The California Horse Racing Board was facing what could be its most important decision in its nearly 90-year existence. Would it try to save Northern California racing with lower odds of success, and possibly putting Southern California in even greater danger, with an external chance that this might work for both? Or will it follow the Kahneman Theory and make the least risky decision and sacrifice the North to give the South a better chance of immediate survival? This was the question asked at the monthly board meeting of the state regulatory agency, held Thursday in Sacramento. So what did it do? It kicked the can down the road until March.
Despite the certainty of the item on the agenda for “allocation of racing dates in Northern California… for 2024,” it was well known that no decision would be made in order to give a group trying to save Northern California racing additional time to come up with a plan. But it’s not a good sign when the plan is still full of uncertainties after nearly half a year of warning about this eventuality.
Commissioner Wendy Mitchell expressed the greatest skepticism about a plan drafted by Larry Schwartzlander, executive director of the California Horse Racing Board. “I don’t want to create false hopes for people that are really unattainable,” said Mitchell. “Nothing is worse than having your hopes dashed. I don’t see how all this fits together. I appreciate all the hard work and effort. But we don’t have the CalExpo, we don’t have funding. There really isn’t a path that I see. … I am very concerned, absent some external dynamic change, that there’s creating unrealistic expectations.”
This issue came to a boil in July, when The Stronach Group announced, without any input from stakeholders, that it would cease racing at Golden Gate Fields at the end of the year. It was widely seen as a slap to California racing. Its plan became clearer when a TSG executive indicated that it would allow six more months of racing at Golden Gate if industry groups did not oppose AB 1074, a bill that would allow ADW (or mobile phone and tablet betting) and simulcast revenue to be diverted to the South if there is no racing in the North. The bill was approved and racing will continue at Golden Gate until June.
Commissioner Damascus Castellanos issued a scathing critique of how TSG handled the closing of Golden Gate. “We’d be much farther ahead if The Stronach Group had come to us with proper notice, as Hollywood Park and others did,” Castellanos said. “The groups that are in this room today could have gotten together and hammered out this plan. … It really is a mess that all this has happened this way. The Stronach Group didn’t notify us. Let’s be real about this, it leaked to us and that wasn’t right.”
Despite the industry’s initial distress over the closure of Golden Gate, it seems TSG was correct in making the best business decision for itself and for Santa Anita’s survival. Despite the lack of transparency, the numbers seem to prove this.
Craig Fravel, 1/ST Racing and Gaming executive vice president, a TSG arm, suggested a dire future for Santa Anita without an infusion of money to the South. “As you can see by the numbers, three days of racing at Santa Anita make it nearly impossible to support year-round racing and training for the horse population in the South,” Fravel said.
But Northern California racing, which does not include the 13 to 15 weeks of fair racing, has been put on life support. Fair racing is expected to continue full steam ahead, but with fewer horses in the area, its viability may also be in question.
The California Thoroughbred Owners of both Northern and Southern California did not publicly declare a preference, but based on its presentation on Thursday, made it clear it would rather see the North go away to help save the South.
Bill Nader, TOC CEO, highlighted Santa Anita’s alarming statistical overpayment of $4 million this year. An “overpayment” means exactly the opposite of what you think. It actually represents the revenue shortfall to fund purse money based on a reduction in handle, the amount of money bet on racing and other related revenue sources. He went on to note that despite current purse cuts, overpayment at Santa Anita would reach between $5 million and $6 million by the first half of 2024. Purse money is always paid to owners, trainers, and jockeys, but at the expense of the track.
Last year, Del Mar, deemed by most standards a very successful meet, had a $2.1 million overpayment on purses. Without additional revenue, both Santa Anita and Del Mar will likely be cutting purses this year.
The diversion of northern Californian ADW and simulcast transmission funds to Santa Anita, Del Mar, and Los Alamitos would add about $8.5 million purse money, Nader told The Times. It would merely stabilize the current purse structure but not increase it.
The TOC had said it would support a plan for the North if it met certain stringent criteria. It included “an increase in horse population” and “adequate funding, race schedule, and a business plan that provides confidence and assurance to promote a sustainable footprint for racing and breeding in California”.
These are factors that most racing in the South currently fail to meet.
“Now we look at the once strong and stable South, at the beautiful race tracks of Santa Anita and Del Mar and at the rich history,” said Nader. “We see a very different picture, one of vulnerability and of an increasing degree of desperation. To put it another way, the North is fighting for survival and the South is literally on the ropes, trying to hang on, losing ground constantly. It’s not a pretty picture. The North and the South are interconnected and both are in trouble.”
Racing’s economy is like a barbed wire fence with weak links. You need high purses to attract the best horses and trainers. Purses are mainly paid for by the amount of money wagered. Bettors like races with a lot of horses, which only happens if purses are high. California is at a major disadvantage compared to many states that supplement racing with revenues from casinos and related gambling. Purses in Kentucky, in some cases, are nearly double those in California because of support from Historical Horse Racing, essentially a slot machine disguised as a game of skill.
Regarding the future of racing in California, come back in March, and everyone will know. Maybe.