When the hammer fell at the Keeneland sales pavilion last month and declared $1 million as the selling price for 2014 Canadian Horse of the Year Lexie Lou, it began another chapter in her incredible story. The daughter of Adena Springs’ Sligo Bay, who earned $1.7 million U.S. in her career on the racetrack, is heading to Japan to be a broodmare. It’s a fairy tale that began in an ordinary Ontario-sired (OS) maiden allowance. Over the course of five years, Lexie Lou became the poster girl for everything that is possible for a locally-sired and raised thoroughbred: the OS program has allowed breeders big and small to reap incentives by breeding and racing OS and Ontario-foaled horses.

Since its inception in 1974, the OS program had grown to make Ontario one of the most lauded breeding jurisdictions in North America. It democratized thoroughbred breeding and owning in Ontario, while supporting thousands of jobs in the province.

Lexie Lou isn’t the only standout of the OS program, of course. There has been 3 year-old Champion Pender Harbour, $2.4 million maker Rahy’s Attorney and this year’s star three-year-olds at Woodbine, Caren and Ami’s Gizmo.

But amid the millionaires the program has spawned — some of them able to beat the best in North America — there is criticism that the program has also produced a deluge of horses with very little upside outside the OS ranks. The program awarded juicy purses and awards for locally-sired progeny, but the majority of horses, once they graduated out of restricted conditions, wound up struggling in low-level claimers.

“Personally, I felt the program was becoming a bit of a false economy,” said Jeff Begg, chief steward of the Jockey Club of Canada and long-time breeder and buyer. “The valuations were not justified for the quality of horse. The only time they had that value was on the backstretch of Woodbine. Once they got off the backstretch of Woodbine, they weren’t worth a quarter of what they were at Woodbine and to me that was not a very healthy program.”

This became evident about a decade ago when the CTHS yearling sale’s results began to dwindle, and many U.S. buyers that once headed north looking for quality pinhooking and racing prospects stopped attending the sale.

An industry-wide horse shortage, poor Canadian dollar, and the cancellation of the Slots at the Racetrack Program (SARP) has only made things worse.

“How the government handled the cancellation of SARP basically destroyed the breeding industry,” said John Burness, owner of one of Canada’s biggest breeding operations, Colebrook Farms, and a CTHS director. “Then, after that, Woodbine announced they were getting rid of the Ontario-sired program overnight races, which was about 300 races in a year.”

Despite some stability in terms of funding from the government, it is clear from September’s CTHS yearling sale and the November breeding sale results that local stock is threadbare.

“I see no other thing that they need to concentrate more on than the heart of the industry,” said Arika Everatt-Meeus who runs Shannondoe Farm in St. Thomas, ON, which stands three stallions including Society’s Chairman, the sire of Caren. “No breeders, no Ontario-breds, then no need for racing here.”

In Ontario, the Thoroughbred Improvement Program (TIP) was developed to encourage horse people to breed, shop and race locally, but also to “reward quality and increase the value of the Ontario-bred horse,” said Begg.

“Every time I look back at the TIP, it’s not really how it was envisioned. It envisioned improving the breed, rewarding quality… and it didn’t happen. And unfortunately, when we started losing the Windfields and Gardiner Farms of our industry, it seemed that the Ontario-sired program allowed people to breed a lesser-quality horse and still reap these rewards and typically the guy breeding the Ontario-bred horse, he didn’t get to share in that financial windfall.”

Presently, Woodbine still offers OS progeny their own classification of races for two-year-olds, in addition to 23 OS stakes, plus Ontario-bred stakes and Canadian-bred stakes. In the US, states with regional programs such as Florida, New York, California and Louisiana offer incentives for their state-bred and state-foaled horses and sire stake days, but Ontario may be the only jurisdiction to offer overnight races restricted to sire progeny.

For instance, for horses sired in Florida, the Florida Thoroughbred Breeders and Owners Association implements the Florida Sired Stakes program, a 12-race series for two-year-olds and three-year-old Florida-sired horses, Sunshine Millions Day and it offers a $5,000 purse bonus for Florida-sired winners of one of the 30 maiden special weight races for two-year-olds carded throughout the year. Additionally, Florida tracks offer the Florida-bred daily, a Florida-bred preferred race on each race card.

Louisiana offers three Louisiana-bred races per day at each track, breeders awards and multiple state-bred days.

In California, it’s legislated that each track write at least one Cal-bred/Cal-sired race on each card in addition to lucrative incentives and the Golden State Stakes series and California Cup day.

The New York Racing Association runs 800 overnight NY-bred races, 67 stakes for New York breds and 10 New York stallion stakes and more than $18 million in owners’ and breeders’ awards.

“In today’s world, we can’t afford a restricted overnight program (in Ontario),” said Begg. “We need races that attract any horse on that backside to fill the races and have large, competitive fields. They just need to get that program set so people can make adjustments accordingly, but you can’t have an overnight restricted program. There’s not enough horses and there will not be enough horses.”

To illustrate that point, Caren and Ami’s Gizmo, both contenders for Canadian Horse of the Year, graduated from Ontario-sired stakes to become graded stakes winners.

“I think there’s definitely a place for (Ontario-sired horses),” said Begg, “and I think the stakes program should be even enhanced.”

Burness, whose farm stands 10 stallions, said he gets calls every day from horse people looking to find homes for their mares because they can no longer afford to breed them. On top of that, he said horse racing has failed to attract a new generation of fans and investors.

“It’s two-fold,” he said. “There’s no young people getting into the breeding, which is a problem, obviously, and the people that are in it are older and they are questioning why should we stay in the industry that obviously has no future.”

In the wake of the cancellation of SARP, Premier Kathleen Wynne earmarked $93.4 million from the province every year until 2021 to help stabilize the horse racing industry. Currently, new industry organization Ontario Racing is working to lobby cabinet to extend those payments until 2038.

“I do believe that with the $100 million the Premier allocated to the industry (each year), there should be at least 10 per cent of that going to the breeding industry itself, to have people be encouraged,” he said. “There is a reason for us to stay in it.”

Burness suggests an incentive for breeders who produce a live Ontario-sired foal.

“If you want to encourage breeding in Ontario, you’ve got to put money into breeders’ hands,” he said.

“Money for registering a live foal that would encourage somebody that they may get their stud fee back: a live foal bonus, if you registered an Ontario-sired foal.”

Begg, Everatt-Meeuse and Burness all think a broodmare investment scheme, like the one recently implemented in British Columbia (http://www.cthsbc.org/incentives.html), is another idea for replenishing the breeding industry. If executed, the plan would bring new mares and bloodlines into the province, offer buyers a more diverse selection of yearlings at sales and will pump new horses into the barns of Woodbine and Fort Erie. In September, the BC branch of the CTHS announced a new broodmare purchase program which offers a rebate of 50 per cent of the purchase price up to $10,000 to buyers of mares in foal, purchased at an auction outside of the province.

“We have emphasis on the sires, we have no mares,” said Everatt-Meeuse. “Breeders can’t make any money at the sale, but you look at the sale and it’s filled with Ontario-sired foals. No U.S. buyers across the border come up here shopping for these (horses that are) unknown to them, really. If we had a catalogue that had U.S. sires in it, we’d have something for American buyers; they’d love to come here (and save) 30 cents on the dollar, and they would buy Ontario-sired horses for themselves as well. But everyone’s trying to stay in the business by cheapening the product they are offering because they can’t afford to buy new stock.”

Those babies from the newly acquired mares will most likely end up at Woodbine as Ontario-breds and Ontario-sired horses, said Everatt-Meeuse, because it’s the “best and most money… It’s an immediate boost to the industry here,” she said.

A mare incentive program will help the local stallion business, too, said Begg. “You’ve got to be re-build,” he said.

California’s breeding and racing industry hit bottom and bounced back, thanks for the most part to a concerted effort from the California Thoroughbred Breeders Association to leverage the tracks to highlight Californian horses.

“When I first started here (Cal-breds) made up one-third of the field sizes and now we’re more than half,” said Doug Burge, association president. “If this Cal-bred program and this breeding program were to go south, we’d go from four days of racing to maybe two or it would be over. Everybody realizes that, so over the last decade we have been able really strengthen the Cal-bred program.”

That means there’s at least one restricted Cal-bred/Cal-sired race in each card at all tracks in both northern and southern California, and the Golden State stakes series for Cal-bred/Cal-sired horse. To be considered a Cal-bred, the horse must have been conceived and foaled in California or foaled in California and the mare remains in California to be bred to a stallion standing in the state.

When a Cal-bred/Cal-sired horse wins a maiden special weight race in southern California, the owner receives $17,500 US bonus. In the north, it’s $10,000, with the hope those owners will reinvest in the local industry.

“We are such a breed to race state as well, that helped spark the foal crop and mares bred. This year the foal crop is just under 2,000, which is highest it’s been in nine or 10 years. I was in Kentucky (at the Keeneland November breeding stock sale), I saw a lot of Californians buying mares there to send here to foal out.”

Burness said he understands why Woodbine had to make changes to its condition book, and the breeding statistics point to the problem. According to the Jockey Club fact book in 2004, there were 1,483 Ontario registered foals. A decade on, in 2014, there was 747 registered Ontario foals.

“At the end of the day, if you don’t have a breeding industry,” said Burness, “it’s pretty difficult to have a strong racing program.”