Panel sessions from the 2003 Joint Annual
Meeting of HTA, Thoroughbred Racing
Associations and Racetracks of Canada
held in Hollywood, Florida, March 13-14, 2003

Racing Today and Tomorrow, As Seen By:
Regulators, Legislators and Administrators

Mr. Stan Bergstein: While everyone else in North American racing management talks of slots and alternative gaming, Ron Barbaro is the man at the top of the industry in Ontario, where it has had a huge impact on the success of racing. He is chairman and CEO of the Ontario Lottery & Gaming Corporation. Sandra Lang is the deputy minister of the Ministry of Consumer & Business Services in the province of Ontario, and has impressed the racing industry by her understanding of racing's problems and her artistry in matching its needs with the practicalities of government. Fred Noe is the Executive Vice President of the United States Trotting Association, the unique record-keeping organization that also administers security, publicity, and promotion of the sport of harness racing. Bill Oberle is the speaker pro tem of the Delaware House of Representatives. He also is a horse owner and breeder, that rarest delight of an influential legislator who actually knows racing. And he played a huge role in the introduction of slots in Delaware, a development that transformed two harness tracks there into organizations that went from $20,000 a night in purses to $120,000 or $130,000 a night, and revitalized Delaware Park as a major racing venue. He currently has another interesting project in the works, which we will ask him about. Stanley Sadinsky is a professor of law at Queens University and chairman of the Ontario Racing Commission. He was honored last year by his peers in the ARCI, and he will be honored again tomorrow night at the Diplomat Country Club for his aggressive rulings on wrongdoings in Ontario, along with Mr. Oberle who will be honored for his contributions to racing. 

I am going to start with Mr. Barbaro. Slots at racetracks in Ontario are the envy of North America, and of the North American racing world and you are the man who runs them. Tell us about the Ontario experience and your views on the phenomenon. 

Mr. Ron Barbaro: It is nice to be the envy, but at the same time, it's many, many good people all doing good work all at the same time, coming together, which is probably where it all started. To get the racetrack industry to agree on a formula that would work and share, and to have a government that was willing to pay attention, there are bouquets all around. 

I couldn't have just pulled it off, used what was given to me; I negotiated with the municipalities, which I guess you would call the hosts, because I think in different states it's the cities, not municipalities. I got involved with that negotiation, where the government, the minister had decided three percent for the host community. That's the flaw I find in all the formulas I see coming out of the different states that are lobbying for or trying to obtain. You must take care of the local host community, because they are the ones that are going to have the harassment with the enormous traffic flows, all the things that happen on a site, and if they are not taken care of you are going to have picketers and protests. But if you take care of the local government where it comes first, that's very important. They had offered three percent, but I talked the government into five, because I thought the formula would work. The racetrack formula was established at 10 and 10 percent. 

Now that formula could be under question at times. You know that the racetrack owners take most of the responsibility. I think maybe 12 percent and eight percent, or something like that may have been the wish of most, but it ended up 10 and 10 percent works quite well. And the municipalities to date, the host municipalities, host cities, have received, since we started the program in December 1998, over $150 million among the 15 sites. 

The racetrack owners have received $418 million, the purses; the horse people have received $418 million for a total of $900 million and change, $980 million or something to that effect. This month we will go past the billion-dollar mark shared, and I don't think there's a better government program than that. The government probably looks at it sometimes and says, "We should have taken more, we should have given more," but that is an overview, and the handle has gone up. I was reading some numbers: two years before the slots, the handle had declined across the country 12.4 percent. At the end of 2000, with 11 tracks, the number had stabilized a little bit in Ontario to 0.8 percent, less than one percent; and my calculators tell me that with 15 tracks in 2001, the handle grew by almost eight percent. 

So it is working from that standpoint, and that is why, we have been called by everybody around the world to try and figure out how to make it happen for them. But unless you have a lot of tracks, there were 18 facilities and to have a centralized management there are many economies of scale. With the government running, controlling the marketing, so buses aren't running into people here and there, there are tracks everywhere competing with each other and fortunately in Ontario, a man who is as knowledgeable as anyone in this room, the racetrack industry has all the tools to be very competitive in the entertainment business. You can phone in.  You have your off-track. You have all those wonderful things that, I'm sure Dave Willmot will emphasize if you ask him, are available to you and what we have done is just taken it to another level and brought tons of people to the locations to use some of the facilities on-site. That is very important to the tracks. So on balance, if you have two or three tracks in a state, I would take the money and run.  

I'd put a percentage, say take 25 percent off the top and let the industry run itself and build and give the track person an opportunity to make a living, as opposed to some of these things I hear coming out that are just enormous. You know, somebody's jealous about Delaware. If I made so much money, we are not going to let that happen. Well, I think the government, if you have two or three tracks, let it happen from that standpoint. I would support that. 

Mr. Bergstein: Miss Lang, it's rare to find a civil servant in government who has won the respect and admiration you have for your role as an administrator who has worked diligently with the racing industry. Can you give us your views on the relationship between racing and government? 

Ms. Sandra Lang: I think the government in Ontario has two major interests in the horse racing industry. One is to ensure there is an appropriate kind of regulatory regime, that laws are in place and the framework is there to make sure the system continues to have integrity. That is very critical. But the other interest is the economic advantage and development that is incurred as a result of a significant investment in the industry. Ron talked about slots. I think the revenue coming from slots has been strategically developed in a way, that it is reinvested, so that the industry itself will benefit and that there will be continued reinvestment. 

We have seen, I think, a fair amount of growth. We have been able to sustain significant investment in the core agricultural base. We have seen incredible improvements in terms of the capital infrastructure, the reinvestment in the venues through the racetracks. We have seen the growth of jobs. So the province is enjoying both the benefit of having probably one of the best regulatory regimes in the world. And at the same time is enjoying tremendous economic growth and benefit as a result of the way in which the government has used its tax levers, the revenue from slots, and the commitment of the horse racing industry, which has come together. It is somewhat unique the way the horse racing industry in Ontario has come together to work collaboratively and try to shape the direction where they are all engaged in thinking about how they can make the industry the best it can be. From a government perspective, it's win-win. 

Mr. Bergstein: Fred, it's 10 years ago this month, almost this week, that you left private industry as the chief executive of a major international company to take over the USTA. What lessons and reactions of a decade of herding an organization serving 25,000 horsemen and the management of racetracks can you give us? 

Mr. Fred Noe: Before I answer that, I really am happy to be on this panel, because as I look down here, I see three Ontario representatives, I see another representative from Delaware, and I sort of represent the have-nots in this forum. Obviously these people are talking about how wonderful wealth is, and how well it is divided up among all the various stakeholders. In my position at the USTA, I get involved a lot more with the have-nots. As I look around at this room, I see a lot of tracks, representing various jurisdictions and states that are looking for the wisdom these people are expressing, that brought about the slots and gaming support racing is getting. 

When you described the initial panel here this morning as “The Hunt for Red October” that really could be expanded to that effort as well. Many states that are involved with harness racing do not have the gambling support that representatives on this panel provide. I happen to be located in Ohio, and maybe it is because of my experience there, but it is an agonizing process to go through to try to get where Ontario apparently is, listening to the previous two speakers. When you live in Ohio, it is comparable to a marriage with the devil if you even think about slots and other gaming devices. You are just selling your whole soul and life down the river. I'm always an admirer of what Ontario does, and it doesn't seem they are related to the devil or nor have they brought demise and misery to the citizens of Ontario, or of Delaware. So I just don't understand how you can live in one state and be surrounded by doom and gloom and then listen to what can happen in other states. That is not much help. It's just a frustration coming out.

Mr. Bergstein: That is why we have this assembled wisdom from Ontario here. 

Mr. Noe: I wish I were a part of this, because I'm so close to it, and still so far away. At the USTA, there is another kind of frustration to some degree that I learned pretty fast in the job, and ten years have not lessened it. The USTA in general has a lot of responsibility, but very little authority. A lot of people in harness racing contact me constantly, often daily, by e-mail and demand that we take action somewhere because this or that owner or trainer is still functioning. They threaten me with almost bodily harm that I can just sit there and tolerate it, as if I have no feeling as to what goes on in the industry. Obviously that is far from the truth. I do have somewhat of a bully pulpit, and although I'm preaching to the choir here, I don't have the authority to step into any jurisdiction or state, and just exclude somebody from participating in the sport, although often I wish I could. 

As stated, USTA is a statistical and data-gathering organization, but in the old days, before there were racing commissions, we had responsibilities way beyond that and it has continued to live on in people. We do have the responsibility for the integrity of the sport, and we feel very strongly about that responsibility, but we do not have the authority to be the final arbiter in who participates and who doesn't. 

Mr. Bergstein: That was going to be my next question, about the relationships you have discovered or found with state racing commissions. 

Mr. Noe: I learned early on that not having the authority, the next best thing is to get in bed with these people. I don't want that to sound too sarcastic, but I have made a strong effort to work closely with racing commissions, and I found that to be a very gratifying experience. The Ontario Racing Commission and Mr. Sadinsky are an example. I've learned to admire a lot of these people, and I find that I have created an avenue of contact that I have used frequently and constantly in my job in contacting the various commissions and the executive directors, when I'm confronted with a problem. We also work closely with an organization that we call Standardbred Investigative Services that the thoroughbreds know as TRPB. It's the same people. There is an integrity hotline. There was criticism from the industry that we are creating snitches and rats and those kinds of things, but the hotline is an ongoing process. We get calls and they all are passed on to TRPB/SIS and the individual racing commissions, depending on the state the call comes from. I found there is a real necessity to be very close to the regulators throughout North America. 

Mr. Bergstein: One of the objectives of this whole symposium is trying to stress the idea that thoroughbred and harness racing have common goals and problems. The creation of SIS, Standardbred Investigative Services, and the Thoroughbred Racing Protective Bureau, is an example of how well collaboration can work. Obviously wrongdoers don't pay much attention to state boundaries or to any other boundaries, and there are common problems, whether you are talking about running horses or trotting and pacing horses. The formula and the pattern of success is there in TRPB and SIS. 

Bill Oberle, your views as a unique combination of small breeder and big time legislator, are very interesting. Could you give us some insight into how you crafted the legislation that led to slots in Delaware, and how you specifically tailored it so racing would be the primary beneficiary, along with the state? 

Mr. Bill Oberle: I want to get a copy of the tape to take back to my colleagues so they know I'm a big-time legislator. What drove the Delaware model was more a sense of history and the importance of the industry in the state of Delaware. Also, open space and farm preservation issues were a big part of that equation. There was a sense, Delaware, believe it or not, although it is known as the chemical and banking center of the country, is really an agribusiness state. That is the largest industry in the state of Delaware and the horse industry is a large part of that. The term "racino" wasn't known when we first got into this issue, but it seemed like a perfect marriage to save the industry. It was an eight year struggle to try to convince my colleagues and two governors that it was the right thing to undertake to save the industry; but obviously we were successful in doing just that. 

One of things that the Delaware model has in place and it's important for any jurisdiction that is interested in preserving the race industry, is to make sure the tail didn't wag the dog. Contained within the Delaware legislation was a provision that the licensees could only maintain their slot operations so long as they maintain a minimum number of days of racing at each facility, and that is important if anyone is looking to move in that direction. We wanted to make sure that the race industry was the driver, was the predominant issue before the general assembly and that is what was achieved. 

Just to give you a slight overview, the state takes 35 percent and we take 35 percent of the keep right off the top. That amounted, in a small jurisdiction like Delaware, with 5,400 machines, in a fiscal year 2002, to $200 million to the general fund of the state. Twelve percent of the take goes towards the purse structure, and in 2003 that was $61 million.  So it has been successful. We have come upon some precarious times right now. We are surrounded by the states of Maryland and Pennsylvania, who are looking at a similar situation, racino-type gaming. And last year the general assembly not only shot themselves in one foot, but blew both feet off by entertaining the most restrictive smoking ban in the country. It has impacted slots play; we are down about 25 percent as a result, so when we return to session on Tuesday the 18th, the first item on the agenda is House Bill 15, which would provide some relief to bars, taverns and the racino industry. 

Mr. Bergstein: The issue of smoking will be addressed by other panels subsequently; it has turned out to be a very serious issue. As far as the priorities of putting racing first, with the slots, I see Bob Farinella sitting in the audience, and of course that was the premise in Iowa, when slots were introduced there. Mr. Farinella has carried through on that by having his operation known as Prairie Meadows Racetrack and Casino and not the other way around, which is significant. I realize that your bill for relief on smoking may be your first priority, but I understand sports betting is also one of your priorities. 

Mr. Oberle: We are currently looking at the issue of sports betting. Delaware is one of the few states that is grand-fathered in. Actually sports betting has a checkered past in Delaware. Our lottery office back in the early 80's undertook a sports gaming card, but it was a bust because they didn't know how to set the point spreads. It almost bankrupted the lottery. Actually it was a blessing in disguise, because Delaware was in fact grand-fathered, and we are in a due diligence phase right now. We have a committee that was created to look at that. It's quite interesting because we have even gone back and looked at the Congressional Record, because there was some question as to what extent we could participate in sports gaming. Even a conservative reading of the Congressional Record would suggest it is wide open, at least in terms of what we can do, in Delaware. 

As an aside, it's kind of curious, the National Football League has sent two attorneys, and they have been very active in Delaware. They have been in a stealth mode trying to undermine our efforts, and their contention is that sports gaming would degrade the image of the professional athletes in the minds of the youth. What is even more curious—I looked at some statistics of those athletes, particularly in the NFL, who have experienced troubles, both in the use of illegal substances and troubles with the law—is, at last reading, about 29 percent of the NFL players have been either indicted or accused of felonies. So it seems to me those two attorneys could better serve focusing more on the owners to clamp down on the players. 

We are very hopeful. There is a lot of interest within Delaware about pursuing this, and quite honestly, and I don't mean to offend my neighbors in Maryland and Pennsylvania that are here, but we are going to need an edge in Delaware and we believe that sports gaming will give us that edge, and help preserve the race industry for years to come. 

Mr. Bergstein: Stanley Sadinsky, HTA salutes you as a courageous and far-seeing regulator who has understood from the first day you took office that without integrity as the keystone, racing really has not much chance with its constituents, the public. You have levied fines up to $350,000 and you have handed out suspensions as long as 10 years to both owners and trainers, which is something virtually unprecedented in North American racing. Can you tell us a little bit of your philosophy, and how, as a distinguished teacher of law, you have made this stick? 

Mr. Stanley Sadinsky: From a regulator's perspective, particularly in the Ontario environment, I have often thought long and hard about what role we have been assigned to fulfill. Before getting to the integrity issue, I would just like to say to those states that are struggling with the introduction of ancillary gaming, that, in my view the key in Ontario to success was, the creation of the partnership between the industry and government. Speaking about partnership, it was first absolutely vital for the industry to come together as a partnership as well, and that happened in Ontario under the aegis of our Ontario Horse Racing Industry Association, or OHRIA, which I'm sure you have heard about. It happened under the leadership of Jane Holmes, who has recently moved from OHRIA to Woodbine Entertainment Group. 

It was the coming together of the industry that provided the singular voice that government was prepared to listen to. Prior to that, government was being lobbied by the various players within the industry for special favors to their particular interest group. The slot program was preceded by a very significant advantage, and that was virtually the elimination of the tax on pari-mutuel wagering. That came first, and that was the first success of OHRIA; the second success was facilitating the negotiations that lead to the agreement that provided the benefits to the Ontario horse racing industry that you have heard about. So to my way of thinking, that is the place to begin, where the success is basically born and nurtured. 

In terms of the role of the regulator, my philosophy has always been to basically stick to regulation, to stay out of the business of the industry as much as possible, although you are often encouraged to get involved. We try and draw the line of letting the industry do its business and we stick to regulation. The object is for the regulator to create a regulatory environment that basically permits good things to happen. If you don't have that solid regulatory environment, then everyone is going to be suspicious about granting benefits, particularly the tax break and the introduction of slots, to an industry that is suspicious in terms of integrity and regulation. 

So our role, basically, is to enhance the environment, and we enhance it through promoting integrity. At the same time, realistically we recognize—and I think everyone has to recognize—that government is going to basically provide these benefits to our industry, it is entitled to expect paybacks. Government is not in the business of just handing out benefits to any particular interest group without expecting and being entitled to a return on its investment. Sandy has already spoken about the benefits in Ontario that government perceives as being the nature of the returns. 

Politicians, of course, are interested in those kinds of returns from a political dimension, and they won't basically support benefits to an industry unless they see those political returns. We have to face the fact, and be prepared to recognize that those paybacks are expected and government is entitled to them. Why should this industry consider itself so deserving when government has so many other candidates for the benefits? We have to be prepared to demonstrate to the government every day of the week that we deserve these benefits, and that there are paybacks. 

As far as integrity is concerned, we have tried to raise the bar. Stan has mentioned some of the major cases that we have been involved in, where there have been perhaps tougher enforcement results than had been expected in the past, but that is exactly what has to happen. I'm gratified to see that there have been some other jurisdictions that have followed along and have taken enforcement far more seriously than we all have in the past. Our job is to ensure that there is honesty, integrity, and public confidence in our industry; otherwise the whole house of cards falls apart. 

I have been in the regulation business as chair for the past eight years, but I was a member of the commission in the 80's for five years, before there was off-track betting. I have seen the evolution of the industry over quite a period of time from a regulator's perspective. What I am finally sensing and concluding there is, unfortunately, an attitude of some tolerance within the industry as a whole for a certain level of misconduct, and I use the term "misconduct" advisedly. In the drug enforcement area and in the business practice area as well, there has been historically an acceptance of some level of hanky-panky that we all know about and we are all prepared to accept and live with. Maybe it is a result of the lore, the history of the industry, maybe it's because sometimes we think some of these activities are really victimless types of offenses, but the time has come, and we have been trying to do it in Ontario, of not just paying lip service to integrity, but making serious commitments to it. And that applies to horsemen and to racetracks as well. Penalties are one way of doing it. Investing in investigators to do extensive investigation of perceived misconduct is another. And to do extensive due diligence examinations in order to keep people out of the industry before they get in, and to thereby attract the kind of people into the industry, perhaps as owners, who have that sense of integrity as well. Basically turning this industry around, and making it an industry of integrity and of very little tolerance for activities that just simply ought not to take place. We are going to continue to do that as best we can in Ontario. 

Mr. Bergstein: Ron, I noticed that you smiled earlier when Stanley mentioned whining of racing. Would you like to expand on that? 

Mr. Barbaro: That was a slip of the smile. I'd just like to say, when you are consolidating an industry like we were, one of the biggest complaints we had at the beginning, was the control of the marketing; control of the economies of scale that we were incorporating in operating all the slots at the racetracks, and that was a challenge for everyone to get used to. We centralized. There is so much maintenance that goes on throughout the place, but what was mentioned was the non-smoking. That is the biggest uncontrollable competitor you have. When it first hit Ottawa, the Rideau Carleton track, we had an instant 25 percent drop. We are trying to build it back now, we just experimented, spent a few million dollars in one of our charity locations in Brantford, where we built a glassed-in section for smoking, with proper ventilation. It is all glass and they are only nine seconds away from the slots. We even timed how long it takes for people to get to it. Right away we went back up to 10 to 12 percent the next day. So we are feeling well, we will have to take some space and build an environment for those people who find that when they come to a place like that, they must smoke, and get it as close to the floor as possible. That is one thing that I found extremely important.  

On thing not mentioned is we helped many of the tracks. That is why when the New York State people came to see us, they were awed by what the government had done in another area. When I first took it on, everyone was coming in with their financial statements, and other than Woodbine, everything was red ink, red ink, red ink, and I said, "Where the hell are they going to borrow money?" So I ran out to the bankers, and I said put a reserve of $450 million, so when they came in to negotiate what we were going to do, because the tracks had to get ready for us, and we needed a wall, we needed the wiring, and we did everything inside.  

If they had gone on their own, they would have encountered prime plus two, three percent, whatever it was, and I thought that was unfair. If we are going to help this industry as a government body, and at the same time try to keep those 45,000 people involved in the industry in Ontario, you have to help these guys spend the money that is required. I arranged for this money at one over prime. Then I went to the finance minister, who is now the premier, and we negotiated a thing, saying what the hell, let's just lend it to them at prime, because this is a partnership. So they got money at prime, which they could never have gotten themselves. As an example, Flamboro Racetrack, we spent $28 million, $29 million, on the inside of it and the racetrack owner spent $20 million. 

Now what we do, the 10 percent that goes to the owners, it's like an accordion, so we hold back depending on the loan, the length of time, so they have enough capital to go. We may hold 40 percent of the 10 percent every week. They do a million a week and they get $100,000, we would hold $40,000. All those loans have just come down like a cube of ice melting, and everybody is very happy. So we did the financing. Working together was a big issue, and the government agreed to do that to help, so that is where the cooperation has to come in. When New York State came to me and said they had no money to loan anybody, that they weren't going to do this, I said, "This is going to be a big problem for you to make it work." It's like churning the water by helping them with finance, and right now many of the tracks have paid their debt off and have worked it down considerably, and now they are starting to get more and more of the percentage, and that is extremely important. 

Mr. Bergstein: Any questions from the audience for any of the panelists on any aspects of what they have said to this point? Also, the law in Delaware, which Mr. Oberle is trying to get amended, does not provide for any facility to just build a non-smoking area, including restaurants. As I understand it, it's that any public gathering can't have smoking at all, is that correct? 

Mr. Oberle: Correct. 

Mr. David Willmot: Ron, you touched on the importance of three percent going to municipalities, as the host cities of the racetracks. What you didn't mention, which is important as well, is the amount of money that goes to compulsive gambling efforts as well. 

Mr. Barbaro: Right. We take two percent of the slot revenue, which is in the $20 million to $28 million range, that goes back, and it's not like, "Hey, look at us" kind of a thing. We are actually extremely aggressive. Just recently I put clocks in the washrooms at your locations, David. We are doing signs around every slot machine with the 800 help number, and we are very aggressive, because of the sensitivities coming from the business I was in before. I ran Prudential America Worldwide—I dealt with regulators and all the hazards you have in an industry.  One person commits suicide at your location or because of what you do, that is the most nauseating feeling, and we had one, and that just flipped me right out from the standpoint of how do you cope with this. So you do everything in your power to help the awareness that there is help available. All our agencies throughout the province are fairly busy with people. I'm coming out with a new phrase, "Responsible gaming spoken here." It is such a responsibility to help people who refuse to help themselves, even a reminder, "go home", that kind of thing. 

Mr. Willmot: Just don't put clocks in my management's offices. They'll stop at 4:00. 

Mr. Oberle: I'm glad you brought this up, because it always seems to not get mentioned, but in Delaware, there are two segments of the revenue that come right off the top. I mentioned the 12 percent for the horsemen, for purse enhancement. There is also one percent for the treatment of those with gambling problems that comes off the top before the division of revenues is made. And, I know it is fair to say that in a state with 800,000 people, on a per-capita basis that is more money per person dedicated to the treatment of those with gambling problems than anywhere in North America. 

Mr. Willmot: Yes, that is a critical issue. Mr. Sadinsky, have you noticed and could you share with the audience your concerns as purses have increased dramatically in Ontario, any correlation which you see between integrity concerns that have arisen as a result of those increased purses? 

Mr. Sadinsky: As a result of our ability to do more investigation than we have ever been able to do, we become aware of problems that surround any industry that is prosperous, and particularly an industry where there is a lot of cash moving around. And so this has basically raised our level of awareness and sensitivity to the fact that because of the introduction of slots, that has created an added dimension to enhance integrity at the location. And in Ontario particularly, where it is government, through Ron, that operates the slot programs at the racetracks, they have a very legitimate interest in the overall integrity of the operation that is going on at the location. Now the major, active operation, of course, is horse racing, and we are going to do everything we can to keep it just that way, but as a result of this partnership of government and the racing industry, the slot program at the racetracks has created an even greater onus on us as regulators to do more in the area of integrity than we have ever done in the past. 

Mr. Willmot: You and I have had this discussion, but I think one of the fears which we share a great concern equally is of the various threats that are out there to horse racing. Personally, I feel that one of the greatest is an increasing movement by SPCA, the Humane Society and animal rights groups, which are watching our industry more and more closely. One of the real concerns with increased purses, especially in the claiming ranks, is the tendency for the horse people to revolve through these animals and just re-circulate animals, and care less and less what they look like the day after a race. As the claiming purses get higher, there's a tendency to just claim, abuse, and lose. And I think as an industry, we have to be very, very careful on these integrity issues to make sure, as more and more jurisdictions hopefully get slots, and purses do increase, that we act responsibly to make sure the animals do not get abused, because there are increasing circumstances of the nature. 

Mr. Sadinsky: I absolutely agree with that. And you and I have talked about one of the major issues that is before the industry as a whole, and that is the public's perception of how horses are treated. If we have Achilles heels out there, that certainly is a major one for the entire industry to pay attention to. In the area of turnover in the claiming situation, there are some proactive steps that can be taken. I will give you two examples of what we have done. We altered our claiming rules on the standardbred side to basically create a longer period of wait time before you can re-enter your horse at the same level. We had an enormous amount of opposition, I must say, to the introduction of that particular provision. What we have actually done is moved the standardbred rule to the thoroughbred rule, so that they are now basically the same, but because of the frequency of racing the standardbred animal, we have created some adjustments in that particular regard. But that is one step that we have taken, and in spite of a lot of opposition, we have done it, and it seems to be slowing things down on the claiming side. 

The other is, we have created what we call a death registry, and now we have rules that make it a requirement for all licensees, whether they are owners, trainers, vets, everyone, licensed by us to report to the commission the death of a horse that has recently raced. We have provisions in the rule that provides for autopsies of those horses for the purposes of determining, if we can, the cause of death. And we hope that this will have two benefits. One, it will give us some hard information about what is happening out there, and secondly, it in itself acts as an inhibitor for people taking steps with their horses they may well know are going to be detected. So there are things that we can do, but we can never do enough in terms of animal protection. 

Mr. Bergstein: Michael Shagan? 

Mr. Michael Shagan: The panelists have talked about partnerships, and I think properly so, first, within the racing industry, and then with government. What concerns me is the longevity of that partnership with government. I'm thinking of a number of examples, for instance, in the changing in the tax rates. In Iowa, the rates escalated after the bill was passed. I'm thinking of the changing of the exclusivity; in West Virginia, a number of facilities were added other than racetracks after the fact. And still other jurisdictions where the marketing of the machines is not controlled by the racetracks, but controlled by government in a way that might create a conflict of interest between the interests of expanding the racing franchise and the interests of the machines. Or in fact, where the machines are determined by the government with some, but not necessarily enough, business input from the tracks. I'm wondering if the panelists have comments about the two-way street here in terms of the partnership and how government can assure racing that they will stick to their guns in that partnership or should they. 

Mr. Oberle: That is a very good question, and one that we are actually wrestling with right now in Delaware. There is a sin tax mentality that exists within government sometimes, that suggests one should grab the 25 or 35 percent and run, or grab 45 percent and run, and they only look two years down the road as opposed to 20 years. Right now, the licensees, the tracks, in Delaware receive 40 percent of the net, or take. That was designed specifically to allow them the revenue, the capital necessary to expand the operations, make them destination-type facilities, and in fact that has resulted in about $250 million worth of capital investment since the inception. But, there are always the concerns among those licensees about whether the percentage might change, which makes it very difficult for them to plan long-term for the capital investment. 

I don't know what the absolute answer to the problem is. In Delaware we really do have a true partnership, but there has been some difficulty with the lottery office, which administers the marketing end of the program, even though the tracks hire their employees and operate independently. Those problems seem to be working themselves out right now, with increased dialogue, particularly. The lottery office until recent times was very restrictive on what types of machines they would allow in the facilities. In Delaware, they were some of the least desirable machines, as an example, and now the lottery office through some political pressures, has turned around on that issue. But it's something that members of the general assembly and the legislature have to be very aware of and diligent in terms of allowing these facilities to be competitive, understand they are businesses and they need to operate as any business would, with as few government restrictions as possible. That is a challenge. 

Mr. Barbaro: One thing, in response to what David Willmot asked, is, I was reading on Maryland or Pennsylvania, I can't remember which state, where you could be 18 years of age to bet at a track, but you can't get into a slot operation until you are 21. I don't know what your handle is between 18 and 21, or how much betting you get before age 21. But if you came out to your regulators, your state, and you leveled it out to age 21, brought it up, it's a step of goodwill and a condition that may help. You don't want those problems, and that would be a giant step to consider, taking it to a level playing field. I have a proposal to the government now, to raise the age for buying a lottery ticket from 18 to 21. Let's just have it right across the board the same age for drinking and everything else. No ID, no entry, no kidding, you have to be 21. End of story. 

Mr. Bergstein: Ms. Lang, do you have a comment on that? 

Ms. Lang: I'd like to pick up a bit on the issue of governments being somewhat fickle, and changing quite radically their views. There are two things that need to be considered as you think about how to sustain the partnerships, particularly those that we have enjoyed in Ontario. One, you need a very strong industry, and a very strong industry association that can continue to lobby and keep the legislators honest and focused on what they had promised. The second thing you need, is to make sure the industry continues to deliver the benefits. That way, hopefully, you can sustain horse racing with slots, and not slots with horse racing. That is a very important kind of distinction, but it is really critical we keep a strong industry focused and able to lobby the government, and that the industry continues to deliver the benefits they have derived from the concessions the government has made. 

Mr. Noe: I do agree. It is obviously very difficult with governments coming and going in all the various jurisdictions and states. The Delaware Standardbred Owners Association Annual banquet is a very festive affair. Somewhere during the dinner they begin to recognize the legislators that are in attendance and you find almost as many legislators there as you find horsemen. There are 50, 60 people that rise as they are recognized at various table, so somebody is doing a good job between these dinners every year to stay close to the legislature and the people involved. They make sure there is a continuous awareness of the need of cooperation and partnership.  

Mr. Oberle: The Delaware Standardbred Owners Association has become a very keen political force in the state, which will help, in the short and long term, preserve the division of revenue so there can be some long-term planning. 

Mr. Jerry Bouma: My question is specifically to the Ontario people here, and it has been partly answered. The partnership between industry and government, the other qualifier that needs to be added is the partnership was with the conservative government, as it is in Alberta. You have an election coming up. Three key public issues are health, education and infrastructure. What is your sense with regards to the pressure that may be coming from an alternative government to the conservative government toward the arrangements that are now in place between the horse racing industry and government? We have a situation where I don't think our government is going to change in Alberta, but the premier's office might change. We have a special relationship at that level, and we are very sensitive toward the politics, because we are talking serious politics here. So I'm interested in what your sense is of the possibility that you will have slot machines elsewhere, or a change in the numbers? 

Ms. Lang: I think you are right, the conservative government has been a very strong supporter of the horse racing industry, but it is largely because the horse racing industry has done a very good job of getting to the appropriate members of that particular government. If that government changes, and the industry can continue with its effective lobbying, then quite frankly, they stand a chance. There is no question that there is a major challenge on the part of legislators to decide how they are going to divvy up the resources of the province. Health, education and environment are right up there at the top. But if the industry continues to demonstrate that there is an economic benefit to the province, then they enjoy a chance of having it carry over and transcend the politics, so that it's good public policy, a good way to conduct business, and it has a continued benefit. So my sense is that there is a fair amount riding on the capacity of the industry to keep its act together and to be able to sustain the kind of relationship with whoever the party in power may be. 

Mr. Bergstein: Jane Holmes, do you want to have the final word?  

Ms. Jane Holmes: I originally had a question for Sandy Lang, but she has covered it in terms of what the government expectations were of the industry now. I just want to say that it wasn't straightforward and simple in Ontario. We negotiated for over two years with the government before we were able to get the arrangements to have the partnership with the lottery corporation and the government in terms of the slot organization. What we are unique in that, while we have are differences with our regulators, we have a partnership there too, because we all have a similar vision about the integrity of the industry, the importance of responsible gaming. The horse racing industry has to recognize that they are part of the social fabric of the community, and part of the racetrack's responsibility is getting the tools the government gave us, to give back to those communities. That is what you are starting to see as the racetracks pay down the debts and do things like that, is they have to look more at what they can do to help their communities, and to help grow the agricultural industry in the province. 

Mr. Barbaro: The only thing that could destroy the good things that are happening now, with a new government would be from the standpoint of the public outcry, there is too much of this, they are 19 years old, they are sneaking into places, doing all this kind of stuff. The only thing that will destroy it is a level of sensitivity from the public outcry, and the politicians will run for the hills as fast as they can from the standpoint to get the hell away from the mess. That is the only thing that could really upset you. It is a controllable competitive environment within your industry, and this is why my suggestion of 18 to 21, get a level playing field, be aggressive, be proactive in that area, because you have never been under this type of scrutiny before. Fifty-two million people went to our locations in Ontario last year. Fifty two million could be a hell of a thing to go against. 

Ms. Holmes: I absolutely agree with you, Ron, and that is why, as an industry association, we worked with the Responsible Gaming Council of Ontario two years ago to develop a program on responsible gaming for the racetrack side, because as Ron operates and manages the slot side, we have to look at the same kinds of things on the racing side. We introduced a self-exclusion voluntary, and we have introduced brochures and we are working very aggressively on those areas, because it will be that aspect that is going to be important, because we were never under the eye before in the focus the way we are now.