Monday, June 24, 2024

The future of California racing is told by 9 industry insiders

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Albany, Calif.

Roxy Roxborough is a true friend of California horse racing.
A longtime bookmaker in Las Vegas, he practically lives at Del Mar during the
summer.

Being a successful professional in gambling, Roxborough also
knows all too well the direction that racing has been headed this century. He
made his feelings evident when he went on social media three months ago to make
a prediction.

“Dateline: Blackfoot, Idaho, Jan. 1, 2033. The last Thoroughbred
to race in what was once a vibrant industry was given a birthday cake at the
Eastern Idaho Fairgrounds. Marshalsea, named after a Dickens era debtors
prison, is an 11-year-old gelding.”

The nine-year time bomb seemed hasty, except maybe in
California. That was where another domino fell Sunday with The Stronach Group’s
closing of 83-year-old Golden Gate Fields. Following the fire that burned down
Tanforan in 1963 and the demolition of Bay Meadows in 2008, it was the last
major racetrack in the Bay Area.

Now Northern California is left with a part-time,
county-fair circuit that is hurriedly trying to expand from its summertime
trappings to fill the void on the racing calendar this fall.

“If Northern California goes, it’s just a matter of time
before Southern California goes, too,” said trainer Steve Specht, 74, who has
had the same barn at Golden Gate Fields for 31 years. “You have to have some
other facilities for horses to move back and forth. You get horses here, they
get good, they move down south. You’ve got horses down there that can’t cut it
anymore, they come here. Without that, where are you going with these horses?
If Northern California goes, Santa Anita will be right behind it, and Del Mar
can’t exist on its own. And then the whole West Coast will be gone.”

Specht is not alone with this daunting prediction. Trainers
and breeders have been sounding off about what they believe to be this fait
accompli.

“With no plan and no racing in the north, there is very
little incentive for California breeders to continue,” California Thoroughbred
Trainers executive director Alan Balch told the California Horse Racing Board
in March.

The gloomy predictions have come despite the Stronach Group’s
announced intent to concentrate West Coast racing on Santa Anita with an open
invitation for north-state horsemen to head south. Executives with both
Stronach and Del Mar say Northern California has become an unsustainable money
loser.

“There are $20 million in administrative costs a year. The
south is responsible for over 80 percent of those costs,” Del Mar president
Josh Rubinstein told the CHRB in March. “That just simply is no longer
sustainable.”

Even as he neared the end of his seven years as general
manager of Golden Gate Fields, David Duggan said he was hopeful about the
future of California racing.

“I’m an optimist, because I believe that when you see an operation like the
Breeders’ Cup consistently coming back to California, I think that that’s a
very good sign,” Duggan said. “Santa Anita has held it for a record number of
times. It’s at Del Mar this year. There’s got to be a reason.”

Horse Racing Nation conducted interviews during the
final days of the last meet at Golden Gate Fields and distilled them into this
oral narrative about the future of the sport in California. It boils down to six
talking points that were the fulcrum for these conversations.

In short, it’s complicated.

Viability of Northern
California racing

County fairs have been a pillar of California racing for
more than 90 years. The meet at the Alameda County Fair in Pleasanton starts the
summer season Friday. After then touring Sacramento, Ferndale and Fresno, the
NorCal colony will return to Pleasanton for a new October-December meet that
will fill the autumn void left by the closing of Golden Gate Fields.

The financial wherewithal of Golden State Racing, the name
under which the California Association of Racing Fairs will operate this fall,
has been the subject of questions before and since the California Horse Racing
Board approved the dates for the new meet.

Alan Balch, executive director, California Thoroughbred
Trainers:
“The CTT’s position is we have to give them a chance, because it’s
so critically important, and breeding in Northern California is critically
important for the survival of California breeding. I know that the people
involved in so-called Golden State Racing are optimistic, but the latest quote
I just saw from Larry (Swartzlander, the executive director of CARF) is he’s an
optimist, that there’s a 60 percent chance (of success). That’s not super
optimistic. I think there are a lot of trainers and breeders who are very
interested and believe that this model does have some upside. The CTT certainly
believes it should be given a chance.”

Bill Nader, president and CEO, Thoroughbred Owners of
California:
“We set benchmarks with CARF, the TOC did. Key performance
indicators to measure their ability to be viable would be a minimum of
three days of racing for a week, a minimum of 24 races per week and purse money
over that period of Oct. 19 through Dec. 15 of $4.42 million, which is $170,000
a day, not including Cal-bred incentive money. We gave them a little bit of
relief on their own benchmarks, so we’re trying to make it reasonable.”

Three TOC board members from Northern California resigned in
January. They were upset that the organization endorsed The Stronach Group’s move
to focus its West Coast racing operations on Southern California. One of the
ex-directors who is advising Golden State Racing admitted the task ahead is
daunting.

Johnny Taboada, a top owner and breeder and former TOC
board member:
“Honestly, it is scary. It is challenging. But I’m very
happy. All of this really brought a lot of us together. A lot of us being able
to work together, I see a lot of union among the people, the decision makers, in
the north. Because of that I do see a light at the end of the tunnel. It is
going to be a tall task for us to stay in racing in the north. However, I do
believe that this is a great opportunity for us to show that this can be done
from the inside out without having a corporate world to run over us and for us
to make decisions. So on the outside looking in, I think there is there is
hope.”

Balch: “It’s a big hill to climb, because Golden Gate
Fields as an entity had such a following around the country. (Now) you
establish a new track and a new form line and so forth. They don’t have grass,
and that’s an issue. They’re going to face a lot of serious issues.
Fortunately, they know it. We’re going to find out if marketing and enthusiasm
and dedication can carry the day. And of course we’ve got to see what happens
to the breeding stock.”

Nader: “(The north) is not being set up to fail. Honestly,
I think it’s going to be very difficult for them, but they’re confident, and I
can’t say for certain, because you just don’t know. The racing is moving from a
track that has some pretty big history over the years at Golden Gate to a fair
track at Pleasanton. The surface is changing from synthetic and turf to dirt. In
the end I think the true judge and jury of this is going to be the horseplayer.
Purse generation is in California is based almost exclusively on handle. If
they can get people to accept their racing and their content and bet on those
races at a level equal to or at least close to what was bet on Golden Gate,
then they’re on their way. And if they can’t, it’s not going to be sustainable.”

Steve Sherman, longtime trainer and 2024 meet titlist whose father Art handled two-time horse of the year California Chrome: “I’m
kind of uncertain. I’m rooting for it as hard as I can. I’m going to be
supporting it as hard as I can, and I hope they have a phenomenal October-December
meet there. I really do want it to work, but we’re going to see who bets on
the product. That’s what a lot of it’s going to come down to. We need the product
to get bet on. Hopefully, they’ll have good-size fields. I do think the lack of
a turf course could hurt right now.”

Taboada: “Nobody wanted to go to this transition, but
we were forced to do so.”

The Stronach Group successfully lobbied the state government
to divide dollars from simulcast wagering so that NorCal gets money only on
days when it is racing. Otherwise that revenue heads south to Santa Anita, Del
Mar and Los Alamitos.

Nader: “The north gives its signal to the south at no
fee, and the southern tracks give the north their signal at no fee. There was a
time when there was Bay Meadows, and it was Golden Gate, and now neither will
be around. It will be basically fair racing in the north, and you have the
power tracks in the south, mainly Santa Anita and Del Mar. That’s another thing
that some here in the southern part of the state are questioning. When our
members come to us and ask those questions, we need to have an answer that is
rational. Everyone is kind of rethinking how things work.”

Taboada: “It’s extremely tough being that (the
Stronach Group) runs California racing as you look at it for the last X amount
of years. They run this entire state other than the fairs. Honestly, they’re
the big dog in the group. They’re doing anything they can to close the north.
It’s very clear. They are doing everything they can politically and within the
industry to consolidate racing in the south. We know in the north that that’s
not possible, because the south is struggling on their own. The south has so
many more issues. The south is no longer feasible to live on their own. The north
can actually do OK without the south.”

David Duggan, general manager, Golden Gate Fields: “I
don’t think we’ve ever tried to work against anybody. Those are decisions that
have a material effect on individual businesses. The chairman of the (CHRB) Greg
Ferraro, who’s a fabulously knowledgeable, sensible guy, has implored all
parties to work together. It would be unfair for me to comment on their
prospects going forward. My focus would be on the trainers that I’ve been with
for the last seven years, the horses, the grooms, I know so many of them, and my
riders. I just want all of them to be successful.”

With its closing of Golden Gate Fields, the Stronach Group
opposed the creation of the new meet this fall at Pleasanton. In March, Craig Fravel of 1/ST Racing wrote a letter to the CHRB saying “it is clear that the CARF proposal puts the
board in the unenviable position of choosing between an unworkable and
unrealistic outline of a plan and putting Thoroughbred racing statewide at
risk.”

That was considered by many in the state’s racing industry
to be a threat, one that impelled the CHRB to approve the new NorCal calendar
by a 6-0 vote.

Fravel said Sunday he did not regret writing that letter.

Craig Fravel, executive vice chairperson of racing and gaming, The Stronach Group’s 1/ST Racing: “No. As I said earlier, I think in these
situations you owe it to everyone to be straightforward and tell the truth. It
wasn’t pleasant news to be delivering, but I think it was truthful and
accurate. Sure, the reception was not among the more pleasant I have had in
front of regulatory organizations, but we were just trying to be
straightforward and honest, and I don’t apologize for that.”

Taboada: “That letter, that was the best thing that
happened to the north now looking back, 100 percent. Honestly, there were a lot
of question marks for us. … We were working behind the scenes diligently on
making it work, but that letter really helped us. After that letter, it was
just like, wow, thank you.”

The dwindling Thoroughbred
population

The U.S. and Canada foal population has dropped from its
1986 high of 51,296 to last year’s estimated 18,500. That represents a 64
percent plunge. California is emblematic of that. In its American Racing
Manual
for 2024, The Jockey Club reported the state went from 1,695
registered foals in 2013 to 1,303 in 2022, the most recent year for which it
has an exact count. That represents at 23 percent fall in the past decade.

The closing of Golden Gate Fields has fueled fear that the
races it hosted for entry-level Cal-bred horses will get lost in the shuffle at
Santa Anita and Del Mar, potentially discouraging breeding.

Taboada: “I’m about how to save California as a
whole. If you look at the numbers, if we don’t have breeders, if we don’t have
anything else, and the north isn’t going to help the cause, it’s going to be detrimental
for racing in California as a unit.”

Brent Harmon, jockey agent for 20 years in Northern
California:
“To have the breeders do what they’re doing, give them an
incentive. Nobody’s doing anything to help the breeder. That all starts from
breeders and all starts from owners. I mean make these guys want to be part of
the game. Make owners want to be part of the game. Owners have been a key factor.
You need to get owners and get breeders, but the way they’re doing it, nobody
wants to come here (to a dying racetrack at Golden Gate Fields). Nobody wants
to be part of this. You go to the fairs, people want to be part of it. They
want to be part of owning a racehorse, which goes to breeding. It goes to
anything. But here? No. Nobody wants to be part of nothing, because they’re
doing nothing for the owners. … During the fairs you will get new owners. You
come back here (to Golden Gate Fields), they disappear.”

Harmon’s top client said the fall-off in the quality of Thoroughbreds
in Northern California has been evident to him.

Francisco Duran, jockey for 25 years in Northern
California:
“It’s dropped. It’s dropped tremendously, because a lot of good
horses have left to run for better money in other parts of the country. I
understand the owners for doing it. I know it’s nothing personal. It’s
understandable, but it sucks, because it took away from our game here. It took
away everything from here. Unfortunately, that’s the reality.”

Balch: “The future of California racing is tentative.
It depends on whether all, the players can get in the same room at the same
time around the same table, including with the legislature, and figure out a
way to dramatically incentivize California breeding. Because without California
breeding, which is over 30 percent of the starts in Southern California and probably
double that in Northern California, we don’t have a game.”

Alternative revenue is
needed

California is the only major racing state that is not stoked
with money from alternative sources. Most others supplement purses and pay the
bills with a lot of help from dollars pouring into slot machines and casinos.
Kentucky, in particular, uses historic horse-racing machines, which ostensibly
are like slot machines with a Thoroughbred theme. Texas uniquely uses a tax
split on the sale of horse products like feed and tack.

Lacking that added money, and with the erosion of racing’s popularity,
the sport’s executives say it has been a struggle to make ends meet, especially
when it comes to funding purses.

Nader: “It’s super important. I think it really is
critically important. We’re in a downward spiral. The history and the tradition
of racing in California, and the jobs it supports and the economic impact, it’s
a very powerful narrative. How we can convert that into something that can at
least make us competitive on the national platform is critically important.
Otherwise, we just keep treading water here and moving along, and we don’t
really have a game changer.”

Fravel: “We’ve got challenges, and we’ve
made no secret of the fact that we’re competing with states that have
alternative gaming revenues that put us at a competitive disadvantage. There are
sort of two alternatives that need to be pursued simultaneously. One is to take
advantage of the wagering population in California and try to focus the
wagering revenues on fewer products. That’s in our view, and I think others
believe, that Southern California with Del Mar, Santa Anita and Los Alamitos. We’ve
been working on that and working with the CHRB to try to figure out what the
future is going to look like, although the fairs are going to give it a shot
(in Northern California). The second is to figure out if there’s a way to
enhance our position economically through some other options. We don’t have
that formalized at this point, but we do need to do something to improve the
economics of the game out here for horsemen and for tracks.”

Balch: “Those are the things that should have been confronted
over the last not just five years but 10 years or 15 years. The industry as a
whole needed to confront them. The Federation of California Racing Associations
hasn’t even had a meeting for 10 years or more. When California racing was
strong, … the horsemen at every track had a seat at the table, so we could
brainstorm strategy of how to work together as a group and, of course, with the
legislature. … The legislature, they’re not following the races. We used to
have a lot of people in the legislature who really understood the economic
impact of racing, and now we don’t. Why is that? It’s because the people who
are in racing haven’t taken the time and the effort to make sure that the
political people in the legislature and the governor’s office and everyplace
else really understand the economic impact of racing, which includes breeding,
which is the key agricultural component.”

If there was one area of agreement between everyone who was
interviewed in the past week, it was that Native Americans who have a monopoly
on casino dollars in California wield a lot of power. Understandably, the
tribes are not eager to cede it or the money that goes with it.

Fravel: “Obviously, tribes are sovereign nations. They
zealously protect what they view as their franchise. We don’t want to interfere
with their franchise. We want to be able to take advantage of our game, whether
it’s taking advantage of technology or increased distribution through
technology or whatever that format might be and find additional revenues from
our game. That’s what we want to do.”

Balch: “It’s very difficult, but those are the things
that everybody would have to work on together. I mean it all comes down to
money. So some place, there’s a place where we could work together, it seems to
me. But again, I’m uneducated on it, and people are constantly saying, ‘Well,
you can’t do this, and you can’t do that. You can’t do this, that or the other
thing.’ All I can say is something my old horse trainer used to always tell me.
‘If you say you will try, you’ve at least begun. If you say you can’t, you’re
already done.’ ”

Sherman: “Instead of fighting them, maybe try to get
them on board for something. I don’t know how all the inner workings or
intertwining of that can work out. My whole philosophy is, if you can’t beat
them, join them, and we haven’t been able to beat them by any means. Maybe they
can come aboard and try stuff. Maybe they can’t. I’m not sure. I don’t know the
politics about all that, but it would be nice. I think there’s a lot of gaming
out there, a lot of dollars out there to be had, and it’s just a shame that
they won’t give the racetracks just an opportunity. Hey, if we fail, we fail.
But at least let’s go out swinging instead of getting a called strike three. I
want to go out swinging. I feel like the state really hasn’t given us a really
good shot about sustaining our future and sustaining our purses and our
livelihood.”

There was talk that historic horse-racing machines or the legalization
of fantasy-sports games was being floated in back channels as an alternative. Although
no one got into specific details, the state attorney general and legislature in
California were said to have been approached about the viability of going
forward with these ideas without necessarily bringing Native American tribes
into the picture.

Fravel: “I don’t know what form it’s going to take at
this point. It’s a matter of ongoing discussions with other elements of the
industry and state government, whether that’s the governor’s office, state
legislature, however we have to go about that. I don’t have a definitive option
on the table right now, but we’re going to keep looking at it.”

Long-term plan for the
Stronach Group

Until there is some lifeline that comes from another revenue
stream, California racing faces the daunting task of persisting in the face of
a shrinking revenue footprint. The Stronach Group said it was overpaying into
Northern California purses before slashing them 25 percent this year. Southern
California purses also were cut, although not as severely.

The idea of continuing down this path without another light
at the end of the revenue tunnel is daunting.

Fravel: “It’s a huge challenge. But people rise to
challenges, and I think part of my job and other people’s jobs is to make sure
we articulate the challenges, honestly, and engage in straightforward
conversations with our partners in this business, which are the horsemen and
other racetracks like Del Mar, and find a path forward.”

One longtime north-state trainer said he did not believe the
Stronach Group truly lost money at Golden Gate Fields.

Steve Specht, trainer for 31 years at Golden Gate Fields:
“You’re taking what they say? From everything I’ve ever seen about the Stronach
organization, to work there you have to be a bona-fide, qualified liar. That’s
what I think about the whole damn thing.”

Even though his track is closing, Duggan remains loyal to
the Stronach Group. As such he said breeders and horsemen from Northern
California will find races that suit them at Santa Anita without having to make
a big jump in class.

Duggan: “I think there will be opportunities at Santa
Anita. I think you’ll see a lot more movement in that particular area, which is
quite boutique, in the not-too-distant future. Once, dare I say, we’re out of
the way, I think there’ll be a huge focus on making Santa Anita as successful
as it possibly can be. With that will come more incentives for breeders and
others.”

Are Santa Anita and Del
Mar dominos waiting to fall?

Tanforan burned down in 1964. Bay Meadows was closed in 2008
followed by Hollywood Park in 2013, Fairplex in 2015 and Golden Gate Fields on
Sunday. Are Santa Anita, Los Alamitos and Del Mar potentially dominos that are
about to tumble behind them?

Fravel: “No. I think we’ve got a great marketplace
throughout the state. There’s going to be change, and that’s hard, particularly
in a business like this one, where people don’t necessarily adapt well with
change. We’re going to have to face up to that and try to make things work, and
we’re going to give it a try.”

Sherman: “I would definitely worry about a domino
theory and the game in general, especially here in California.”

Balch: “It’s one state. That’s been something that
our organization CTT has been very strong on publicly as well as privately. This
idea of north vs. south has never made any sense. The Stronach Group had a fantastic
opportunity when they had both these tracks open, when they bought them both to
create a real synergy between north and south, and make that operate. Instead
there have been many, many, many people who have led the Stronach Group, and
none of them have seemed to see that as an opportunity. It’s really not only a
crying shame, but it’s been a debacle for California racing as a whole, because
people have to have places to bring their horses up. … It’s all one state,
and it should have been treated as one state, and it wasn’t and hasn’t been.”

Optimistic, pessimistic or
realistic?

The question was posed to interview subjects in the past
week. Do they consider themselves optimistic, pessimistic or realistic about
the future of California racing?

Fravel: “I’m optimistic. We have an incredible
wagering base here in California. I’ve said this in many forums. People in this
industry deserve a great amount of credit. They have persevered and kept at it
despite the fact that New York had (video lottery terminal) revenues coming
from the Genting (casinos), and despite the fact that Kentucky has had HHR, and
Virginia has HHR, New Mexico has slot machines, and Delaware and Maryland have
slot-machine revenues. The racing industry out here has gotten by on doing
great work putting great horses on the racetrack and attracting wagering
dollars. With the proliferation of options for entertainment both online and in
person, it’s a challenge. I give people great credit.”

Balch said the same answer did not necessarily apply to north-state
racing in particular and California racing as a whole.

Balch: “Those are two sort of two separate questions.
I’m certainly not going to say I’m pessimistic, because I still hold out hope
that, faced with this situation, everybody can get together. Although the form
line is against it, that’s for sure, because they haven’t up to now. Maybe
facing this serious an issue, and maybe when they see things like (5,936 people
attending closing day at Golden Gate Fields), there’s a huge, huge following in
Northern California horse racing. Of course that’s one reason that the south
wants all the betting handle proceeds down there. I think this has been a
tragic mistake to close Golden Gate Fields. It’s beggar’s belief that Golden
Gate, which last year had over $24 million in income from betting alone, couldn’t
make money. How they calculate that this is a money loser is beyond me, because
within the framework of everything, frankly, I don’t believe it.”

Specht: “I just don’t see California racing existing
if you shut down the north. I do think there should be breaks. I think there
should be a month of no racing in Northern California and a month of no racing
in Southern California. Give horses a chance to catch their breath. Horses
could still run. You’ve got horses doing good, you can ship them south, or they
could ship north. But get some breaks. It gives the public a break, you know
what I mean? Whenever you see there’s time off, the first crowds back are
always the biggest ones.”

Taboada: “I’m optimistic. I’m in the weekly meetings
with all these people (at Golden State Racing) that are running the new show. There
are going to be ongoing challenges and even more to come, and a lot of things
are happening from the outside that we’re going to expect in the future, but
there’s creative people around that want this to work. Their heart is with this
industry, and they understand how important is to get the north running.”

Nader: “I’m always optimistic, but in this case you
don’t want to give false hope anybody. It’s not easy in California, so I’d be
cautiously optimistic. By that I mean you have to measure expectations. Look,
it’s 2024, and (financial solvency) hasn’t happened. That tells you what you
need to know. We’re going to need to dig deep and work hard to try to create a
realistic opportunity to make that happen.”

Duran: “I’m positive about it, because the (CHRB)
meetings that I’ve gone to in Sacramento, the owners that have been
participating, businesspeople, what they’ve said and what they want to do, they
gave us those days to race. It’s just a positive indication that they do want
to give us a shot. I think it’s a going to be a positive thing. I believe more
owners will come and invest in the product here, because we will be part of the
Stronach Group anymore.”

Harmon: “We’re going over there (to Pleasanton), and
they’re building new barns. A future turf course is on its way, which is going
to happen. I just think good things are gonna happen over there. There’s a lot
of plans. They want to market. They do a great job of marketing over there,
which they don’t do here. They enjoy their product over there, which they don’t
enjoy here. They don’t like it here. When you stand behind your product, then good
things are going happen. I think we’re going to get a lot more owners. We’re
going to a part (of the state) that we consider like agriculture. You get
farmers, ranchers, cowboys and all that. They’re going to be where they want to
go. Do they want to be part of that here? They just don’t want to be part of
what’s going on here.”

Fravel: “We as a company I think get some criticism,
but I think if it weren’t for people like the Stronach family that were willing
to invest in these racetracks and persevere through some of these challenges, (the
closing of Golden Gate Fields) could have happened years ago. We saw Churchill
move out of Hollywood Park. Bay Meadows was sold and closed 16 years ago. Arlington
Park was sold and closed. We haven’t historically been in the business of
closing racetracks. We’ve tried very hard to keep them going. You look at
places like Santa Anita, we’ve made major investments in them. At some point
you have to make intelligent decisions about allocation of capital and where
that’s going to have a return. That’s really at the heart of the story.”

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