June 11, 2012

Perspective from Quebec On the Cancelling of the Slot Agreements with Ontario Racetracks

As the Chairman of the Quebec Jockey Club (QJC) an organization that is working to rebuild horseracing in Quebec, I am here to speak of our experiences, which saw the end of horseracing in my province. The QJC emerged because of the closure of all of the racetracks in Quebec. These closures were the result of the bankruptcy of Attractions Hippiques, the company that operated Quebec racetracks as the successful bidder to the 2006 government-issued RFP to privatize horseracing. Part of the privatization plan was for Loto-Quebec to install a total of 1900 Video Lottery Terminal (VLTs) at Quebec racetracks. The revenue from these VLTs was projected to reach $49 million per yearfor the horseracing industry. However, the revenue shared with the racetracksamounted to only $7 million. This combined with other factors resulted in the bankruptcy of Attractions Hippique and the shut-down of racing in 2008.

In Quebec, 87% of the jobs in the horse racing and breeding sector have been lost. From a high of 3,000 full time equivalent jobs in 2004 to a mere 400 jobs today. To put the size of the Quebec horse industry in context, Equine Canada’s study identifies 34,816 direct industry jobs in Ontario. Similarly, the number of licensed horsepersons in Quebec has declined by 80% over the same period from over 7,000 to less than 1,500 individual licensees.

Someindividuals left Quebec to seek employment in Ontario, New York, Pennsylvania, New Jersey, Illinois, and Indiana depriving the Quebec government of valuable tax dollars and economic spin-off. For many, the opportunities at Ontario racetracks offered some reprieve for their businesses that were no longer viable in Quebec. To illustrate this point, today more than 15% of the Ontario Racing Commission licenseesarebusinesses, and individuals whose principal address is Quebec. These licensees include owners, drivers, grooms, trainers, and tradesmen. The number of Quebec residents licensed in Ontario represents 60% of the total number licensed in Quebec. The proximity to Ontario racetracks has allowed these businesses and individuals to continue on in the industry.

Our horse owners and breeding farms were well dispersed in the many agriculturally rich regions of Quebec and were part of the healthy fabric of regional agricultural diversity. Horse racing and breeding also sustained opportunities for other businesses in the province such as feed suppliers, farming equipment suppliers, veterinarians, livestock transportation, and regional farm labour to name a few. Horse owners and breeders have been equally devastated by the lack of racing in Quebec. The number of horses in the racing sector have declined by 85% in the last six years. The number of matings has been reduced by an astounding 95%, over the same period, as a result of the massive decline in the number of stallions and mares available in the province. All of these factors contribute to the difficulties that the QJC faces in rebuilding the industry.

Sadly, many misplaced individualscould not transition into other work, other sectors, or other jurisdictions and joined the ranks of the unemployed. Some jobs in horseracing are specialized,making redeployment into another industry impossible. Statistics,unfortunately,do not adequately capture the human tragedy, but anecdotally we have many depressing talesto detail the avoidable social fall out that has occurred.

The negative impact in Ontario will be greater than what Quebec experienced, and far more severe than what our 2004/2010 comparison data shows. In Quebec, more than 90% of the VLTs are available to consumers in local bars and restaurants, creating easier access for the consumer to spend their discretionary entertainment dollar. Less than 6% of the VLTs were located at Quebec’s racetracks. We estimate that if an Ontario model had been used in Quebec, the province could have increased its employment and economic impact by a factor of 10 over its 2002 performance.Nevertheless, the statistics show, fairly clearly, a dramatically negativeimpact on jobs, the economy, and on revenue to the Quebec Government.

The VLTs at racetracks in Quebec contributed a mere 22% of total commissions to horseracing in the decade before the bankruptcy of Attraction Hippiques. Revenue for Loto-Quebec also dropped from $1.062.7 Billion in 2009 to $1.001.1 Billion in 2011. One of the main root causes of this $61.6 Million dollar decline was the removal of VLT’s from racetracks and the closure of Off-Track Betting (OTB) facilities, which also housed VLTs.

Obviously, with machines in Ontario primarily located at Racetracks, their removal will have a much more acute impact. The horseracing and breeding industry’s 20% share of slot revenue makes up 61.5% of the total purses, encouraging the recent development in the industry. However, this structure ensures that it will be Ontario’s horseracing industry that will withstand the worst of the impacts should OLG hastily remove itself from these successful partnerships.

The Quebec Jockey Club is encouraged that there has since been a small resurgence in Quebec horseracing, but we are very cautious during these relatively early stages, especially when the foundation and example that we look to in Ontario is seemingly crumbling under very similar pressures. We in Quebec urge our Ontario colleagues to let common sense and truly sound economic thinking prevail. I call on political leaders in Ontario to truly understand the favourable impact on the economy and on society that the current agreementhas had. Continuing with the current agreements, or developing a similar program with enhancements to incorporate the current realities in the gaming industry, could ensure that positive impacts continue to be generated. It takes great leaders and courage to recognize that an error has been made, and for the good of Ontario, recognize that it needs to be changed. Every day we here in Quebec’s horseracing industry live the negative consequences of past actions and urge Ontario’s decision makers to reconsider this flawed plan to end the Slots at Racetracks Program. Please don’t replicate the carnage of jobs and destruction of economic value we have experienced in Quebec. Find a way to work together with the horseracing industry to establish a comprehensive and collaborative plan. It’s not too late!

Tony Infilise on behalf of the Quebec Jockey Club

2004 / 2010 / Difference in %
Racing days / 325 / 10 / -96.92%
# of races / 3627 / 100 / -97.24%
gross bet / 167,642,221 $ / 19,185,629 $ / -88.56%
Purses / 16,492,475 $ / 500,000 $ / -96.97%
# of horses / 2,739 / 408 / -85.10%
# of mares / 1481 / 72 / -95.14%
# of stallions / 106 / 16 / -84.91%
# of foals / 895 / 289 / -67.71%
# of licenses RACJ / 7117 / 1453 / -79.58%
CJQ's estimate of FTE / 3000 / 400 / -86.67%