Can New York Horsemen Afford to Go to Saratoga This Year?

May 14, 2020

The lockdown of major US race tracks appears to be easing, albeit minus in-person spectators. Churchill Downs and Santa Anita open their spring meets this weekend; Golden Gate in northern California is already running; Canterbury and other tracks in mid-America are planning openings. On the East Coast, though, things are moving a bit more slowly. Monmouth Park has announced plans to start racing on the July 4th weekend, but neither the Maryland Jockey Club, which operates Laurel and Pimlico, nor the New York Racing Association (NYRA) have been able to convince their state regulators to give them firm opening dates.

In New York, training continues on the Belmont backstretch, with strong health and safety protocols in place. NYRA has submitted reopening plans to the state, hoping to start racing at Belmont before the end of May, but the famously racing-unfriendly Governor Andrew Cuomo appears in no hurry to move those plans to the top of his inbox. And the future of this year’s Saratoga meet remains entirely up in the air.

This past weekend, broadcaster Mike Francesa caused a Twitter storm by announcing that the Saratoga meet had been cancelled, only to be met by an immediate denial from NYRA public relations chief Pat McKenna, who posted that “NYRA is seeking to resume live racing at Belmont Park in the absence of fans and we have prepared operating plans that follow the same model for Saratoga should that be necessary.” But, with Saratoga’s scheduled opening day of July 16 barely two months away, NYRA is sending decidedly mixed signals. Ticket sales are on hold, reflecting the likelihood of racing without spectators, if, indeed, there’s racing at all. And the Saratoga calendar on the NYRA website is blank for July and August.

NYRA management wants to run a Saratoga meet of some kind. Last year’s all-sources handle for the 39-day meet (one race day was lost to the weather) was $705 million, an average of better than $18 million a day. And, unusually for racing in the US, that number has steadily increased in recent years, since NYRA went to a 40-day Saratoga meet in 2010. Over the past nine years, total Saratoga handle increased 28%. Even adjusting for inflation, that’s a 9% increase.

It is not surprising then that Saratoga, along with a few other bright spots, like Churchill’s Oaks-Derby weekend and the boutique meets at Keeneland, Del Mar and Kentucky Downs, is a part of the racing calendar that no one would like to cancel. But, if the meet has to go ahead without spectators and without the purse supplements that flow from the currently-closed Resorts World casino at Aqueduct, can New York’s long-suffering owners and trainers actually afford to go there?

While it’s true that Saratoga purses are the highest in the country (except for the very short Kentucky Downs meet), those purses weren’t enough even last year to attract the usual complement of out-of-town horsemen, and the racing office was scrambling to fill cards from early in the meet. Hard to imagine that $90,000 for maiden specials and $98,000 for an N3X allowance wouldn’t be a sufficient draw, but that’s what happened. And the competition isn’t getting any easier. The condition book for the Churchill Downs meet this year, for example, has purses of $79,000 for maiden specials and $83,000 for an N2X allowance, pretty close to what Saratoga was offering last year.

The new Churchill condition book does show a small purse decrease from last year, but only a small one – about $6,000 for those allowances, only $2,000 or so for the bread-and-butter claiming races. If Saratoga does run this year, could it even match Churchill’s figures?

There are two major elements in the Saratoga purse structure that are problematic this year: the lack of casino money and the lack of on-track betting. Casino money is easy to account for; in normal times, Resorts World accounts for 38% of the NYRA purse account. If that money doesn’t come back in time for the Saratoga meet this summer, and if it can’t be replaced from other sources, those $90,000 maiden races would be at $55,000, back where they were in 2010 before the slot-machine dollars started flowing. And all other purses would take a similar hit.

The difference in purse sizes made by on-track betting is a little trickier to assess. Unlike most tracks, Saratoga still earns a significant portion of its handle from on-track betting (including online betting via the in-house NYRABets account). Last year at Saratoga, $146.6 million of the total $705 million handle, or 20.8%, was bet on-track or on NYRABets. That compares with a national average of something less than 10%. And on-track betting is way more lucrative than off-track. NYRA gets, on average, 20% of everything that’s bet on-track (that 20% is the blended “takeout” over all the different kinds of bets that are offered). In contrast, somewhere between 6% and 8% of what’s bet off-track comes back to NYRA as host fees; the rest goes to ADW operators like Churchill’s Twin Spires or TVG, who actually take the bets, and in rebates to the big players who wouldn’t bet a dollar if they had to play into a real 20% takeout.

The cash from the takeout and host fees is then divided up among the state, NYRA and the purse account. Unlike other horsemen’s organizations, the New York Thoroughbred Horsemen’s Association (NYTHA) doesn’t have a statutory right to bargain with the track, the result of the Jockey Club’s lobbying influence in Washington half a century ago. But, in practice, NYRA needs the horsemen in order to put on the show, so purses have been maintained at a high enough level to keep racing in New York functioning, if not at a level to allow most owners to break even.

If Saratoga runs without spectators, it will probably get only a small fraction – through its NYRABets accounts – of that $146.6 million it took in on-track last year. The rest is likely to come from other ADWs. Because of the difference between the takeout rate and host fees, for every on-track dollar of on-track betting that NYRA loses, it will have to pull in about $2.50 to $3 in new off-track betting. To replace the entire lost on-track handle, NYRA would need something like $350 to $400 million in new off-track betting, over and above the $558 million that it already generated off-track last year.

Possible? Yes; the last months have shown that there’s an appetite for televised racing, and Saratoga would certainly be the star attraction of the summer season. But, realistically, even without competition from other sports, could NYRA actually generate a 65% increase in off-track betting, above last year’s already high level. Doubtful.

So, let’s say, for the sake of argument, that a Saratoga meet could hit last year’s handle total – $705 million – but that it would all come from off-track bets. That would reduce NYRA’s take from betting by about $18 million, or, very roughly, by about a quarter of the total retained by NYRA last year. Applying that to the 61% of purses that are still bankrolled by the takeout, that’s another 15% hit to the purse account. So, our $90,000 maiden, already reduced to $55,000 by the absence of slot money, now drops to somewhere around $42,000.

Would any horse owners or trainers head to Saratoga for a condition book that featured $42,000 maiden specials, $50,000 N2X allowances and $25,000 claimers that had purses no higher than the claiming price? Given the costs of owning and training in New York, the answer has to be no.

So if there is to be a Saratoga meet this year, and if it is to be without spectators and slot-machine money, then NYRA will have to do what Churchill Downs has apparently done with its new condition book: use its cash reserves to keep racing going while it hopes for an eventual recovery. The Churchill condition book does have some small purse decreases from the equivalent period last year – a $6,000 drop for maiden specials and allowances, a $1,000 or $2,000 decrease for claiming races – but nothing like the adjustments that NYRA would have to make if it does not supplement the purses. But can NYRA do this? Churchill has the advantage of having plenty of cash; it drew down a $700 million loan facility at the beginning of this year and doesn’t have to pay the money back until 2024. Though NYRA no longer publishes its financial statements, I’ll make an educated guess that it has nowhere near the financial security net of Churchill. For the still-to-be-approved Belmont meet, NYRA plans to cut stakes purses by 45-50%, maidens and allowances by 15-20% and claiming races by 5%. And even that requires using a large piece of the “purse cushion,” money that typically accumulates over the summer and is then used primarily to fund purses at the Belmont fall meet. How much of a cushion would be left at the end of a spectator-less Belmont meet?

NYRA CEO Dave O’Rourke came in as a finance guy in 2008 and understands the numbers as well as anyone. Can he find the money to make a spectator-less Saratoga meet doable? We hope he can!

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