KY Lawmakers Get Horse Industry Update

The Kentucky General Assembly Interim Joint Subcommittee on Horse Farming was given a generally positive update on the status of the racing and breeding industry in the state Nov. 12 in light of years of declines triggered in part by national economic conditions.

Racing industry officials, including several from the Kentucky Horse Racing Commission, brought lawmakers up to speed on the Kentucky Breeders' Incentive Fund, the state's Thoroughbred foal crop, racing dates, drug testing, and the return of the Breeder's Cup World Championships in 2015.

Breeders' Cup

Keeneland will host Breeders' Cup next year for the first time, and it will mark the first Kentucky Breeders' Cup since the 2011 edition at Churchill Downs. Chauncey Morris, executive director of the Kentucky Thoroughbred Association, said there will be added economic value in 2015 because the event will be linked with the November breeding stock sales in Lexington.

"And generally, attendance and wagering numbers are much better in Kentucky than other states (that host the World Championships)," Morris said.

Sen. Damon Thayer is a former Breeders' Cup executive who years ago helped the organization get a now-expired pari-mutuel tax credit if the event was held in Kentucky at least once every three years. He urged the KHRC to do longterm planning on racing dates and consider the return of the World Championships in future years.

"Breeders' Cup chose willingly to forego the tax credit (by not returning within three years)," Thayer said. "We need to hear from Breeders' Cup on its plan to come back to Kentucky on a regular basis."

In another Breeders' Cup matter, Thayer brought up the California stewards' decision not to disqualify Bayern or Toast of New York, the top two finishers in the Breeders' Cup Classic (gr. I), despite what appeared to be serious interference at the start. He asked KHRC executive director John Ward Jr. if the same type of decision could result in Kentucky because of racing rules.

"I'm not a steward but I've watched thousands of horse races," Thayer said. "The recent Classic ruling was an absolute abomination because of the lack of the disqualification of the first two finishers. With the Breeders' Cup coming to Keeneland next year—it's rightfully so to be back in Kentucky after three years in California—what would have happened (with the Classic result) in Kentucky? What are the Kentucky rules of racing?"

Ward explained the 2014 Cup was run under California rules, which allow the stewards to discount interference at points of a race if they believe it didn't affect the finish. Ward said that's not the case in Kentucky.

"California has a rule most of the country doesn't have," Ward said. "In Kentucky, from the time the horses leave the gate to the finish, any fouls can be looked at by the stewards, who would then make the judgment call. So the outcome here would have been possibly different."

Drug testing

KHRC equine medical director Dr. Mary Scollay explained to lawmakers the issue of cobalt, a naturally occurring mineral that in large doses is believed to have blood-doping qualities in racehorses. Kentucky has been part of ongoing research and testing this year involving high levels of cobalt salts.

Scollay said the Racing Medication and Testing Consortium was prepared to recommend a testing threshold level for cobalt in blood at its October meeting. She said the RMTC was sidetracked by the release of a United States Trotting Association-commissioned study that suggests a 70-parts-per-billion threshold; that's almost three times the unofficial threshold being used by some laboratories.

The supporting data for the study wasn't made available to the RMTC, though Scollay said the organization has been told it will receive it.

Scollay said during a Nov. 11 stewards' class at the University of Louisville she was asked if cobalt can lead to exercise-induced pulmonary hemorrhaging, or bleeding in the lungs. The question came from a steward in Quarter Horse racing who said there has been an increase in incidents of bleeding from the nose since cobalt use came to light.

In addition, Scollay said researchers have found that testing samples from "cobalt horses" have taken longer to clot blood—four hours rather than the standard 10 minutes. She said more research would be done to see if there is a link between excessive cobalt levels and increases in EIPH.

Racing dates and wagering

Ward told the subcommittee that, after a couple of months of conflict over the 2015 racing schedule in Kentucky, he intends to call stakeholders together early next year to begin mapping out the 2016 schedule. The primary issue for 2015 was an overlap in requested days by Churchill Downs and Kentucky Downs; the KHRC bowed to Churchill's wishes even though Kentucky Downs, through Oct. 31, is the only racetrack in the state to show pari-mutuel handle growth this year.

"It's how we recruit horses and horsemen back to the state," Ward said of having a set racing schedule prepared well in advance. "We need to come up with a format to get it set 24 to 36 months out."

Greg Lamb, supervisor of pari-mutuel wagering for the KHRC, said the only other Kentucky track that wasn't "substantially down" was The Red Mile harness track, which registered a wagering decline of only 0.6%.

Lamb said advance deposit wagering by Kentucky residents continues to increase. The KHRC now regularly monitors ADW because as of Aug. 1, the state began taxing such bets made by Kentucky residents at 0.5%.

Thayer said the tax has allowed for more transparency in the tracking of ADW handle and where it is generated. He noted, however, wagers made through ADW systems do not contribute to the Kentucky Thoroughbred Development Fund.

"The problem is money is not going to the KTDF," Thayer said. "At some point I would like to change that. We should tax all (pari-mutuel) wagers the same at 1.5%. A flat tax would be fair and allow for the proper flow of revenue."

Incentive funds and foal crop

Jamie Eads, director of incentives and development for the KHRC, said as of Aug. 17 more than 8,600 Thoroughbred mares were nominated to the KBIF, revenue for which comes from the 6% sales tax on stallion fees. She said that of the mares cataloged for the Keeneland November breeding stock sale, more than 1,300 were nominated.

Eads said KBIF officials were on hand at the Keeneland and Fasig-Tipton November sales to reach out to consignors and buyers to push for participation in the KBIF, which this year will award more than $10 million in bonuses tied to races around the world. Since its inception in 2006, the overall KBIF has paid $97 million (80% of total) in Thoroughbred awards, $17 million (13%) in Kentucky Sires Stakes purses for Standardbreds, and $9.2 million (7%) in awards for non-racing breeds.

Morris of the KTA said preliminary data from The Jockey Club indicates the number of mares bred in Kentucky this year will be about 16,900, up from 15,700 in 2013. The projected Thoroughbred foal crop in Kentucky for the next few years could return to about 10,000, the highest since 2008, according to projections.

"It's a sign the industry is recovering from the Great Recession," Morris said.

Though there are fewer stallions in the state, stable stud fees are helping the "middle market" of the breeding industry, Morris said.

"As long as stud fees are stable, there is a greater chance at profitability," he said. "It's a sustainable rise we're starting to see."