by Brian de Lore
Published 3 January 2018
There may be a storm brewing on the horizon; the present calm isn’t expected to last the month out as some summer heat produces a zephyr of expectation which could develop into thunder and lightning by Karaka Sales time.
How do we arrive at such a forecast? Read the NZ First Racing Policy and combine it with the associate spokesperson for racing Clayton Mitchell’s election statement that Racing Minister Winston Peters will have some news for the industry by the commencement of the National Yearling Sales series.
Thunder and lightning might be a little melodramatic but the least we can expect is that the wind might get up and disturb the plain sailing of a few administrators and their off-siders. Change is in the air and those changes to be considered were clearly outlined in the Racing Policy devised by Peters and his NZ First Party which subsequently attracted the racing vote and assisted, to some degree, the election outcome.
“We have it very clearly in our minds how we are going to implement things and I think you’re going to see a quick turnaround – before Karaka Sales there is going to be a lift,” said Clayton Mitchell at election time. “We have a great plan with significant changes of a positive nature which will re-invigorate confidence in the industry.”
The 10 bullet point items in the policy included only one which is designated ‘urgent’ and that is ‘urgently review the operations and costs of the New Zealand Racing Board.’ Another near the top of the list is ‘return a greater proportion of industry taxation to the racing codes.’
Winston Peters has been relatively invisible post-election, but rest assured there has been plenty of work going on behind closed doors and this is the proverbial calm before the storm.
An effort by NZ First to push racefields legislation through parliament pre-Christmas on the urgency list failed for technical or priority reasons, but there is every reason to suggest it will be passed into law at the earliest possible time in the New Year.
During a call to NZRB CEO John Allen a couple of weeks ago when I questioned the merit of spending $40,000 on the pop-up function for the Elite Customer Programme at Riccarton on Cup Day, I also asked him if he had met with Peters and what his view was on the NZ First promise to investigate costs at the NZRB.
“No, I personally haven’t had a meeting with Winston yet,” Allen replied.
My argument to Allen that the NZRB had grown too large since the time Peters was previously ensconced as Racing Minister but revenue had increased $50 million over a four-year period, during which time there were no stake increases while NZRB infrastructure had continued to grow and that the whole structure needs looking at, brought this response:
“I’m not defensive about that – if the Minister or whatever want to look at the structures of the NZRB and have ideas on ways that it can be made more efficient, then I think that’s good and from my point of view what we are trying to do is substantially increase the profitability of the Board so that we can enhance stakes and investment in infrastructure and the like.
“So I’m not at all concerned about initiatives to look at the structures of the Board and nor am I concerned about people who have ideas to make this organisation more efficient.”
The problem with the NZRB from this writer’s viewpoint is that after nine years of National Party rule they have evolved into just another government department, complete with the party faithful, which runs with par-for-the-course government department efficiency and speed, or in this case, lack of it.
At the very top of management there is a lack of business experience at the highest corporate level – most come from other government jobs – evidence offered by the recent recruiting of three Government and Industry relations appointments plus a reshuffle with existing staff for the addition of an Operations Specialist and a Strategy Manager for Calendar Optimisation.
Yes, believe it or not, we have a Strategy Manager for Calendar Optimisation. In the press release which announced the appointments there was no racing background cited for any of the new employees.
John Allen defended the appointments by saying: “Our business is a dynamic thing and we are continuing to invest in some areas that have become really important and industry relations is really, really important to me and it’s not an area that the NZRB has done particularly well in over the years – I’m not being critical of others in the past but it’s just an area we have to get on top of.
“We are deliberately investing money in that space and in other areas where things aren’t as good or where technology has evolved or things have changed. We are making changes that will take cost out of the business – it’s a constant dynamic, living organism, this organisation, so we are continuing to work on lowering our costs and I would expect our costs trajectory to continue to decline.”
It is true that when the NZRB Annual Report eventually came out, after the AGM, total expenses were down from $205,187,000 in 2015-16 to $204,681,000 in 2016-17, a total saving of $506,000, or if you prefer to examine it in percentages a saving of 0.25%.
Lower staff costs were achieved in the past financial year with one reason being that 70 phone-bet operators were made redundant and the number of employees on salaries of $100,000 or more reduced from 138 to 134.
The biggest concern for racing is that betting on racing fell by more than $50 million from $1,715,316,000 to $1,665,287. Sports betting and gaming were both up on the previous year and the TAB continues to market sports betting on the premise that new customers to sports betting will eventually convert to racing. And we already know that sports betting returns about one seventh of what every dollar bet on horses returns.
At the NZRB AGM at Karaka in November, the speakers were generous in praise of themselves and quick to blame any industry ills on their incompetent predecessors, for which they actually received a round of applause, mainly from the faithful in the front row. The comparison I always make with RWWA in West Australia was poo-pooed and branded as fake news. But it’s not.
The difficulty for Winston Peters is that an overall saving of one quarter of one per cent for the year is probably not going to cut the mustard if you can read something into his racing policy. It’s a bit like a band aid for a severed head – it’s hardly going to stem the blood loss.
Peters is likely to look long and hard into NZRB costs and it won’t be an overnight job; there will be plenty for him to consider. The other point about the NZ First Racing Policy is the one mentioned earlier about returning a greater portion of the tax savings to the racing codes.
When Peters gained those annual tax concessions for racing all those years ago they were worth $33 million in the first year. Today the same concessions, still in place, bring back at least $65 million annually, but the problem is that most of that money has not come back to the stakeholders; it’s instead been used to expand the size of the NZRB and embark on some of its development such as IT, etc.
Peters has always championed racehorse owners and wants stakes to increase to keep them in the game. Some money has been channelled back into stakes but it’s probably fair to assume the new Racing Minister holds the view not enough has been used for the purpose it was intended. Time will tell on that issue.
If you took the whole of the New Zealand Racing industry; all the clubs and their assets included, and then added every level of administration, and made it into a public company, it would produce an interesting fiscal dilemma. For the level of assets tied up and the return yield those assets provide along with a top heavy administration, the corporate raiding sharks would be circling.
The fictional scene put before a share market man also involved in racing brought the response that the share price would have halved in the past five years. And that share price would now be down to a few cents; it would be ripe for a corporate takeover with a lot of people to be sacked and the dispersal of a fortune in assets. That’s how well this business is going.
The true test of how we are progressing as an industry is, in a thoroughbred context, the number of mares being bred, the number of foals being born and the level of participation by the domestic market at our second tier National Yearling Sale. Statistics will show that in the 2017 breeding season there were less mares mated than in any of the past 40 years and Book Two at Karaka will tell its own story.
The year of 2018 has to be a year of change, because if we get to the end of it and nothing has changed, then nothing will ever change. By this time next year this government will be nearly halfway through its term and the window of opportunity will be slipping away.
It has to happen this year – and it will.