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The Last Resort. Ideas for an Industry Funded Race Horse Retirement System. Dorothée Ostle Jon Hansen December 2004. When the Race is All Over. Breeding - for some stallions and mares Retraining - for some Adoption - for some And “the rest”??? About 3,000 TB in need [1]

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The last resort l.jpg
The Last Resort

  • Ideas for an Industry Funded Race Horse Retirement System

Dorothée Ostle

Jon Hansen

December 2004


When the race is all over l.jpg
When the Race is All Over

  • Breeding - for some stallions and mares

  • Retraining - for some

  • Adoption - for some

  • And “the rest”???

  • About 3,000 TB in need[1]

    [1] Estimate from Thoroughbred Retirement Foundation


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What’s Happening to “The Rest”?

  • Anything from adoption to slaughter

  • Whatever option owner happens to know and care about

  • Breed registries maintain lists of endorsed (private-initiative) retirement, retraining and adoption organizations

  • But information not always readily available


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Current System Structurally Unsound

  • When their racing career ends, 3000 TB per year (13.4%) are in need because stakeholders negligent of moral and financial responsibility

  • Dependent on private initiative of horse lovers to address the problem and account for the ones in need

  • Dependent on donations from horse lovers

    • About 20 years ago, various retirement, retraining and adoption organizations were started

    • Almost entirely run by volunteers, funded by donations

    • Some of them endorsed, but not financed, by breed registries


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Current System Financially Unsound

  • Individuals from inside and outside this industry give generously to support the second careers of many ex-race horses.

  • Their donations are greatly appreciated and will always be needed. Unfortunately, they don’t meet the needs for caring for all the horses in need.

  • It is high noon for the industry to assume responsibility and fill the financial needs.


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Consequences

  • Industry is increasingly vulnerable to animal welfare issues

  • Industry is perceived as irresponsible

  • Industry is not in control of what is happening

  • Industry is missing an important chance for image improvement


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Public Concern is Rising

  • Outcry of “Ferdinand” and others

  • Recent rally “Remember Ferdinand” by the National Horse Protection Coalition at the Breeders’ Cup World Championships at Lone Star Park


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The Greyhound Example

  • Accountability – from first to last bark

  • Systematic, controlled and well-organized adoption program implemented – after public pressure from Animal Rights groups


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The EU Car Example

  • EU imposed an “old car disposal fee” on manufacturers for each new car sold – against the fierce resistance from the industry

  • Every car accounted for from assembly to disassembly

  • Permanent de-registration requires proof of lawful disposal

  • New business opportunities – certified car recycling companies thriving


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The Arizona Example

  • State Legislature passed a 5% surcharge on all fines levied by the ADOR

  • Arizona estimates between $2000 and $3000 collectable

  • Nationally this would provide up to $50,932

  • Arizona Owners volunteered a $1 per start[1]

  • Nationally, from 489,503 starts in 2003, this

    would contribute $489,503

    [1] Source: Arizona HBPA , all but two owners volunteered

    [2] Source: The Jockey Club, 2004 Fact Book


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Our suggestions go even further than AZ...

  • The whole industry, nationwide, should take responsibility for the ex-racehorses in need

  • Every part of the industry should contribute its financial share to the funding


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… and result in an Industry-funded Racehorse Retirement System

  • With more second career options for QH & SB racehorse retirees, this idea will be explained in detail for the TB

  • It can be immediately applied to the QH and SB racehorse breeds


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Racing Industry - System Shared Responsibility from Foaling to Retirement

  • All enjoy the efforts of this grand animal, it’s time to give back:

  • Breeders – Sire fee, Registration fee

  • Owners – Tattoo fee, Start fee, Claiming fee, Win participation

  • Other Stakeholders – Fine surcharge

  • Bettors/Racetracks – Uncashed tickets, Price/Takeout increase

  • Racino – Contribution


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Legal Framework System

  • Pro-active (like AZ):

  • Initiate legislative/regulatory action

    • Industry-wide commitment to common goals and strategies to achieve these goals

      OR

  • Reactive (like Greyhounds):

  • Imposed legislative/regulatory action

    • Influential pressure groups outside racing industry


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Need for Addressing this Issue System

  • Approximately 34,000 TB (compared to 11,000 SB & 150,000 QH) [1] were foaled in each of the last four years

  • Of those TB registered with the Jockey Club about 66% make it to the racetrack

  • Of those retiring from the racetracks an estimated 3000 TBs (13.4%) are in need per year [2]

    [1] Source: Individual Breed Registries from The Jockey Club online Fact Book

    [2] Estimate from Thoroughbred Retirement Foundation


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Costs for Caring for a Retiree System [1]

  • $5 to $8 / day for a sound horse on good pasture

  • $10-12 / day for a horse in need of vet care

  • 3000 per year—assume 30% in need of vet care

  • 2100 x $6.50 x 365 = $4,982,250

  • 900 x $11 x 365 = $3,613,500

  • Total estimated $$ needed for 3000 Thoroughbreds =

    $ 8,595,750 / year

    [1] Source: Estimates from The Thoroughbred Retirement Foundation


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The Breeders System

  • A $50 Sire Fee for each mare bred could be paid to the fund

  • With approximately 50,000 mares bred per year this would result in $ 2,500,000


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The Breeders System (cont.)

  • $ 40 additional registration fee

  • Approximately 34,000 TB foals a year x $40 = $1,360,000


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The Owners System

  • A $30 additional Tattoo Fee

  • Around 11,000 horses make it to the track as 2year olds per year = $330,000

  • Tattoo also proof of eligibility for future benefits for horse


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The Owners System (cont.)

  • A $25 fee for Claims

  • Estimated rate of .2593 claims per race

  • In 2003, 53,503 races x .2593 = 13,873 claims x $25 =

  • $346,825

  • Win participation of 0.5%

  • Using 55% as the nationwide average of purse money that goes to the winner, and 2003 gross purses $1,055,496,849, the 0.5% contribution to the fund would be = $2,902,616


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Other Stakeholders System

  • Trainers, jockeys, etc…

  • 5% surcharge on all fines levied by the respective Racing Commission

  • Nationwide, this would amount to approximately $ 50,932


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The Bettors System

  • Uncashed tickets: “Outs” could become “Ins” for the fund

  • We realize that moneys from uncashed tickets are already allocated in most jurisdictions, how about 2% for the horses? This would contribute

    $570,239 to the fund.


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The Bettors System (cont.)

  • We realize that bettors have become increasingly price sensitive[1]

  • However, we are convinced that a 0.2% rise in takeout nationwide would have no significant effect on handle, which is currently $15,180,000,000

  • Using a 20% blended takeout, the 0.2% rise would contribute $6,072,000 to the fund

    [1] “The NYRA takeout cut…proved that bettors – even those who don’t bet tens of millions of dollars a year – are price sensitive”. LaMarra, Tom, “Pricing Wars”, The Blood-Horse, 6 March, 2004, pg 1416, Quote by Bill Nader.


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Racetracks System

  • Instead of rising the takeout, the 0.2% contribution to the fund could also come from the racetracks

  • Or bettors on one hand and racetracks on the other hand could share the contribution and each pay 0.1% to the fund

  • Unchanged amount = $ 6,072,000


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Racino Contribution System

  • In 2003, racinos in Delaware, Iowa, Louisiana, New Mexico, West Virginia generated $1.8 billion

  • Contribution of 0.25% would result in $4,670,250

  • When other jurisdictions legalize racinos even more money would be available


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Summary of Revenues System

  • Sire fees----------------------------$ 2,857,100

  • Registration fees------------------$ 1,360,000

  • $30 Tattoo fee---------------------$ 330,000

  • .50% Win --------------------------$ 2,902,616

  • $25 per Claim----------------------$ 346,825

  • $1 per Start-------------------------$ 489,503

  • 5% Fine Surcharge----------------$ 50,932

  • 2% Uncashed Tickets-------------$ 570,239

  • .2% of Takeout--------------------$ 6,072,000

  • Racino contribution---------------$ 4,670,250

  • Total revenues---------------------$19,649,465


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Summary of Expenses System

  • Equine related cost (one year/3000 horses)

    • Non-vet care 70% of horses $4,982,250

    • Vet care 30% of horses $3,613,500

  • Total equine cost $8,595,750

  • Overhead cost 15% $1,289,362

    • Including marketing cost for second career horses

  • Total expenses $9,885,112

  • Minus revenues sold/adopted horses$1,477,500

  • Total Expenses $8,407,612


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5-Year Business Plan System

  • Sound only if racinos and bettors/racetracks contribute

  • Sound for 6 years if program allows for rearward eligibility

  • Sound for around 12 years if first two years used for accumulation of capital and no rearward eligibility

  • Problem is the accumulation of horses, mainly “pasture ornaments” and those in need of vet care

  • In Year 6 the total cost will reach around $30 million!!!


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What about the Private Retirement Organizations? System

  • They are an integral part of the idea

  • Utilize their up-and-running facilities for rehabilitation, retraining, and retirement

  • Utilize their established network for sales and adoption

  • Payments from the fund will improve their financial situation and provide a steady source of basic funding


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Can we do without donations? System

  • No, especially if contributions from racinos and bettors/racetracks are not available

  • Donations will always have to be an integral part of the funding structure:

  • If program offers rearward eligibility, industry fund will only be able to complement, not replace donations

  • Even if program does not offer rearward eligibility, industry funding will not be sufficient after around 12 years, unless contributions would increase substantially


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Can we generate more donations? System

  • From the bettors – maybe they will donate if we encourage them

  • Provide links to racehorse retirement information and to donations

  • On every ADW web site

  • On every track web site


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Business Opportunities - like EU Car Disassembly System

  • A new agribusiness industry with jobs for “soured” stakeholders

  • Job creation as people are needed to re-train the horses and care for them

  • Second careers for trainers, grooms, pros and amateurs of show disciplines,…

  • Industry funding will secure quality life for both the animal ex-athletes and their caretakers


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How could the idea work in practice? System Eligibility of Horses

  • Only racehorses would be eligible – tattoo as proof of eligibility

  • All breeder fees for horse must have been paid

  • Payment of all other fees related to horse (claiming fee, win contribution etc) to be recorded on foal papers and/or in database

  • The industry’s retirement agency (to be created) would be responsible for distribution of the funds depending on the individual needs of the horses


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How could it work in practice? System Admission Procedure

  • Not mandatory for all horses retired from the racetrack

  • Option for only the needy horses retired from the racetrack, whose owners have no other use for them

  • Owner signs eligible horse over to industry retirement agency

  • Accountability for all horses through exit papers from racetracks – require destination declaration


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How could it work in practice? Organizational Structure System

  • Industry retirement agency would implement regional/local offices utilizing existing networks, for example track vet, HBPA

  • Track vet at regional office would classify signed over horses depending on their second career potential

  • Regional office would utilize the existing, already endorsed (private-initiative) retirement organizations for placement of horses accordingly and

  • Try to expand list and certify all endorsed organizations for special tasks – rehabilitation, discipline-specific retraining, adoption, pasture-retirement


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How could it work in practice? System Financial Structure

  • Endorsed and certified organizations would be compensated for each horse in accordance with their service provided

  • Retrained horses could be advertised, presented and sold, the profit (sale price minus sales expenses) is part of the calculated revenue for the fund


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Conclusion System

  • This idea is do-able – if all parts of the industry are willing to assume their collective responsibility

  • Arizona is a first step in the right direction

  • All positions allow adjustments, however, balance of contribution from each group essential

  • Act - rather than be forced to react