hurt equine feed sales, and that is a pretty significant tonnage. Then there’s the question of what becomes of those jobs in the rural areas.”

On a personal level the loss of Ontario’s racetracks could be devastating. “This will destroy us,” says Bonnie Rowntree, who operates a breeding and boarding facility for thoroughbred horses north of Durham, Ont.

photo: Bill and Bonnie Rowntree

“It kills me to know that a government, without any consultation with an industry, can just come in and wipe out that industry. I just don’t understand that.”

The Rowntree family owns six brood mares, and this winter was boarding 51 thoroughbred horses. The business survives on boarding fees and the annual sale of its yearlings, and the family has invested heavily in the farm. Last year they built a $100,000 barn and installed $75,000 worth of fencing, along with the purchase of a $40,000 trailer to transport horses, in the belief that the future of racing was secure because of the slots-racetrack deal.

That deal was a win-win for everyone, says Rowntree.

Old deal split proceeds
Under the arrangement set in 1998, when the slot machines started moving into the tracks, a deal was struck that allowed the province to receive 75 per cent of the slots profits — or about $1 billion a year —while 20 per cent went to the track and the remaining five per cent went to the host municipality. The racetracks’ gate and betting receipts went to the racing industry, and the province’s 17 tracks were taxed by the federal, provincial and municipal governments to the tune of about $780,000 in 2010.

The essential problem now, those in the racing business say, is that there are only so many gambling dollars to be had — money that is now being split between slots, racing, lottery tickets, casinos and bingos. Racing, once the top dog in the betting business, was forced to do the deal for the slot machines — its competition — by opening its facilities to them and sharing in the take.

Times were good, for everyone, the horse industry says.

But earlier this week the provincial Ministry of Finance gave a nod of approval to an OLG plan to initiate a massive redirection of the province’s gambling industry, one that would involve a massive redistribution of its slot machine facilities as well as construction of a new casino in the Toronto area and more outlets for the sale of lottery tickets. The OLG contends the moves will increase revenues by $1 billion yearly, and create 2,300 jobs in the gaming industry and another 4,000 jobs in the hospitality and retail sectors by 2018.

Job loss anticipated
Rowntree, and others in the horse industry, contend the OLG report is based more on wishful thinking than sound business practices and does not take into account the ripple effect of job losses through rural Ontario.

“If we go, what happens to our five employees?” asks Rowntree.

The farm bought $40,000 worth of feed last year from mills in Desboro, Hanover and Owen Sound, spent $25,000 for veterinary services, and more than $700 a week for hay and straw from local farmers.

“What happens to those people?” asks Rowntree.

“And we are just small peanuts compared to some of the other horse operations in this province. We’re small timers, just making a living. What will happen at some of those bigger farms?”

She says the Ontario racing industry is the most highly regarded in the world, with a reputation so good that many American breeders choose to keep their horses north of the border. That reputation, and the money that flows into this province because of it, is now in danger.

And the provincial government doesn’t seem to understand, says Rowntree.

In a written statement, finance ministry spokesperson Scott Blodgett said: “Our government is currently reviewing every program and asset as we lower the rate of spending growth.  

“Since 1998, Ontario taxpayers have been subsidizing horse racing in Ontario at $345 million a year.  This is more than we spend on research and innovation, water protection and road safety each year. It is also more than 10 times the total amount provided by British Columbia, Alberta and Manitoba to the 14 total racetracks in those three provinces.

“Following a review of the program our government will decide whether this money could be better spent on key public services, such as education and health care. (For example, this kind of money would pay for over nine million hours of home care or insulin pumps and supplies for five years for almost 17,000 people.)  

“The government remains committed to supporting the industry through the 6.9 per cent reduction in pari-mutuel tax, which leaves about $70 million with the industry for horse improvement, marketing and other industry support programs.”

Not a subsidy
But that’s nothing more than a smokescreen, those in the horse industry say — and they strongly dispute the government’s use of the word “subsidy.” The money that flows from Queen’s Park to the racing industry is nothing more than the legitimate kickback owed to it under the slots-racetrack deal.

“If anything, we subsidize them,” said Rowntree. “We allow them into our houses, and give them 80 per cent.”

John Gallinger, the president of Standardbred Canada, says the industry is now in shock. “The landscape has changed, but to what degree it will continue to change we don’t know. Horse racing will survive, but it will be very different.”

And there is a strong likelihood that some of the racetracks will close. The slot machines have already been shut down at Windsor Raceway, Fort Erie Racetrack and Hiawatha Horse Park in Sarnia.

“If there are less racing opportunities it is going to mean a loss. It’s supply and demand. People will have to scale back or be forced out of business, and there are people who have invested serious amounts of capital into the business,” says Gallinger.

“I was told there would be a consultation process. That didn’t happen,” he says.

“This is a poor decision. It makes no sense economically. This decision does not seem to be fact-based.

“We’re looking for an opportunity to sit down and discuss it. This had been a very successful partnership.”

Standardbred Canada has about 5,500 members among people in the harness racing industry.

Sixteen of the province’s 17 tracks feature harness racing, where the horse pulls its driver. The Woodbine Race Track in Toronto does double duty as a venue for both standardbreds and thoroughbreds, where the horse carries its rider. Fort Erie is also a thoroughbred track. BF