Emerald Downs boss adds context to concerns about fees

After reading Friday’s story from Ron Flatter concerning Emerald Downs, I wanted to add some context.

His story questions the timing of the Seattle Times story and the lack of quotes from the Horseracing Integrity and Safety Authority, but I will point out this was a local story, and this is the time our legislature is in session.

Flatter: Getting cynical about Gulfstream & Emerald Downs.

HISA fees affect not just the racetrack but also state racing commissions along with horse owners and industry workers. Dropping out of HISA is not a viable option as the loss of interstate wagering would adversely affect our industry workers even more than the increase in fees.

So why the panic now? The change in assessment methods also eliminates a rule that fees could not exceed 10% of a track’s purses. State commissions are also having to raise fees to offset increased costs, while as we all know, handle in the country has been on a decline.

Horse Racing Nation and other industry news organizations need only to look at the Federal Trade Commission orders to find out what has happened. The original method, which included the 10% cap, was approved by the FTC.

The FTC quoted HISA in its order, saying, “The authority was not in favor of simply treating all racing starts in a given state uniformly as a ‘covered racing start,’ because this would result in an inequitable allocation of costs. For example, if all starts in all races at all tracks were treated equally, West Virginia would have a larger proportionate share than Kentucky, even though the purses and entry fees generated by the Kentucky races dwarf those generated by West Virginia races.”

HISA contended that using only projected starts would have been unfaithful to the Horseracing Integrity and Safety Act, whose “requirements for proportionality among states, equitable allocation among covered persons within each state and the requirement imposed on the authority to establish by rule ‘a formula or methodology for determining assessments’ demonstrate that basing allocations on starts alone would not meet the full requirements of the act.”

A final component of the proposed interstate methodology is a cap on any state’s amount so that no state needs to pay more than 10% of its total purse. The authority justified this cap in the notice as necessary to “avoid an inequitable or skewed allocation.”

So fast forward to the change in assessment method, which doesn’t avoid an inequitable or skewed allocation. The FTC received over 30 comments, and they were all against the rule change. The FTC acknowledged those comments in its order, saying, “The commission acknowledges the concerns raised by several commenters. The new assessment methodology may adversely affect some segments of the horse-racing industry. Indeed, tracks and states without high-stakes races may see a significant increase in the fees that they must pay.

“We expect that the authority will continue to review its assessment methodology on a regular basis, and if the potential adverse consequences described in the comments come to bear, we trust that the authority will consider whether further modification to its interstate methodology is warranted.”

So here we are. Emerald Downs is not alone. We have seen smaller tracks without large simulcasting revenue already make the decision to not sell their signal. The more tracks that decide this, the more we have races that are not covered by HISA rules, which ironically goes against the intended purpose of HISA to bring uniformity to every racetrack.

We hope over the next few months there can be discussions and solutions for tracks and states that are adversely affected by the new methodology. Our industry must work together to ensure that industry workers can make a living and fans can enjoy a day of live racing for many years to come.

Phil Ziegler is the president of Emerald Downs in Auburn, Wash.