Kentucky Conundrum

Timing is everything, and the spin required to convince the Kentucky legislature that the Thoroughbred industry needs alternative gaming to survive just got a lot trickier.

A recent statewide equine survey did reaffirm the economic clout the Kentucky horse industry wields with an estimated 40,665 direct and indirect jobs and a $3 billion economic impact. Total equine-related expenditures in 2011 amount to around $1.2 billion, which includes breeding fees, health care, training fees, equipment maintenance, shipping, etc. These numbers include all breeds of horses with a total value of $6.3 billion, but Thoroughbreds make up the biggest segment, valued at $5.5 billion.

On the heels of this survey came the blockbuster Keeneland September yearling sale. The 12-day sale grossed $280,491,300 for 2,744 yearlings, which was 27.6% higher than 2012’s gross for 2,516 yearlings. The cumulative average was $102,220, up 17% from last year, marking the first time the average has hit six figures since 2007. The cumulative median reached $50,000 for the first time and was up 11.1% from last year’s $45,000, which matched the record set in 2006.

Add to this that Kentucky registered foals continue to account for about 30% of the total North American foal crop and it would be easy to understand how state legislators can see more reasons to wait than to act.

Yet there are indicators that action should come sooner than later.

Prior to the 2012 equine survey, the best numbers on Kentucky’s economic health had come from a 2005 American Horse Council study done by Deloitte Consulting. That study pegged the economic impact of the state’s horse industry at $4 billion and estimated direct and indirect jobs at around 97,000, according to Patrick Neely, executive director of the Kentucky Equine Education Project (KEEP).

As far as Neely is concerned, the 2012 study showed definitive contraction—a loss of $1 billion in economic impact and around 50,000 jobs gone. Now, the world economy has been through significant turmoil since 2005 and some of the lost jobs were certainly casualties of the Great Recession. But many of those jobs have likely been affected by the growth of breeding programs in other states with alternative gaming.

And while Kentucky has held its own in terms of its market share of the North American foal crop, anecdotal evidence among Central Kentucky farm owners is that the boarding business has decreased substantially, particularly as New York’s breeding program has grown. A more objective indication of this shift can be found in a Kentucky report generated by The Jockey Club that shows in which states Kentucky-sired foals are actually taking their first steps. In 2011, 454 Kentucky-sired foals were born in New York. The number rose to 679 in 2012, a gain of 225 foals. Meanwhile, the number of Kentucky-sired foals born in Kentucky dropped from 7,088 to 6,811, a drop of 277 during the same crop years.
As New York’s own sales and its breeding incentive program grow, this shift is likely to become more pronounced.

Still some leaders in the Kentucky Thoroughbred industry have said they don’t see any need to panic. Kentucky still has the highest concentration of quality stallions and mares, is among the world leaders by breeding and veterinary facilities, and has the most well-trained workforce; and even through the Great Recession, it essentially maintained its place as North America’s leading producer of top-class Thoroughbreds.

In this context and with leaders within the industry in disagreement regarding urgency of action, any substantial efforts to level the playing field with other racing states appear unlikely.

Things will have to get worse, much worse, before they get better. As one person put it, the legislature will actually have to see bleeding. With the New York racing and breeding program now growing at a brisk pace, Ohio on the verge of opening up more racinos, and Maryland ramping up its own gaming-fueled breeding incentive programs, it most assuredly will. 


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There has been some debate over the accuracy of the American Horse Council numbers, with some people involved in the most recent 2012 Kentucky study believing the AHC study's estimates were overly broad because of the methodology and available data. Bottom line, many believe the degree of contraction in Kentucky is less than $1 billion and a portion of what has contracted can be attributed to the weak economy.

There are some numbers I just recently received that do indicate other trends of concern. In 2002, the Kentucky Thoroughbred Development Fund (KTDF), which provides supplemental purse money for Ky-breds, had a pool of $8.02 million. In 2011, the KTDF was down to $4.91 million. The introduction of Instant Racing helped boost the fund to $5.28 million in 2012.

The Kentucky Breeders Incentive Fund was worth $12.65 million in 2006. The KBIF dropped to $10 million in 2011. Instant Racing helped increase this fun dto $10.36 million in 2012.

25 Sep 2013 12:00 PM

Although horses mean far more to Kentucky’s finances than those of any other state, each and every elected official from the Commonwealth, not dissimilar to the leadership of other states, has the same thing on his mind when he wakes up as he does when he falls asleep – as in “how do I go about getting re-elected”? Unfortunately, proposing and voting to expand gambling results in lost votes to most if not all those incumbents. Granted, that spread is not as pronounced as it is in a state whose thoroughbred industry is a tiny piece of its fiscal puzzle. But the concept is the 800 pound gorilla nonetheless. Aside from those who make their living in the industry, not one in twenty otherwise unlikely voters is going to show up at the polls to cast a yes vote for expanded gaming. But rest assured that conservatives will go out of there way to vote down such measures so that conservative leaders can take full credit for keeping Kentucky free of the harmful effects of such an expansion.

Regardless of positive recent sales trends, more and more owners are situating their mares elsewhere to take advantage of incredible purses driven by electronic game offerings. Free enterprise and common business sense assure the continuance of that trend. Kentucky can brag about its bluegrass and limestone impact on equine bone structure until no one hears or cares about it anymore – at the end of the day it’s about where an owner can best position his or her assets. Kentucky lawmakers seem destined to trade votes for a passive view of its most cherished trademark’s back-end as owners and their assets vote with their feet and hooves. Any argument of Central Kentucky being forced to part with that trademark brings to mind the movie Absence of Malice and Wilford Brimley’s response to Sally Field’s statement – “Oh it’s more than possible Miss Carter … it’s damned likely”.

07 Oct 2013 5:08 PM

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