Racing profits don’t tell real story
Despite recent gains, the industry cannot be sustained under the Liberals’ current policy,
PRESS coverage of the Tasmanian racing industry recently has demonstrated the wide gap between the views of the grassroots participants and those responsible for developing the policies for their future in a sustainable industry.
Joe O’Neill, a major horse racing syndicator, has said his reasons for reducing his involvement in Tasmania include the poor level of stakes on offer relative to other states.
Scott Brunton, the state’s leading thoroughbred trainer, indicated he was considering moving to South Australia because of the poor state of racetracks, particularly at Elwick.
In 2016 the major racing clubs incorporated a new organisation, Racing Clubs Tasmania (RCT), the first cross-code body in Australia.
RCT’s objective is to get a new business model for the funding of racing in this state.
Last Friday the minister for racing announced that Tasracing had made a profit of $371,000 in 2016-17 and this would facilitate a stakes increase across all codes of 4 per cent in 2017-18.
This result follows a profit of $180,000, and he said this was evidence that Tasracing was now operating on a sustainable financial basis. However, to achieve these very modest profits the minister approved a 13 per cent cut to stakes in 2015 of $3 million. The industry has good reason to be bitter about this situation given that before the 2014 election the Liberal Party promised it would boost stakes across all three racing codes as a priority. In doing so it acknowledged publicly what everyone in the industry knows, stakes money is the key to driving growth in the industry.
To cut stakes by 13 per cent the minister amended a funding deed put in place in 2009 by the then government of Tasmania to obtain the industry’s agreement to the sale of TOTE Tasmania. The key commitment in this document was that stakes were to be maintained in real terms for 20 years at the level paid out in the 2008-09 financial year. Had this undertaking been adhered to the racing industry would have received to the end of 2015-16 an additional $5 million on top of the $3 million cut made by the minister.
The current aspirational objective in the Tasracing corporate plan is to increase stakes by 4 per cent annually, however this is comprised of an inflation component of up to 2 per cent (which only maintains their now real value) and up to a further 2 per cent based on Tasracing’s financial performance which, as noted, is only marginally profitable.
RCT wants a commitment from the next government to restore to the funding deed the commitment to maintain the real value of stakes and in a way that removes future exposure of the industry to sovereign risk.
Another promise made to the racing industry removed by the current government is that funding of $43 million was to be provided for future capital investment across all three codes. The task of funding this shortfall is now left to Tasracing, which lacks the financial capacity to service any additional debt. For example, Tasracing can only upgrade Elwick from internally generated funds which, at the end of 2015-16, totalled some $12 million.
This is barely enough to refurbish the main track let alone the two tracks to a status befitting a capital city. This situation raises the question of how any significant future capital expenditure for tracks and facilities for all codes will be funded.
Another outcome from cutting stakes is that local breeding is not producing sufficient foals to maintain the number of horses needed each racing season; the gap is 50 per cent for harness and 20 per cent for thoroughbreds. The greyhound code is little better off with restrictions now on the number of pups produced annually. The inevitable outcome of the Government ignoring this situation is that smaller and poorer quality race fields will ultimately impact on Tasracing’s revenue from wagering operators.
RCT wants a new business model to restore the industry to a growth path without seeking access to additional funding from the state budget. In this context in 2000 the then government removed all wagering taxation from TOTE Tasmania on the basis that the revenue foregone by the state budget would flow directly to the racing industry as stakes and increase its impact on the state’s economy. Tatts continues to enjoy this taxfree status in Tasmania even though the company pays wagering taxation in Queensland and makes a direct payment in lieu of this to the industry in South Australia. RCT estimates this tax-free status benefits interstate shareholders by some $4 million a year at the expense of Tasmanian racing.
For this reason RCT considers that a point-ofconsumption tax, as now applies in South Australia and soon to be introduced into Western Australia, should be introduced on all wagering originated out of Tasmania. RCT understands that if the merger of Tatts with Tabcorp takes place, Tabcorp has indicated publicly it is prepared to pay a point-ofconsumption tax.
Alternatively an equivalent amount should be recovered by reintroducing a wagering tax. There is no justification to continue to improve the financial return to interstate shareholders while the local
racing industry struggles to survive.
RCT also considers that Tasracing’s cost of running the racing industry at some $20 million a year over and above stakes is excessive and needs to be reviewed. Further, given its poor financial performance and lack of capacity to fund capital works its continued operation as a state-owned enterprise is questionable.
Discussions with the Labor Party indicate it understands the reasons for the poor outlook for the future of the racing industry and has proposed policies to address the key issues raised above. In contrast the Liberal Party continues to ask industry participants to accept that because Tasracing has made two modest profits off the back of cutting stakes by 13 per cent that the industry is now on a sustainable footing going forward. The Liberal Party should reconsider its position and commit to policies that will provide real sustainability for the racing industry. Andrew Scanlon is the chairman of Racing Clubs Tasmania.