Impact of Breeder Awards: Ontario Case Study

A part of the Ontario Horse Improvement Program, TIP was designed to provide a variety of incentives for breeders and owners with the primary goal of increasing the quality and value of Ontario-bred racehorses.

Funding for the program has changed dramatically over the years. Originally a percentage of the wagered dollar was provided by the government. During the era of the SlotsAt-Racetrack-Program (SARP) additional funds were channeled to the breeders who saw the program peak at $22 million in 2007. Such funding resulted in a booming industry that was the envy of North America. In fact, the program has since been copied by many areas across the continent – including Maryland, Pennsylvania, and New York – that now boast thriving racing and breeding industries.

Since the announcement of the cancellation of SARP in 2012, the TIP program is now largely funded by a 3 percent levy (split evenly between Standardbreds and Thoroughbreds) on Ontario customers wagering on Ontario tracks. As on-track wagering has decreased in the province, so has the TIP budget and the 2018 program features $12.74 million and will be further reduced by about $1 million in 2019. Overall, the budgeted expenditures for TIP in 2018/19 declined by about 15 percent from the 2017/18 budget.

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The effects of this funding change have had a devastating impact on the breeders in rural Ontario. At the height of the program in 2011, Ontario was home to 95 stallions that bred 1,470 mares which represented 3.7 percent of mares bred in North America. In 2016, Ontario recorded just 62 stallions that bred 894 mares
which was just 2.5 percent of North America.

The lack of funding has caused the value of horses to drop precipitously. The average sale price at the 2011 sales was $21,914 from 277 yearlings sold, but in 2018 just 152 yearlings sold for an average of $18,532. This decline has forced some breeders out of the business or to cut back, which has lessened the horse population due to smaller crops which has in turn created a horse shortages for both Woodbine and Fort Erie.

In an attempt to mitigate the damage to the racing industry, the provincial government announced a long-term funding agreement. Introduced in March by the majority Liberal government, which has since been replaced by a Progressive Conservative majority, the agreement is scheduled to begin April 1, 2019 and will provide up to $105 million a year, plus additional supports for smaller racetracks and those that are experiencing financial shortfalls.

While many in the industry support the initiative, the Canadian Thoroughbred Horse Society has declined to sign the agreement. The organization is particularly concerned that the TIP program, which they have administered since 1993, would no longer be under their control.

“Breeders know what breeders need and want,” said Peter Berringer, President of the Ontario Division of the CTHS. In a letter to their members, the board of the Ontario CTHS explained why they cannot support the new long-term agreement.

“The breeders had 12 business days to assess the entire restructuring of the horse racing industry in a legal document of nearly 200 pages,” the letter said. “Not fully understanding or not being in full agreement wasn’t an option open for negotiations! It was continually stated it didn’t matter if horse industry participant
organizations, the investors, the horse producers and participants signed the 19-year deal for the future or their livelihood. It was only the racetrack operators who were important.

“It is our duty as a Board to do what is in the best interest of the Breeders in the province and the OR Membership Agreement as drafted did not provide enough assurance of our continued involvement in the development of the Thoroughbred Improvement Program that has been managed by the CTHS for over 25 years (and) is the only avenue for direct funding for breeders of Ontario. It is to be taken over by OR, who in turn will allow Ontario Racing Management, a subsidiary of Woodbine Entertainment, to administer and manage the program going forward…The horse industry needs participant input for a successful future
for Ontario Breeders.”

The CTHS Ontario reached out to the Ontario Lottery and Gaming Corporation, which works with the horse racing industry to provide support, seeking one amendment that asked for a five-year period of status quo to allow the breeders to manage TIP, but the request was declined.

Aside from the issues surrounding the TIP program, Berringer also noted that the agreement does not take inflation into account. “The problem is there is no room for growth for the Thoroughbreds or any indicator for inflation during this 19-year period,” he said.

“Something is going to have to give or there’s going to have to be some new revenue streams. Twenty years ago minimum wage was $6 and gas was 50 cents a litre. Now minimum wage is $15 and gas is $1.35 a litre. The same money is not going to work 20 years from now. It’s difficult for the breeders to sign off on that or agree to it. Our breeders are dependent on and re accustomed to breeders’ awards and bonuses and that’s what has kept them going.”

While it’s true that the breeding industry across North America is shrinking, Ontario’s is shrinking much faster. The Jockey Club estimates a 2016 North American foal crop of 22,500 down 10 percent from 2011, but in the same time frame Ontario’s foal crop has shrunk by 37 percent.

“We’re all struggling,” noted Berringer. “Breeders are struggling to make money at the sales. Stallion owners are struggling to get mares. Everyone is struggling right now. We’re at a real crossroads and we need stability. The breeders of Ontario can’t take much more.”