STAKEHOLDERS REAPPLY FOR 2011 RACING DATES

On Tuesday, Colonial Downs, the Virginia H.B.P.A. and the VTA filed a joint response to the Virginia Racing Commission requesting 33 days of live racing for 2011.  If that sounds familiar, it should. That is the same number of days the racetrack and horsemen requested back in December.

Late last year, for the first time in recent memory, the racetrack and horsemen agreed on a plan for live racing days for Colonial Downs in 2011.  In January, the VRC rejected the plan and asked them to return with a schedule of 40 live racing days and an overnight to stakes purse ratio of 80%/20% instead of the current 70%/30%.

The original application called for overnight purses of $4.8 million and stakes purses of  $2 million.  The VRC wanted those number revised to $5.44 million for overnights and $1.36 million for stakes.

The stakeholders then set out trying to figure out how to do this facing severe time, money and contractual restraints, some of which were ultimately unresolvable.

As total wagering has declined since 2008, total purses available for the meet have plummeted from $9.4 million in 2008 to a projected $6.4 million (CLN and horsemen) or $6.8 million (VRC) in 2011.  This is the biggest single problem facing live racing in Virginia.

Following the 2010 meet with $6.7 million I purses, the most consistent suggestion was to “increase purses.”  Horsemen have grown sensitive to the decreasing purses noting that the long, hot ship to New Kent and the ever increasing costs of training and shipping have made it physically difficult for the horse and financially difficult for the owners.

So the challenge was to increase daily purses with fewer purse dollars.  This can be accomplished three different ways: 1) Reduce the stakes schedule and apply that money to overnights as suggested by the VRC, 2) reduce racing live racing days as suggested by the racetrack and horsemen or 3) some combination of the two.

Colonial Downs position was simply that they would not agree to further reduce the purses on the two marquis races – the $500,000 Colonial Turf Cup and the $600,000 Virginia Derby —  noting the purses on both races had been reduced by 50% and 40% over the past four years.  In addition, the racetrack points out that those purses are part of the negotiated purse contract between Colonial Downs and the VHBPA and that the VRC has no authority to dictate purse amounts.  It appears they have a valid point.

In addition, Colonial Downs points out that the two “big days” turn the meet from red to black.  
Attendance, handle, concessions and simulcast sales for those two big Saturday’s make the meet profitable just as the Preakness does for the Maryland Jockey Club.

The math seems to back up their assertions. 

Average Saturday handle $781,556 (excluding Virginia Derby and Turf Cup days)

Average Derby/Turf Cup day handle $2,685,320

Average stakes handle on a typical Saturday $79,382 (for a $50,000 stakes)

Average stakes handle on Derby/Turf Cup days $209,385 (for a similar $50,000 stakes)

Maiden Special Weight (3 yrs. and up) (5/29/10) handle $93,548

Maiden Special Weight (3 yrs. and up) (Va. Derby Day) handle $158,364

As you can see, besides generating more handle on the big race days, similar races draw more total handle on Turf Cup and Derby Saturdays than they do on a “regular” Saturday.

Also, Colonial Downs in determined to get the Virginia Derby designated a Grade 1 race – an admirable goal.   

Long story short, the purses for the two big races are not going to be reduced.  As a result, that left only $260,000 for the balance of the stakes schedule using the VRC’s 80%/20% model.  This simply won’t work since the unfunded races include the All Along ($150,000), the Virginia Oaks ($100,000), the Zeke Ferguson over jumps ($50,000) six Virginia-bred stakes at $50,000 each ($300,000) and six open stakes at $50,000 each ($300,000).

VRC Chairman Peter Burnett seemed willing to bend on the stake schedule and he also had some innovative ideas about making the Va-bred stakes $100,000 races with expanded conditions – Virginia-owned, -trained, -raised, etc.  While this is an interesting concept, it would have been impossible to develop this program through the VRC and VTA Breeders Fund Committees in time to award 2011 racing dates.

And there was another little problem…there simply isn’t enough money.  If the Turf Cup and Derby have purses of $1.1 million, and the All Along is reduced to $100,000 added to the Va Oaks at $100,000, plus the Zeke at $50,000 and four hypothetical Virginia-restricted stakes totaling $400,000, that equals $1.75  million – a far cry from $1.36 million or 20% of the total purses.

Fact is, if you have an 8 to 10 week race meet and you want to have stakes races on Saturday to draw crowds and horses, you are looking at a fixed cost no matter what your purses are.  This is another situation that is exacerbated by the decline in overall purses from $9.4 million to $6.7 million. Using the 2008 figure of $9.4 million the current stakes schedule would be 21%.

In the end, the joint application says this:

Although 30% of purses devoted to stakes can be considered relatively high, there are racetracks with higher or comparable stakes/overnight purse ratios.  They are: Keeneland (48%), Saratoga (48%), Pimlico (42%), Keeneland Spring (41%), Churchill Spring (41%), Belmont Fall (41%), Del Mar (39%), Santa Anita (36%) and Gulfstream (31%).

There are no big surprises in the tracks above, but what was bit surprising was Ruidoso (36%), Arapahoe (30%) and Aqueduct (29%).

We would assert that this list shows how big stakes with mega-purses ($250,000 and up) quickly drive up the stakes to overnight ratios for both short and long meets. 

So if the stakes schedule is cemented at $2 million, that leaves $4.4 million for overnight races.  That works out to $110,000 a day for 40 days or $133,000 a day for 33 days.  The bottom line, is that both numbers are too low.  Back in 2008, with $9.4 million in total purses, those overnight purses were $153,000 a day.  
So, we’ve come a long way – in the wrong direction.

However, one must remember that every $100,000 moved from the stakes side of the ledger over to the overnight side nets each day of a 40 day meet $2,500 or $277 per race (on a nine race card.).  The overall problem remains that all the numbers are so small they don’t have a meaningful impact no matter how we move them around.

Here’s the math:  A 33 day meet with current stakes program of $2 million (30%) nets an average overnight purse of $15,278 – that’s an increase of $2,398 per race over 2010.  That seems like a meaningful amount of money.  A 40 day meet with the VRC’s stakes schedule of 20% increase the average overnight purse to $14,815, an increase over last year of $1,935. Again, a meaningful amount.

However, if we frame this with the realization that the 20% stakes schedule won’t work for a variety of practical and legal reasons, that leaves us facing a 40 day meet with a $2 million stakes schedule.  That nets an average overnight purse of $13,695 which is a modest increase of $815 per race.     

In the end, the math just won’t work.  If the purses on the Turf Cup and Derby remain at their 2010 levels there is simply no way to create meaningful overnight pures increases without shortening the meet.   In the end, after discussing any number of compromises, the most logical approach was the original one – 33 days. 

With calendars all around us shrinking and the Blood-Horse declaring 2010 the “Year of Contraction,” it seemed unlikely that we would find a way to expand our calendar in the face of shrinking purse dollars.  

The good news is that the process generated a number of very good ideas to be pursued further as we look to 2012.

It remains to be seen if the VRC will agree with the stakeholders’ position. – Glenn Petty