Economic Impact of the Horse Industry

As of June 18, 2012, I have further revised the presentation on the "Economic Impact of the Ontario Race Horse Industry" for presentation to the Ontario government Transition Committee. A PDF version of the presentation is located at the bottom of this page. The presentation updates Thoroughbred and Standardbred industry data. Send me an e-mail if you have any specific questions or comments.

The Revenue Sharing agreement between the Ontario government, race track operators, horse owners, and municipalities is one of the success stories of the Ontario government. Unfortunately, the government doesn’t know the industry well enough to understand the great success it has been and the huge impact on the economy of Ontario as well as the local economy of Wellington County. It is so successful that it is a model that should be replicated to other programs. This program allows the government to take 75% of the net revenue from slots and invest it as they see fit while the remaining 25% is placed in the hands of the municipalities (5%), track owners (10%), and horse owners (10%). Sharing with the community in this way ensures local investment and maximizes the local impact where the gross revenue was generated.

It is easy to tell that this government doesn’t understand the industry by looking at the OLG Annual Report of 2010. On page 7, it shows a donut chart of the Economic Impact of OLG Revenues. The Revenue Sharing agreement is completely absent from the illustration. However, on page 41 it states that:

“Payments to racetracks and horse people are a major economic stimulus for the agriculture industry in Ontario, with spin-off benefit for workers who stable and provide care for horses and farmers who supply feed.”

No attempt to quantify these spin-offs are made.

The problem is, no one has quantified the impact of the $334 until I did and presented this on May 29, 2012. The Revenue Sharing Program as stated in the OLG Annual report 2010, on page 43, paid $169,270,000 to tracks and $164,574,000 to horse people (for a total of $334 M).

On slide 6 of my presentation, I show the Thoroughbred industry and the number of horses in each phase of the industry which adds up to the total Thoroughbreds in the industry. From 1999-2009, the increase in number of Thoroughbred horses in the industry (height of the graph) is 3,361 horses with an increase of 26,971 horse years (area under the curve) from the inception of the Slot Revenue Sharing Agreement.

Slide 7 shows the Standardbred industry and the number of horses in each phase of the industry which adds up to the total standardbreds in the industry. From 1999-2009, the increase in number of Standardbred horses in the industry (height of the graph) is 9,621 horses with an increase of 85,419 horse years (area under the curve) from the inception of the Slot Revenue Sharing Agreement.

I will develop a similar slide for the quarter horse industry once the data is available.

Various sources estimate the cost of keeping horses in the standardbred industry from $20,000 to 40,000 per year (annual expenditures) with an additional investment in fixed assets of $200,000 per horse. Therefore, the infusion of $169,000,000 from the Revenue Sharing agreement into purses for the horsemen resulted in an additional 102,000 horse years (Standardbred + Thoroughbred + Quarter Horse estimated), or an economic impact of between $2.7 and $5.4 billion.

On slide 14, I estimate that there is a minimum direct economic impact for year 2010 of $272 to 544 M of economic activity from the horse owners share of the Slot Revenue sharing agreement ($164.6 M).

The Revenue Sharing agreement added $164.6 M in purses to the racing industry which added 13,600 horses (of the 34,0000) to the industry. This translates to:

  • Ø102,000 horse years as a result of the infusion of funds from 1996-2009;

  • Ø20,000 jobs annually, or 200,000 person years of employment in the 10 year period.

In addition, on slide 15, I estimate that the horse owners share of the revenue sharing agreement resulted in between $1,079 to 2,631 M in direct and indirect economic activity.

Slide 16 shows the gross wageing and the provincial share of $50M. What is not included is:

- the economic impact; or

- credited to the industry is the impact from the $169.3 M that was shared with the racetracks; or

- the $6.6 B in gross OLG revenue that Slots at Racetracks and OLG Casinos generated.

What is clear to me is that:

1. This program is a very successful government program.

2. The economic impact of the program is unrecognized outside of the horse industry.

3. Government has lost all resources in which to measure the impact of this and other programs.

Before any changes occur to this program and as Drummond recommended, there needs to be "a re-evaluation on a value for money basis". This will require:

- a proper study of the economic impact of this program;

- survey of the 17 racetracks which can be compared to the 1994 Study of Ontario racetracks;

- proper consultation with the industry which directs the future direction of the Revenue Sharing Agreement.