Archives for September 2016

Hackers have recently revealed private emails from a variety of VIP sources, including former Secretaries of State Colin Powell and Hillary Clinton, as well as the Democratic National Committee.  Now a website called Fancy Bear (thought to be a Russian group retaliating for the ban of Russian track and field athletes from the 2016 Olympic games) has joined in by leaking documents from the World Anti-Doping Agency pertaining to the medical and pharmaceutical records of prominent athletes, including both Williams sisters and Rafael Nadal (tennis), Simone Biles (gymnastics), Mo Farah (track and field), and Bradley Wiggins (cycling).

According to the Wall Street Journal, some athletes “obtained ‘therapeutic-use exemptions’ to take medicine with ingredients on the banned-substances list.”  In order to get exemptions, athletes must apply to “an independent panel for a ruling that the drugs are necessary and will level the playing field rather than provide an unfair advantage.”  If the exemptions are granted, they are not made public.

Therapeutic exemptions are viewed, understandably, by many as a way for athletes to gain an unfair advantage via performance-enhancing drugs.

The hacked documents demonstrate that formulating drug regulations (pun intended) for athletic competition is not nearly as straightforward as it seems.  In the case of the World Anti-Doping Agency, the rule banning performance-enhancing drugs can apparently be circumvented if an athlete can demonstrate a medical need, such as to treat asthma.  One Olympic-champion runner was given a health exemption to receive “an intravenous solution of saline, morphine, and vicodin.”  Is this a legitimate medical need?  Who could argue, scientifically, that the drugs were not performance enhancing?

This story has implications for North American horse racing.  While medication reform is certainly necessary and is highly commendable, pertinent practical questions need to be addressed.  For instance, would horse trainers and veterinarians be able to circumvent a race-day medication ban by making the case to an independent panel that an animal needs drug xyz for health reasons?  (That’s how furosemide started out, as an exception for horses prone to pulmonary bleeding.)  Imagine if the exemption was for “saline, morphine, and vicodin.”  How would bettors in particular and the public in general view a race winner that had this exemption?

“Okay, it wasn’t performance-enhancing, folks, it was just a little therapeutic medication to treat the colt’s health issues.  It didn’t give him an advantage, but rather, leveled the playing field.”  Tell that to the bettor whose horse ran second.

The point is:  the devil is in the details when it comes to medication reform in horse racing.

Copyright © 2016 Horse Racing Business

“If I were to remain silent, I’d be guilty of complicity.”

Albert Einstein
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Three compelling but much different rationales can be proffered for why the Thoroughbred horse racing enterprise must find a way to fund a massive and ongoing program for rescue and aftercare.

First, horse buyers and sellers, auction companies, racetracks and advance-deposit wagering firms, owners and trainers, veterinarians, common carriers, bloodstock agents, feed suppliers, and a host of others who derive income and enjoyment from the business of breeding and racing share a moral imperative to staunch the unrelenting flow of Thoroughbred horses to slaughterhouses.

Second, civilized societies expect all businesses to clean up after themselves, which is why the Environmental Protection Agency and similar governmental entities issue and enforce pollution regulations on manufacturers, miners, agribusinesses, and other for-profit ventures.  From this perspective, saving Thoroughbred horses from slaughter is an obligation that the racing industry owes to society at large.

Third, a marketing rationale for saving Thoroughbreds from bad endings is enlightened self-interest.  It is manifestly good for business to do so.  The reputation of Thoroughbred racing–and therefore its widespread acceptance by society as a decent and respectable sport and business—depends on how it is perceived by the public outside racing circles.

By any measure, it is enlightened self-interest to be able to say factually that “We do more than any other equine breed to provide for our animals, including horses that have no value in breeding or racing.”  In order to be able to make this bold claim, the never-ending struggle to greatly curtail the number of registered Thoroughbreds finding their way into the slaughter pipeline must be collectively addressed by breeding and racing interests in a much more structured or formalized way than is presently the case.  Aftercare facilities that do most of the heavy lifting of saving and rehabilitating Thoroughbreds need a dependable and much larger stream of monetary resources to ramp up their efforts.

A well-organized and reliable funding foundation established by the triumvirate of auction companies, pari-mutuel providers, and horse owners would be a huge step forward.  The foundation could be generously built upon and augmented by an assortment of existing and new estimable industry efforts.

The Ontario HBPA Approach

LongRun Thoroughbred Retirement Society in Canada receives one half of one percent of purse money from Woodbine and Fort Erie under a meritorious agreement arranged by the Horsemen’s Benevolent and Protective Association and approved by the Ontario Racing Commission.  Horse racing businesses in the United States have a path-breaking humane funding model to emulate.

A previous article in this series estimated, conservatively, that it would take about $7.8 million annually for aftercare facilities to maintain an additional 2,000 Thoroughbreds, assuming that the normal stay at a facility is for six months prior to outplacement.  (The ultimate “stretch goal” is to find the huge sums necessary to save all Thoroughbreds.)  Over twice this amount–enough to save 4,000 horses–could be raised from three sources without inflicting a monetary burden on anyone.  A self-imposed and tax-deductible half-percent levy in North America on:  (1) bloodstock auction revenue; (2) purses paid to owners (via programs initiated and coordinated by state HBPA affiliates, following the Ontario precedent); and (3) net pari-mutuel revenue (i.e., commission or takeout on betting handle) would produce the funds.

Thus the oft-heard reasoning that the horse racing and breeding industry is too fragmented among provincial interests to craft a unified solution is specious in the case of aftercare funding.  A mere seven pillars of the North American racing and/or auction businesses, with huge market shares, could set the process in motion by adopting a .50% percent funding mechanism as soon as their next quarterly board meetings, if not before:  Churchill Downs, Inc., Del Mar, Fasig-Tipton, Keeneland, NYRA, Penn National Gaming, and Stronach Group.

Based on gross auction revenue in North America in 2015, an aftercare premium of .50% would have yielded nearly $4.7 million.  The sales companies could include a legal condition of sale that the mandatory .50% premium is shared in thirds by the buyer, the seller, and the auction company.  On a horse that sold for $50,000, the three parties would each be assessed about a tax-deductible $84.  The money raised could be distributed by the Thoroughbred Aftercare Alliance (TAA) and similar reputable and transparent organizations.

(Currently, five North American auction companies match contributions by horse buyers and sellers to TAA at the rate of 50 cents per $1,000, with the buyers and sellers having the choice to opt out.  The participating firms are Barretts, CTHS, Fasig-Tipton, Keeneland, and OBS.)

A pact to distribute .50% of purses to aftercare would be initiated by the various state affiliates of the Horsemen’s Benevolent and Protective Association.  The purse contributions would logically be allocated to TAA-approved and audited aftercare organizations in the states in which the purses were earned.

Aftercare contributions of .50% on North American purses in 2015 would have yielded almost $6 million. The charitable donation or business expense would amount to a tax-deductible $500 on a $100,000 purse and $50 on a $10,000 purse.  Over the 43,949 races run in North America in 2015, a $6 million set-aside for aftercare would have equated to $136.52 per race.

Racetracks and advance deposit wagering companies’ net pari-mutuel revenues vary according to the total amount wagered, the takeout rates charged, and what percentage of bets are straight wagers and exotics.  To illustrate, in 2015, net pari-mutuel revenue at Churchill Downs, Inc. came to 10.9% of handle for its racetracks and to 19% of handle for its ADW operation TwinSpires, with a rate of 14.5% on combined handle.  Assuming, again conservatively, that net pari-mutuel revenue is at least 10% of aggregate North American betting handle, a .50% pre-tax charitable allocation to aftercare in 2015 would have come to $5.6 million (the portion wagered on Standardbreds and Quarter Horses would go to aftercare for those breeds).  This is a tiny sum for racetracks and ADW operations to contribute to save the lives of many of the horses that put on the show, especially considering that close to $11.3 billion was wagered last year on horse racing in North America.

Funds from auction firms, horse owners, and pari-mutuel services, potentially over $16 million, would lay a rock-solid cornerstone for aftercare.  Additional sources of ongoing financial support would then greatly expand the number of horses that could be saved.  In 2013, for instance, The Jockey Club increased fees by $25 for nearly all registry-related transactions, including foal registration, and earmarked the money for the TAA, with funds raised from Canadian customers of The Jockey Club remitted to Canadian aftercare operations.  The Jockey Club also has a voluntary aftercare checkoff for owners and breeders that began on January 1, 2009; through 2015, about $256,000 has been donated.  In 2015, nearly 30% of the total funds contributed to the TAA were made by The Jockey Club.

Similarly, 22 farms and syndicates standing stallions designate for the TAA a dollar amount equal to one-fourth of a single stud fee for at least one of their stallions.  The donors are located in California, Florida, Kentucky, and New York.

The TAA should consider extending a certificate of appreciation or recognition to businesses that voluntarily give at least a half of a percent of their annual income to aftercare.  Equine veterinary clinics, racing partnerships, trainers, common carriers, feed suppliers, and sundry others would deservedly be able to publicly demonstrate their concern and gratitude for the horses that make their businesses possible.

Enlightened Self-Interest

The sport/industry of horse racing is an easy target for detractors because it is the equine activity most in the public eye.  No other horse competition, not even in the Olympics, comes remotely close to attracting the media attention and number of spectators that racing does during the Triple Crown season and to a lesser extent for the Breeders’ Cup.  This spotlight makes racing vulnerable to two sweeping claims that have a ring of truth and cannot be effectively answered with rhetoric.  Horse racing tolerates overmedicated racehorses and looks the other way as numerous owners willfully or unwittingly condemn their animals to slaughter.

Just as there is no permanent solution to the everlasting problem of an oversupply of dogs and cats, there can be no assured remedy for saving all unwanted Thoroughbred horses from slaughter.  Nonetheless, the Thoroughbred racing and breeding industry has a golden opportunity to establish the most effective equine-welfare initiative ever launched.  With the leadership of auction companies, racetracks and advance-deposit wagering firms, horse owners, and a host of other munificent industry participants, many more premature horse deaths can be averted, and this principled outcome can be achieved with very little monetary sacrifice from any one source.

The troublesome question of what should be done to significantly curb the dispatch of full-blooded Thoroughbred horses in slaughterhouses does not need the customary “further study, review, and consideration” or more industry conferences.  All it requires are resolve and swift action on the part of the institutions and individuals who have a compelling vested interest in seeing that horse racing has a worthwhile future.  It is within the unilateral power of people and organizations, in all facets of the racing industry, to establish sustainable funding mechanisms, and to do so within months rather than years, so that aftercare facilities do not have to operate hand to mouth and can expand their operations to accept more registered Thoroughbreds for outplacement to new homes.

Wayne Pacelle, president of the Humane Society of the United States, explains in his book, Humane Economy, how he received an unsolicited call in 2011 from Carl Icahn, the prominent Wall Street investor and onetime owner of elite racehorses, volunteering to help with battling against animal cruelty.  Icahn made good on his offer by pressuring McDonald’s to insist that its suppliers of pork bellies abandon the practice of confining pigs in crates, and over sixty food brands ultimately followed McDonald’s lead.  This is just one shining example of what the Wall Street Journal recently depicted as the “unprecedented” progress that has been made in the past decade in “the effort to protect and ameliorate the lives of animals,” encompassing the phase-out of circus elephants to the cessation of orca breeding at SeaWorld.

The unparalleled progress the Journal refers to is the result of heightened societal expectations and stricter demands about how animals must be treated.  A well-funded and ongoing enterprise-wide rescue and aftercare program to spare thousands of Thoroughbred horses from slaughter in the years ahead would be a powerful deeds-over-words statement that the people and organizations in horse racing are passionate participants and leaders in the reform movement.

Carpe Diem.

Copyright © 2016 Horse Racing Business

Three brief notes on aftercare and horse slaughter subjects will appear as follows:

September 22, “Horse-Owner Responsibility”

September 29, “The Euthanasia Alternative:

October 6:  “The Over-Breeding Canard”

I welcome anyone to critique the content in my articles.  Send me an email.  Tell me where I am correct or in error.  The way to solve monumental problems is to bring to bear diverse viewpoints, as no one is always right or has all the answers.

“Wherever you are, I will find you and I will bring you home.”

War Horse
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A plethora of organizations across North America have made aftercare their mission.  They operate independently, continuously struggle for funding, and don’t have the resources to accept nearly enough unwanted horses.

Some aftercare nonprofits specialize by breed whereas others accept horses irrespective of ancestry.  Facilities differ greatly in their financial underpinnings and quality of care, and are generally not regulated by government.

The Thoroughbred Aftercare Alliance, or TAA, was launched in 2012 on start-up money from Breeders’ Cup Ltd., The Jockey Club, and Keeneland Association, Inc. with the charge to inspect, accredit, and award grants to TAA-approved aftercare facilities for Thoroughbreds.  The TAA is now supported by a cross-section of industry institutions and individuals.

Stacie Clark, Operations Consultant to the TAA, cogently summarizes the organization’s raison d’etre as “to complete the life cycle of the Thoroughbred horse in the racing and breeding business.”

Both the American Humane Association and the American Association of Equine Practitioners reviewed and accepted TAA’s Code of Standards and accreditation process.  The TAA imprimatur is conferred for two years at a time, and once an aftercare organization has been endorsed, it becomes eligible for funding.

TAA has certified approximately 56 non-profits managing 180 aftercare operations.  Each retrains and finds homes for Thoroughbred horses their owners no longer want or cannot keep.  Since its founding, TAA affiliates, true angels of mercy, have assisted some 5,000 horses through rescue, rehabilitation, training, adoption, and occasionally euthanasia.

Horse Acquisition

Aftercare operations almost always run at or near full capacity, and turning away horses is a persistent dilemma.  For example, Karen Gustin, executive director of the Kentucky Equine Humane Center, says the center has room for 50 horses and is full 90% of the time.  However, she adds, “We will always take a horse in crisis.  If we get a call from Animal Control, which has just taken custody of a horse through abuse, neglect, or abandonment and there are no facilities to hold the horse, we would accept it.  All other horses are prioritized.”

Beverly Strauss, co-founder and executive director of MidAtlantic Horse Rescue in Maryland, estimates that her organization receives 100 requests every year to provide a safe harbor for horses for which it has no room:  “We get calls all the time about Thoroughbreds in kill pens and many more from people who want to donate their older Thoroughbreds.”

Program Director Anna Ford of New Vocations apprises that the umbrella organization’s six locations in Kentucky, Ohio, and Pennsylvania board 100-110 horses at any given time and are always at maximum capacity.  In 2015, New Vocations accepted 430 horses.  Hence, on average, a horse stays at a center for about three months.  In comparison, the Kentucky Equine Humane Center has a turnover rate of approximately six months.  Most aftercare facilities fall into this range of several months to a half year.

LongRun Thoroughbred Retirement Society is based on the backstretch at Woodbine Racetrack in Toronto and admits racehorses offered by the local racing community.  Thereafter, the animals are sent to eleven foster farms in the Greater Toronto area with a total capacity of 55 horses.  LongRun is in the midst of a capital campaign to purchase its own farm.

Some aftercare operations do not rescue horses at auction, but rather only acquire those donated by their owners or seized by government animal-welfare agencies.  By contrast, other facilities are active in rescuing imperiled auction horses and incur the incremental costs of purchasing and transporting.

The majority of horses rescued by MidAtlantic Horse Rescue are bought at auction and only a small percentage come directly from racetracks.  Ms. Strauss points out how social media has inflated auction prices.  She used to be able to spend between $400 and $500 for a horse at auction, but often can no longer do so:  “…kill buyers are realizing that they can make money buying Thoroughbreds and reselling them through social media, so they are now paying top dollar for Thoroughbreds at auction.  We try to stay under $750…sometimes we can get them for a few hundred dollars, sometimes we get outbid above $750.”

Aftercare personnel occasionally come across a picture posted on Facebook of a horse purported to be a Thoroughbred.  The horse’s owner is sometimes soliciting bids from anyone looking to spare the animal from being sold to a slaughterhouse.  The would-be seller may not reveal the horse’s name or tattoo number in advance so that the ownership chain can’t be traced until after the horse is sold.

A number of aftercare advocates won’t aggressively bid against mercenaries for at-risk horses.  Their reasoning is that doing so only  inflates prices and encourages “hostage-taking,” and there is plenty of sordid evidence to support this view (click here for a case-in-point).

Wendy Muir, LongRun’s executive administrator, conveys that the organization does not attend horse auctions but in some cases “We have gone so far as to help an Ontario-bred horse–with the assistance of its breeder–who ended up in a kill pen in the States.  We have paid anywhere from $500 to $1,500 depending on the situation and demands.  We are …putting together a specific process people must follow if they want our assistance in the future as these requests are almost becoming a ransom.”

Costs and Resources

Monthly outlays for maintaining a rescued horse vary substantially by geographical location and also depend on a horse’s physical condition; therefore averages can be misleading.  The upkeep for one horse–including board, veterinary care, farrier, hauling, and rent and utilities—ranges from around $475 in lower cost venues to $750 in the most expensive places.  These dollar figures are deceivingly low because out-of-pocket costs are held down by unpaid volunteers and pro bono work by veterinarians, farriers, accountants, and attorneys, as well as by donations of medications and supplies.

Neigh Savers, domiciled in California, publicly itemizes on its website the approximate costs of rescuing an animal from auction and subsequently maintaining it each month, as follows.

Rescue from auction, $100-$400
Hauling to Neigh Savers, $150-$300
Average monthly board, $350-$550
Supplements, $50
Farrier trim or two shoes, $50-$100
Veterinary care, $150-$1,000

Average monthly cost, $750

Whenever it is necessary to euthanize a horse, the going rate for the procedure and disposal of the remains are in the neighborhood of $400.  However, veterinarians regularly extend discounts to aftercare facilities and their generosity brings the outlay down to as low as $50-$125.

Aftercare organizations rely on a combination of full-time and part-time employees who are assisted by a cadre of regular and sporadic volunteers.  The Thoroughbred Rehab Center, for instance, is a small facility with one part-time office manager on its staff and no full-time employees who help founder and CEO Leigh Gray.  At the other end of the spectrum, the much larger New Vocations, with its multiple geographic operations, has seven full-time employees, four contracted employees, and over 20 volunteers who help with events.

Generating adequate cash flows to meet day-to-day operations and to support capital expenditures is an endless and worrisome endeavor.  Accordingly, some of the larger aftercare organizations have a person whose primary task is fundraising.

Operating and capital funds come from direct mail campaigns, social-media messaging, special events, adoption fees for outplaced horses, grants like those provided by the Thoroughbred Aftercare Alliance and Thoroughbred Charities of America, and unsolicited contributions from individuals.  LongRun in Canada receives one half of one percent of purse money from Woodbine and Fort Erie under an agreement arranged by the Horsemen’s Benevolent and Protective Association and approved by the Ontario Racing Commission; LongRun reportedly received $343,500 in 2015.

Adoption fees run the gamut from nothing for permanently injured and un-ridable horses that serve as companion animals to $2,500 or more for top-of-the-line mounts.  Price points depend on a horse’s age, soundness, temperament, and suitability for riding or sports competition.

Saving More Horses

Based on an average total monthly maintenance expenditure of $650 per horse, $7.8 million would be required annually to board and maintain 2,000 horses that would ordinarily enter the slaughter pipeline, provided that the normal stay at an aftercare facility is for six months prior to outplacement.  The $650 figure for monthly upkeep is deliberately set toward the high end of the range in order to make a cautious estimate of how many horses could be accommodated.  In addition, some aftercare operations turn over their horses more rapidly than six months.

Thus, in 2015, $25.5 million to $30.6 million would have been required to achieve the “stretch goal” of saving the vast majority of the estimated 6,535-7,842 U. S.-domiciled Thoroughbreds sent to Canada and Mexico for slaughter, not counting the capital expenditures necessary to provide land and infrastructure for the horses.  (A sidebar at the end of this article pertains to stretch goals).

The good news is that over time the amount of money needed is all but sure to decline because the Thoroughbred population is decreasing owing to smaller foal crops and an overall demographic skewed to older horses.

An important unknown in estimating resource requirements is how quickly aftercare facilities could find suitable homes for 2,000 or more horses.  Also, the escalating costs of rescuing some of the animals have to be factored in to the calculations.  Success by aftercare organizations in saving more horses, coupled with a decreasing horse population, contracts supply and drives up prices.

At the present time, the existing aftercare infrastructure is already bursting at the figurative seams and could not accept several thousand more horses on an annual basis.  Capital campaigns would be needed to enlarge retirement operations, and expansion is an expensive proposition.

The subject of Part III in this series is how to address aftercare funding requirements.

Sidebar

General Electric, Inc., under the guidance of legendary Chairman and CEO Jack Welch, instituted the concept of “stretch goals.”  In his 1993 letter to shareholders, Welch explained “stretch is a concept that would have produced smirks, if not laughter, in the GE of three or four years ago, because it essentially means using dreams to set business targets—with no real idea of how to get there.  If you do know how to get there, it’s not a stretch target.”  Stretch goals force and encourage innovation and creativity and new ways of doing things, rather than falling back on the defeatist excuse “it is impossible to achieve.”

Copyright ©2016 Horse Racing Business

Part III will appear on September 15, 2016 at noon eastern time.

I welcome anyone to critique the content in my articles.  Send me an email.  Tell me where I am correct or in error.  The way to solve monumental problems is to bring to bear diverse viewpoints, as no one is always right or has all the answers.