Let Texas Racetracks Compete - By Eric Mitchell

Thoroughbred racing in Texas has been going from bad to worse as the racing states across its borders—Arkansas, Louisiana, Oklahoma, and New Mexico—have steadily grown purses and the value of their state-bred stock through casino gaming.

Since 2007 the number of mares bred in Texas has fallen 65% to 814, and the number of active stallions has dropped 64.3%, according to statistics from The Jockey Club. In the early 1990s Texas was the fourth-leading producer of Thoroughbred foals behind Kentucky, Florida, and California. Now the state ranks 11th in the country with its 2014 foal crop of 440, or slightly more than 2% of the North American crop. At its peak in 1995 Texas produced more than 7% of North American foals.

A year ago, however, Texans had reason to be hopeful.

The Texas Racing Commission adopted rules for implementing historical racing (Instant Racing) despite an on-going legal challenge. Similar action had been taken in Kentucky, where historical racing was implemented in 2011. A challenge to historical racing's legality made it all the way to the Kentucky Supreme Court, which ruled the Kentucky Horse Racing Commission had the authority to license and regulate historical racing but also ruled that historical racing opponents were denied an opportunity for fact-finding when the case was in a lower court. While the case is still pending, historical racing machines since 2011 have generated more than $9.1 million for purses, more than $7.7 million for the state-bred development fund, and more than $3.6 million in state taxes.

In Texas the TRC got an early setback when a district court judge ruled last November that the commission had exceeded its authority in passing the rules for historical racing. The case has been appealed, but in the meantime the TRC has become the political punching bag among key state senators who are concerned about an expansion of illegal gaming. Political leaders have attempted to strong arm the TRC into back-pedaling—repealing its historical racing rules—by cutting off its operating funds. Denied spending authority by the Texas Legislative Budget Board, the TRC shut down Sept. 1 along with all live racing and simulcasting. The following day the TRC had been granted the authority to operate another 90 days but with that will come changes to the commission, with the ultimate goal being an abandonment of establishing historical racing.

Now Texas farms are wondering whether there is any hope the state's breeding and racing industries can be competitive. Fasig-Tipton chose earlier this year to stop managing the Texas August yearling sale, and an increasing number of mare owners are looking to relocate their stock.

"We have a gigantic investment here. Now what?" asked Bill Tracy, general manager of Eureka Thoroughbred Farm, a 200-acre breeding and boarding operation in the Hill Country near Fredericksburg. The farm stands its better stallions at River Oaks Farms in Oklahoma. "We've lost our yearling sale, and this thing keeps banging away at us. The phone isn't ringing except from one mare owner who is moving three to Arizona. About 25% of our outside mares are leaving town."

The Texas racing and breeding industries employ an estimated 36,000 people, which is more than the number working at the University of Texas at Austin or for Dell Inc., according to U.S. Department of Labor statistics. Texas Agriculture Commissioner Sid Miller estimates the total direct and indirect jobs affected are around 100,000.

Maybe instead of beating up on the TRC and telling it to "just do its job," the Texas Senate leadership could adjust its own focus toward helping one of the state's largest industries. Worried about what's pari-mutuel? Then simply legalize advance deposit wagering and/or off-track betting outlets, which seems an obvious solution in a state that covers 268,580 square miles. The Texas Lottery has more than 17,200 licensed retailers hawking its products and earning a record-breaking $219.54 million in commissions during fiscal year 2014. Meanwhile, in 2014 Thoroughbred and Quarter Horse owners received a total of $23.19 million in purses.
ADW and OTBs would at minimum allow the racetracks to distribute their product to a larger audience, just like the lottery does through its retail network. If the industry continues to be hamstrung, there won't be much of an industry left.

"It is a very scary situation," said Tracy. "The employees want to know if they'll still have jobs. The feed guy wants to know if we are going to order feed. The hay guy is asking the same question. And instead of talking about going to the Keeneland November sale and buying mares, we're looking at selling what we have."

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