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Racing Taskforce Recommendations

Racing Minister Annette King says she has been delighted and surprised by the degree of unanimity and level of goodwill in the combined recommendations from three racing taskforces she established in June.

"Since I became Racing Minister, people have told me again and again racing is too divided to get its act together. I never believed that, and the recommendations prove just what the industry can achieve when all sections work together."

Mrs King formed the taskforces, representing the northern, central and southern regions, after a community racing forum in Parliament on June 1. She appointed three people from outside the industry, retired judge Ken Mason, Mike Behrens QC and former Speaker Sir Kerry Burke, as independent taskforce chairs.

The taskforces were asked to provide recommendations in three areas, administration, funding and future development.

"The taskforces represented a real cross-section of the industry. It's not surprising some recommendations are radical and far-reaching, but certainly some of the cynics, who said it would be a waste of time, will be surprised the industry can agree on paths for development. The cynics will just have to eat their own chaff."

Mrs King said the recommendations basically fell into two areas. "Some are recommendations the Government will have to consider in terms of legislation. Others are for the industry itself to implement.

"The general theme of the recommendations is strikingly positive. It's quite clear the industry is looking to cast off some of the chains that have fettered it, and to get on with running its own business. I'm sure there is plenty of talent available in New Zealand to enable it to do so."

Mrs King said she wanted to thank all those who attended the original community racing forum and the members of the taskforces, and particularly wanted to thank the three independent chairs for the enthusiasm with which they had tackled the issues and brought a range of viewpoints together.

"They have done a great job. My job is now to give these recommendations the prompt and serious attention they deserve."

The taskforce report and recommendations are attached, and can also be viewed on the Minister's website, www.executive.govt.nz/minister/king


RACING TASK FORCE RECOMMENDATIONS SEPTEMBER 2000


Introduction


This is a report for the Minister for Racing, the Honourable Annette King, on recommendations made by the Racing Task Forces.

These were set up as the Northern, Central and Southern Task Forces to identify future directions for the racing industry and to provide information on which new legislation could be drafted. The members of the Task Forces came from the three codes, the Racing Industry Board and the Totalisator Agency Board. The harness and thoroughbred representatives came from each grade of venues. The chairmen were independent in the sense that none had any professional involvement with the racing industry.

After public notification of the purposes of the Task Forces, each met independently of one another in July and August 2000 and made recommendations developed from submissions received (each Task Force considered the submissions made to all three) and from the expertise of its members.

The procedure and content of the individual meetings was at the discretion of each Task Force.

The basis of the relationship between those who made submissions and the individuals on the Task Forces, was the principle that the welfare of the racing industry was paramount. Thus those Task Force members who came from a particular part of the industry were not there to just be an advocate for their interest. They were expected to be objective while using their expertise. Similar guidelines were set for those who made submissions.

The recommendations made by each Task Force were considered at a meeting of the three chairmen.

This report is the result of the procedure described. The final recommendations come from a distillation of the written submissions and the deliberations of the Task Forces. Account was taken of constant themes that came through the submissions as well as of the expertise of those involved.

The terms of reference were

I. To examine the New Zealand Racing Industry Board's funding policy, to consider whether the policy was achieving its stated aims and to consider alternatives
II. To examine the administration of racing, including that of statutory boards, the three code bodies (Greyhounds, Harness and Thoroughbred) and the clubs, to consider the appropriate level of administration with particular reference to cost and efficiency and to consider the benefits of any suggested changes.
Ill. To identify strategies to enhance the future development of the industry with particular reference to ownership, sponsorship and investment.

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In practice it was found that these terms overlapped so that future development was the base for recommendations in all areas. Also Task Force Members were aware of suggestions for change already mooted, such as a new Racing Act.

Submissions were received from individual interests, clubs, groups of clubs, the TAB, the Racing Industry Board and owners and breeders interests. Not all submissions dealt with each of the terms of reference and many in the nature of complaints about existing conditions did not suggest remedies. Some submissions were very detailed and extensive. The Task Forces were enjoined to give to the Minister an indication of the level of support within the Industry for suggestions made within the terms of reference and thus a balance has been struck between the detailed and the general submissions to achieve clarity and a fair reflection of their thrust.

Background


The submissions showed that the two purposes of the enquiry, namely to provide information on which new legislation could be drafted and to identify future directions, were relevant to the Racing Industry's current situation. Racing is seeking independence and efficiency in administration at all levels. It wants freedom from statutory and unreasonable financial constraints. It wants to compete with other forms of gambling and to preserve and increase its employment and social advantages.

In July 2000 information from the TAB for the Task Forces showed:

 Racing was "treading water" in terms of turnover;
 Racing turnover was static when the gaming market was expanding. The gaming market increased by 157% in 6 years while TAB Sport/Racing increased by 27% in the same period;
 Turnover targets were not being met by the industry;
 The decline in horse numbers was below the critical mass needed to support the meeting licences issued;
 The industry was fragmented and struggling to find the balance between being a viable entertainment business and a club-based sport;
 The current financial performance could not be sustained just by doing more of the same;
 Starts in gallops races had declined by 23% in the last 10 years and in harness races by 13%;
 Greyhound turnover had almost doubled since 1993/94 through an increased number of licences;
 Oncourse sales, adjusted for inflation, had declined by $500 million over 25 years.

The overall tenor of the submissions was that change to existing structures and methods is essential if the Racing Industry is to survive and grow.

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RECOMMENDATIONS


Administration:


1. That the Racing Industry Board and the Totalisator Agency Board be amalgamated.

The Racing Industry Board replaced the Racing Authority in 1992. It is charged by statute with creating fundamental policies that promote the economic welfare of racing and of those who derive their livelihood from the industry. The existence of the Task Forces and the criticisms of the present state of the industry are an indication of the perceived degree of success. It seems that ironically, statute did not give the Board the ability to direct the industry to achieve the statutory policies.
The Totalisator Agency Board has been independent of the Racing Industry Board. The TAB and its management, the RIB and the governing bodies of the three codes work together in the formulation of policy but the arrangement is no more than that. There has been a perception, particularly within clubs, that there is no machinery to regulate the parts the TAB and the RIB actually play in the formulation of policy.
Before the Task Forces met, the industry was well acquainted with the proposed new Racing Act which enables amalgamation and many submissions saw it as something already decided. There was general approval for the amalgamation proposal outlined to the three codes by Sir Geoffrey Palmer
The industry wishes to see what it considers as its ownership of the TAB, approved by legislation. The TAB has always claimed to act in the best interests of the racing industry and defends itself strongly in this area but some clubs in particular do not agree.

2. That the new Board thus created, comprise seven members appointed: one chairperson, independent of the industry, appointed by the code presidents; three persons, one each appointed by the executive of each code; three more appointed by the presidents of each code and the independent chairperson acting in committee;

There was a minority preference for three members to be appointed from the executive of each code, which was the original suggestion but the clear preference was for the idea that while the executive of each code should appoint one member that appointee should not be restricted to coming from the particular executive. There was support for the view that the right person for each code need not necessarily be on its executive.

3. That there be a new Racing Act whose scheme should be to give the new Board autonomy and the codes freedom from statutory direction except that contained in the directive powers of the board.

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There was a clear desire in the submissions and views of the Task Forces that the industry should become as much as possible its own driver and regulator The clear point was made that the Racing Act was passed when racing was almost the only form of legalised gambling. Since then, other forms of legal gambling have emerged which do not have the restrictions contained in the Racing Act. Thus the industry is seen to be unable to function competitively and efficiently. In fact, even widely supported changes cannot be implemented quickly because a statutory amendment is often required.

4. That the new Board immediately initiate an analysis of the benefits of integrating the delivery of racing services across the three codes and implement integration if viable.

There was a clear preference for integration on the grounds of efficiency alone but the Task Forces in particular thought that the detail required must be the responsibility of the new Board. It was recognised that some of the difficulties experienced in such activities as setting race dates and promoting a growth calendar had arisen from differences between the codes and clubs on the one hand and the RIB and TAB on the other. It was thought that with amalgamation, a new Board and recommended code representation could reduce and even eliminate the difficulties.
There were two submissions that made suggestions for administrative efficiencies that received approval or were not criticised as being unhelpful These were:

 The creation of a racing port on the internet
 A central banking fund for the industry


5. That each code initiates or continues with an analysis of the benefits and disadvantages of a regional basis for racing administration.

It was evident from the fact that submissions often came from regional groupings of clubs that this issue, from an administrative aspect, was a live topic. Essentially submissions encouraged co-operation in the race day organization by clubs within each code and across the codes. It is difficult to see how, for example, one administration in each region working for all the codes could not be economic and efficient, but the Task Forces felt that the final decision should be made by the code.
It was considered that the recommendations would result in better industry control, flexibility and efficiency.

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Funding Policy

I That the three codes, Thoroughbred, Harness and Greyhounds, be bulk funded.

The existing funding policy came into force in 1997. Its long-term objectives were to
 Increase returns to stake-holders
 Develop a strong and viable network of strategic racing venues
 Generate a new investment and involvement in racing

Effectively the flow of funding is from the Racing Industry Board to the clubs. The policy links funding to a percentage of off-course turnover based on venue category and licence type. Racing venues are categorised taking into consideration their location, the size of nearby horse and human populations, their racing surface, their proximity to other venues and the value of other venues as well as a number of other factors specific to venues and/or regions. Clubs receive a single revenue stream directly related to both turnover performance, venue category and meeting classification.
The submissions and the Task Forces were of the general view that the policy needed to be changed. There was not agreement on the degree of success of the present funding policy and it would be simplistic to say that the general call for bulk funding of codes meant that the present funding policy was thought to be failing. The reason for change was more a philosophical one in that there was a desire for codes to be in charge of their own futures. Thus this recommendation for bulk funding changes policy by giving the codes the money for distribution to clubs.

2. That venue grading be abolished and each code be funded as follows: Greyhounds, a flat rate to each club; Harness, a flat rate to each club with provision made for group, premier and feature racing with full allocation of costs to clubs; Thoroughbred, a race-day licensed tiered percentage payment.

There was significant criticism in the submissions from within the codes as opposed to the Boards, of venue classification. Venue classification (grading venues A, B, C, or D and in principle funding them accordingly) was seen as condemning the lowly rated venues to an unattractive funding formula. While the Boards felt that this criticism was more perceived than real, the submissions and to some extent the Task Forces, agreed that there were positive reasons for abolishing the classification. In practice now, the majority of the lower graded venues have been receiving funding in excess of that set for their grade on some of their racedays. Along with the criticism of venue grading was a preference for the funding of race days wherever they are held. The race day licensed tiered percentage payment for the gallops code would of the lower graded venues have been receiving funding in excess of that set for their grade on some of their racedays. Along with the criticism of venue grading was a preference for the funding of race days wherever they are held. The race day licensed tiered percentage payment for the gallops code would of the lower graded venues have been receiving funding in excess of that set for their grade on some of their racedays. Along with the criticism of venue grading was a preference for the funding of race days wherever they are held. The race day licensed tiered percentage payment for the gallops code would provide greater flexibility and opportunity for smaller venues to promote community racing to their advantage. A tiered race
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day formula would recognise premier, weekend/public holiday meetings and other industry or community days. One Task Force, in recognising the criticism of venue classification, was unanimously in favour of this recommendation. Even though the other Task Forces did not consider such a suggestion, the recommendation is well founded in the submissions. It is a recommendation that mainly affects Thoroughbred racing. Greyhounds have always paid out clubs on a flat rate and Harness is moving towards that in line with its own mission statement.

These two recommendations, for bulk funding and the abolition of venue categories, are seen as a package.

As to whether the present funding policy or a changed one will achieve its stated aims, there was unanimity that a funding policy in itself would not save the racing industry from stagnation. Many put it that changing a funding formula was just cutting the cake up in a different way. There is some concern, for example, that if in effect a smaller club is to receive more money than it does now to promote feature racing, it would be money taken from the stakes fund of a bigger club which would mean that the attractiveness of that bigger club as a place to race would diminish.
There was unanimity that there has to be more money put into the racing industry and that there is no sufficient source from within the industry.

Future Development


1. That racing be given access to gaming machine funds to be divided between the codes in the same proportion as their bulk funding is to off-course turnover.

There was strong support in the submissions and Task Forces for access to gaming machine funds. It seemed that recent developments with gaming machines within the industry concentrated the submissions in this area. An income stream from outside the industry was seen as essential to survival. Specifically the codes see increased stakes as the key to halting the fall in the average acceptors per race. If this is done, owning, breeding, training and betting will become attractive again. There was unanimity in the view that the industry itself could not generate the necessary income to do this as well as provide for the maintenance and development of venues even after rationalisation.
One Task Force, in recognising the need for gaming machine proceeds, recommended that instead of the industry operating its own gaming machines, racing be allocated a levy of 1.5% of the yearly national gaming machine turnover to be used for the “development and enhancement” of the industry. It further recommended that in return for the allocation of these funds, the industry not be granted gaming machine licenses, nor would gaming machines be sited at racing venues or TAB outlets. It is emphasised that this idea is a minority view in that it did not emerge from the submissions as such and was debated by only one Task Force. That group felt, however, that it was an alternative that needed wider thought and discussion because there may be strong sentiment in Government against the unchecked proliferation of gaming machines.


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Whatever remedy is adopted, there was strong opinion in submissions and from the Task Forces that Racing was losing ground against other forms of gambling yet it was seen to have positive social and economic affects which other forms of gambling lacked.


2. That the new board immediately initiate a full analysis and review of the present use of venues and training tracks and then give consideration to a restriction in the number of venues.

This recommendation affects Thoroughbred Racing particularly and there was strong support in the submissions for reducing the number of venues. While there were specific suggestions for numbers, (one Task Force recommended no more than 30 Gallops venues in the country, one submission recommended just one venue) the Task Forces recognised that the analysis should be carried out without delay. There was a strong view that such analysis would prove that reduction was the only option. It was acknowledged that over the years, a number of enquiries had recommended a reduction in venues but nothing had been done. It was underlined that a venue reduction did not mean a club dissolution. This topic was seen as one of the most difficult because of the history and traditions associated with "threatened" venues, but the Task Forces accepted as did a majority of the submissions that the time had come to rationalise venue numbers.
As part of the analysis it was seen as imperative that the funding of strategic training centres be examined as well as the importance of a "country" racing structure.

3. That broodmares be written off in full, starting at age 10 and down to $1 at age 12. That a 100% deduction be offered in the year a stallion purchased in New Zealand by a New Zealand taxpayer is first used for breeding provided the stallion remains in New Zealand.

There was general support for the establishment of parity in ownership/breeder incentive schemes with overseas arrangements. The fall-off in interest in breeding and ownership is one of the dramatic aspects of the difficulties faced by the industry. This recommendation is seen as moving to a regeneration encouraged as well by better stakes and industry rationalisation.

4. That horse codes examine the better utilisation of their product so that horses can move up and down classes under a system that is fair to owner and bettor.

This recommendation was developed from a concern that came through the submissions about horses initially succeeding but then being unsuccessful in the class to which they have been promoted, thus having little chance to win stake money. The Task Forces recognised that what is essentially the re-handicapping of horses has been looked at from time to time without a solution. It is a problem directly affecting ownership and investment. The codes must find a way to always give their owners a reasonable possibility of winning.


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Note

While the Task Forces were particularly directed under the terms of reference for future development, to consider ownership, sponsorship and investment, the topic of taxation in the racing industry was specifically outside the terms of reference. It was obvious that taxation is a very hot issue within the industry. A significant number of submissions wanted a tax reform which, in effect, would create equality between all forms of gambling.

5. A number of suggestions under the heading of future development were made in the submissions. There was general discussion about them and some were seen to be in place or under consideration anyway. It is thought practical to list them as a record of what the Task Forces and submissions expect from the Government, the new Board and the codes:

 Developing of media alliances and improvement of mainstream coverage
 Training for careers within the industry
 Developing overseas sponsorship
 Reviewing the levy on horses exported
 Developing contemporary technology
 Looking at a percentage of stakes won going to breeders
 Expanding the "free-to-air" Trackside service
 Further developing opportunities for twilight and/or Sunday meetings

Conclusion


The submissions, their consideration and these recommendations have two aims: to create a basis for legislation and to confirm for the policy makers and administrators in the racing industry, a path for development.

Apart from the new Racing Act and its consequences, the submissions and Task Forces were strongly of the view that the most significant thing to be done for the industry was the securing of a new income stream. This could be done by allocation of gaming machine licences or moneys.

It is to be seen that there were not a lot of recommendations made under the heading of ownership, sponsorship and investment," given that there was a direction that these topics in particular be looked at. It has to be emphasised again that there was a strong opinion in submissions and amongst Task Force members that at the present time the racing

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industry does not attract in particular, owners and investors because its returns are not competitive enough.

The submissions and deliberations of the Task Forces emphasise a willingness for critical self-examination within the industry and a determination to effect rationalisation.

The submissions were seen to be strongly advocating that the restoration of racing to its place as an industry which provided entertainment, profit, and employment, and encouraged tourism and regional development, could only be good for New Zealand.

It must be emphasised however, that the industry needs prompt attention. It is felt that notwithstanding the probability of new legislation and reforms, there may be delay with implementation simply because time is required, for example, to pass legislation. The Task Forces firmly believe that such of these recommendations that can be acted upon now, should be attended to by Government, the existing Boards and the codes, without delay.


Mike Behrens QC (for Racing Task Forces Chairmen) 27 September 2000.


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