Kentucky's horse industry in dire trouble, legislators told

FRANKFORT — Kentucky lawmakers got a peek inside the checkbook of racehorse owners and small Thoroughbred breeders Wednesday. The numbers were bleak.

Rep. Susan Westrom, D-Lexington, said she arranged the hearing as background education, particularly for freshman legislators, on the current financial situation in the Thoroughbred breeding and racing industry.

"It's a different day from what it was in 2006," Westrom said. "We truly are facing a crisis."

Robert Feenick, senior vice president at PBI Bank in Lexington, told the House Agriculture and Small Business Committee that Kentucky's position as the top state for stallions and breeding has been eroding as other states have beefed up purses and breeders' incentives with money from racetrack casinos.

According to figures compiled by The Jockey Club, Kentucky has maintained and even increased its percentage of mares bred in recent years as the breeding industry contracted during the economic downturn, but breeders are worried that the tide is about to change as major breeding states like New York jump in with millions from slots.

Rep. Royce Adams, D-Dry Ridge, asked whether a constitutional amendment to allow expanded gambling is the only thing that could turn Kentucky around.

"From my perspective, a healthy breeding business has to be hooked to a healthy racing environment. Otherwise you leave yourselves exposed," Feenick said. Breeders incentives, such as those currently funded with the sales tax on stud fees, won't be enough, he said. "I don't think you're going to be able to support it and compete with the likes of New York."

Gov. Steve Beshear is campaigning for an amendment to be placed on the ballot in November to allow casino gambling. Beshear's bill has not been introduced yet.

Westrom said this was the first chance she has had to make the horse industry's case for allowing casino gambling at tracks. Westrom said she was alarmed to hear recently from Frank Taylor at Taylor Made Farms, a major breeding operation in Jessamine County, that the farm has gone from 700 mares boarded in 2009 to 300 today and just laid off 10 workers.

John Greely of Wintergreen Stallion Station in Midway said that is happening on a different scale all across the Bluegrass as mares either left production or left the country during the economic downturn, or went to other states for more lucrative pastures, breeding sheds and racing purses.

Greely said that in the past three years Wintergreen has lost 35 percent of its mares, many going to other states.

Dr. Eric Peterson, an equine veterinarian in Lexington, said one farm his firm works with that boarded 90 mares shipped out 30 in the past month. "It's real. It's happening," Peterson said. "We just want a level playing field. Please consider expanded gambling."

David England, who until this winter trained a string of about 20 horses at Turfway Park in Florence, walked legislators through the numbers to explain why he has given up his training license for now.

Racehorse owners at the bottom-level claiming races could either compete for $6,000 in Kentucky or run in the same kind of race but against weaker horses in Indiana for $10,000, in West Virginia for $11,000, or Pennsylvania for $17,000, he said. For horses bred in those states, the money is even higher.

To break even on the costs of training alone, a horse would have to win six races in Kentucky or three in Indiana, he said.

"I have owners who will not let me race their horses in Kentucky," England said. The constant drive to other states just got to be too much for him.

Rep. David Osborne, R-Prospect, said he will likely be the owner of the top Indiana-bred racehorse for the third year in a row, something he said he takes no pride in.

But, Osborne said, the success of his horse, Unreachable Star, has kept the rest of the Kentucky-based stable afloat.

The new threat to Kentucky tracks, trainers, racehorse owners and breeders is New York, which opened a hugely successful casino at Aqueduct last fall.

That casino will pour $40 million to $80 million into breeders' incentives next year, he said.

"There are still lots of 'deniers,' people who deny that our breeding industry is in trouble," Osborne said. But with breeders looking at an average of $10,000 available per mare in New York versus $1,000 per mare in Kentucky, movement is inevitable, he said.

Churchill Downs racetrack president Kevin Flanery said after the hearing that the time to act is now, when Kentucky horsemen are still trying to hang on rather than moving their businesses and their families to other states.

"Time is running out," Flanery said. Two years ago, Churchill closed its trackside training facility to winter training because the number of horses stabling there had dwindled from 425 in 2006 to 70 in 2010. And last year the track dropped Wednesday racing in the spring meet after the Kentucky Derby because there just weren't enough horses to fill the races.

"That's a 20 percent reduction, a 20 percent pay cut for everybody," Flanery said. "This is about an entire economy. It's real people, a real industry, and it's leaving."

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