Wednesday, March 9, 2011

Kentucky and Jersey - How About Some Foresight?

In a not-so-shocking revelation, I am a free-marketer. With more and more people dependent on other people unsustainability comes into play, so I rarely advocate what racing seems to in almost every opinion piece or cry for help - i.e. more taxpayer help to prop them up. However, in some cases and in two states I believe this is something worth getting behind. Some forward thinking and investment can be ROI-positive if the ducks are in a row and the infrastructure is already there.

Two states currently are world leaders in racing, harness and thoroughbred - Kentucky and New Jersey. As Tom Lamarra notes today, Kentucky is a mess. Neighboring slot states are killing the once proud state which is a staple of thoroughbred racing. We all know about Jersey and what neighboring states have done to racing at the Meadowlands especially. The world class facility which is the Fenway Park of harness racing, is on its last legs.

How can state houses let two branded staples go by the wayside, while propping up others? Let's not kid ourselves, states, whether conservative or liberal in nature, are a cesspool of special interest money. Tax rates and government spending are not sky high because they are spending the money only on roads and schools in tiny amounts.

Kentucky already has a rich history, and tourist-centric facilities and races; like Churchill, Keenland, the Derby and the Oaks. The Meadowlands already is the destination for hard-dollars and has branded races like the Hambo.

When you have a following or already are a leader in something, you are ahead of everyone else. If I am going to place money into a potato factory I am going to choose Iowa over another state. If I am in Iowa and my potato farmers need a push, I am going to look at it, because the brand kicks ass. In both cases the return on investment is greater than supporting non-branded enterprises, ten times out of ten.

I don't buy the long-trotted out argument about economic impact. Sure racing might bring $X million of economic activity to a jurisdiction with slot money or government money, but that is a complete red-herring. If the government gives me $10M to spend on an ant farm, and the spin-offs of my spend are 6X, ant farming generates $60M of economic impact. It doesn't mean they should keep giving me free money. Government hears these statistics all day.

The argument for Kentucky and New Jersey to me is simple: If you are a world leader in something, which brings eyeballs, tourism and hard money to your state, you should never let it die; it should always be supported. Supporting and concentrating what you are good at and known for (unless it is completely finished) is ROI positive. Supporting things you are not good at, makes you part of the landscape.

Why spend money on what we are not good at, or have little chance to recoup the money invested? Choose racing instead.

Notes: Betfair joins others and have moved to Gibraltar. What took them so long? If your government is against everything you do and wants to take you to the cleaners, get the hell out and join the others who left before you. Racing is now only 30% of their revenues, partially due to their intransigence, and in ten years (the way racing is going) it will probably be less than ten percent. What is happening has been warned about for years - racing and governments need get out of the stagecoach business.

Gingras is great for the sport of harness racing. He's at it again.

Meadowlands employees are getting layoff notices.

5 comments:

Anonymous said...

PTP,

agree on your Betfair comment but what is truly astounding is that the GB government owned Tote already got out from under its own taxes and levy :) Get That. Hey, I'm moving to Gibraltar too...

Pull the Pocket said...

Anon,

That is the comical part for me as well. When a state owned tote leaves the country, perhaps the country is the problem.

This is simply an iceberg tip. In AUS and elsewhere racing is wanting to charge based on turnover. Who exactly are they hurting when they do that? Themselves. When a company taking bets is maximizing their profit, while being charged at a percentage of their profits, it is efficient. Governments even know this with business - corporate taxes are charged as a percentage of profits, they do not tell them they have to give 20% more to a supplier, or fix their price.

Anyway, it's expected I guess. But in five years when racing is a sliver of their market, and gross revenues for all of racing are down across the board, they should not be surprised.

PTP

Pacingguy said...

I partially agree with you. My problem about giving horsemen state aid is that they spend all their time trying to get slots but do nothing or little to improve the product.

One has to wonder if the horsemen spent half as much time on improving their product instead of spending their time on getting slits if there would even be a need for the slots. There are times, I wonder if they rather be a welfare industry instead of working to become self-sufficient.

Pacingguy said...

I partially agree with you. My problem about giving horsemen state aid is that they spend all their time trying to get slots but do nothing or little to improve the product.

One has to wonder if the horsemen spent half as much time on improving their product instead of spending their time on getting slits if there would even be a need for the slots. There are times, I wonder if they rather be a welfare industry instead of working to become self-sufficient.

Anonymous said...

PTP

completely agree on the efficiency of taxing the profit of a profit maximizing company. Now we just have to figure out what US tracks are trying to maximize... let me know if you figure that one out.