Month: November 2018

by Brian de Lore
Published 22 November 2018

The age-old saying that a week is a long time in politics was upstaged by racing which dragged through the week a disappointing two-day Ready To Run Sale at Karaka, saw some unseasonably inclement weather throughout the country and had a week of silence on racing’s political maneuvering.

Racing Minister Winston Peters had a busy schedule this week with some late nights at parliament but found time to speak briefly to The Informant and confirm progress is being made for racing in the halls of power.

“Everything is being put together to ensure it goes to the cabinet committees in the next few weeks and well before parliament rises so structurally everything is in place,”  said the Minister.

“RITA has to be a creature of the legislation. However, its precursor can be as a ministerial advisory group; one will just shade into the other when the legislation is passed. I can virtually see RITA being established in a matter of weeks, but initially, it will not be what its potential shape will be.

“We are going as fast as we possibly can on getting the legislation done. In a matter of weeks, there will be no delay at all in terms of the transformation we are working on.”

The Minister refused to be drawn into the number of people to comprise RITA or who would be involved but when put to him that past industry leaders had lacked industry knowledge he responded thus, “I expect RITA to have a high level of industry competence”, and competence.”

When questioned on the future involvement of John Messara, he replied, “I want to ensure that the integrity of his report is maintained, and the best way to do that is to keep John involved. That’s what I have asked him to do; there is no doubt that there will be a continuation of communication with Messara because I asked him for that.”

And on the Annual Report from NZRB which is yet to be released but which has to be approved by the Minister before its tabling before parliament, he said, “I’m going through the current annual report with a fine tooth comb. I have it in front of me right now.”

Has the industry adapted to parliamentary pace?  We have a Messara Report which was completed four months ago. We have an NZRB board who are well past their use-by date but remain enconsed; we have a Minister who isn’t in a hurry to get rid of the board, and we have the Department of Internal Affairs (DIA) which is still analysing the Messara Report submissions five weeks after the closing date.

We also have a Fixed-Odds-Betting Platform that during the week was further delayed from December 5 until at least December 31 according to an internal NZRB communique – the chances of the New Year’s Eve launch seemingly highly unlikely given it’s the middle of the festive season.

RITA is the brainchild of the NZ First Chief of Staff Jon Johansson who was appointed to the job over a year ago by Minister Peters. Johansson had been a regular political commentator on TV1’s Q & A, and radio, and has written several books.

At Victoria University in Wellington, he was a senior lecturer in comparative politics at the School of History, Philosophy, Political Science & International Relations of Wellington. He specialised in New Zealand and American politics, and political leadership – can you get more academic than that?

The problem for racing with Johansson is that he doesn’t know a thing about racing or running a business, and he now appears to be having a big say on how the Messara Report is handled; hence the mandatory establishment of RITA.

Until legislation is passed which at the very least will be next May, RITA will have no powers to do anything except make recommendations to the Minister’s office (Johansson) about how to implement the Messara Report.

The existence of RITA means that the Minister is keeping on the current NZRB board who will collect their director’s fees, of course, but are now toothless and will have no say in future policy making.

RITA will supposedly involve four to five people including a chairperson who will be au fait with racing. Whoever is appointed needs to know the wagering business backwards as that’s what the NZRB will become with its impending renaming as Wagering NZ, but it appears to be a typical government-paced project that will do everything in its own time rather than cater to the urgent needs of the industry.

According to some sources, RITA will be appointed before the NZRB AGM on December 7 but as already stated, cannot have any power until it comes under the Act which will not be passed until the middle of the year. Consequently, the current racing board remains in place but can’t make a decision.

An offer to replace the board was made but rejected. Right now it’s hard to understand why the incumbents would want to stay other than to collect the director’s fees because they are effectively powerless to act and only preside in title.

Áction is now required from the collective power of the three codes which collectively could wield a big stick if they got together and made a cooperative agreement to take action and force the issues as they have never done before. Will they do it; it doesn’t appear to be in the DNA of any of them but times are desperate, and they cannot afford to be like Nero and play the fiddle while Rome burns.

The codes could decide on a course of action beginning with the engagement of Deloitte, to procure an urgent decision on the viability of everything the NZRB are doing business-wise including an appraisal of the FOB, and the pursuit of the TAB outsourcing. This is now an urgent negotiation, according to Alan Jackson, relative to getting in the Tabcorp queue in front of the RIWA which starts its process early next year.

If the three codes agree on taking this action then the industry can move forward – they cannot afford to wait. The whole process will take a long time and time is of the essence. To make this work someone has to roll their sleeves up and grind it out for two years.

Outsourcing the TAB shouldn’t be contemplated without the involvement of John Messara because he and his ex-Tabcorp cohort Craig Nugent are both highly experienced in such projects and its only the experience and guile of these people who can negotiate the best outsourcing deal.

The Messara Report aims to double prizemoney, and most of the funding to do that will come from the transitioning of the NZRB into Wagering NZ, the racefields legislation and the outsourcing of the TAB. Perhaps that’s where RITA may be of use in pushing those items forward, but Messara has already shown what he can do with racefields.

Racefields didn’t happen in the first instance here because it was poorly written in haste and did not get the required discussion before it was presented in parliament for its first reading in August 2017. It was never going to be adequate for the industry.

In an internal communique, the NZRB has recently admitted that it’s already eight percent behind budget this season, and with a current flat economy we have been witnessing a decline in betting – Cup Week was down 13.4 percent on last year. NZRB has also budgeted for profits it will not get including those from racefields and the FOB platform for which blast-off is into its fifth delay – Houston; we have a problem!

The cost of the FOB is currently admitted to being $40 million, but is likely to far exceed that with overruns. Some of it will have been capitalised in last year’s result although that is presently unknown due to the annual report not being released until December 7.

Not getting the FOB budgeted profit, racefields and the possibility of the FOB not working for some time, or not working at all, could see the industry staring down the barrel of a somewhat tragic result by this season’s end.

If the below budget percentage increased due to this downward trend in betting, and then you take into account racefields, and the strategic initiatives with the potential of the FOB costing another $6 million due to the ongoing delays.  Afterwards, this leaves only four months of the season to achieve the budgeted profit from FOB in the off-peak racing season, so at best you will get 40% of their budgeted profit. Suddenly they have missed the budget by $25 million.

Next week will be another long week in racing as we await the announcement from DIA on the submissions, the possibility of the release of the names to comprise RITA and the impending AGMs of both NZRB and NZTR.  

by Brian de Lore
Published 22 November 2018

Minister of Racing Winston Peters is back from a busy schedule of overseas events, and with the Department of Internal Affairs (DIA) having had more than a month to assess the submissions and gauge the feeling of the industry, an announcement is imminent.

In around a week-and-a-half the three codes will be collectively holding their $40 million breath when the TAB is due to switch-on and launch the Fixed-Odds-Betting (FOB) platform, the December 3 rescheduled launch date being its fourth after delays since July.

Four days later on Friday, December 7, the NZRB will hold its AGM at its Petone Offices and release the annual report as late as the day of the meeting itself. The question is, will any stakeholders without any knowledge of the annual accounts be inspired to travel to Petone, on the start of that weekend date so close to Christmas, to attend that meeting?

Straight after that very same weekend on Monday, December 10, the NZTR will hold its AGM. It would be fair to assume that, in the general business part of this meeting, the discussion might centre around the fallout resulting from the Minister’s review of the Messara Report submissions, the success, failure or otherwise of the FOB platform launch and anything else emanating from the NZRB AGM.

Following the NZTR AGM, nothing significant is likely to happen before Christmas, but from mid-February onwards the formation of RITA is expected to be announced by the DIA. But just who will be involved and exactly what RITA’s role will be and the extent of RITA’s powers in its ‘transitional’ duties is still very much a mystery. 

Are we closing in on some positive announcements? The jigsaw puzzle that is currently the New Zealand racing industry is poised for more pieces to be inserted with some better news forthcoming because most of these coming events in the space of just three weeks will define this industry’s future.

The industry is desperate for a good story. We are more than a year down the track from an election result which the industry helped achieve, and although things have been slowly progressing in what appears to be a positive direction, no one can say for sure how this will pan out.

About the submissions to the Messara Report, it’s feasible to conclude that every submission will be analysed in a very bureaucratic fashion. Then, the Minister will revert to his initial launch speech of August 30 when he said, “Mr. Messara is an expert in this field, and I am not here to strip this report of its value.”

Afterall, this is politics.

The FOB platform is a far more serious issue than the review of the submissions for the sheer reason of the minimum $40 million investment being at stake. One NZRB employee described the FOB platform as a ‘debacle,’ and although this writer is aware of at least three attempts to live-test it, none of them has been successful.

The industry needs this FOB to work as a repeat of the Typhoon platform would be financially disastrous in every meaning of the phrase. The fallout from another failure would inevitably result in mass resignations from the overstaying board and the management that has been driving it. The week of December 3 through to 7 will be interesting.

If it works and increases profitability to the optimistic budget levels NZRB has forecast then this non-carbohydrate eating writer will be forced to consume a large portion humble pie – at this point, I’m not anticipating any carbo-loading penalties will ensue, though.

By next week it will be almost four months since John Messara completed his much-lauded report and handed it to the Minister, and nearly three months since it was launched amid some fanfare at the Claudelands Convention Centre in Hamilton.

Knowing Messara, it is very much in the man’s make-up to work fast and efficiently and go to the next level as soon as he can. That’s why he wrote in his report at the end of the summary, “I suggest that implementation of the reforms begins with the appointment of members to the NZRB, pending the necessary changes in legislation.

“A clear mandate should be given to the board to drive the reforms through the system with a sense of urgency. Further, I would recommend the establishment of a board sub-committee whose only task will be to progress the wagering outsourcing opportunity.”

This was just one of several recommendations contained in his report that could have been acted upon immediately but for which the Minister preferred to slow the process down and keep everything at typical parliamentary process pace. Two others that could have already commenced include the Performance and Efficiency audit of NZRB and the initiation of the review of the RIU and allied integrity bodies. 

The Messara Report is worthy of continual review and re-reading solely because it’s lost impetus due to non-activity since August 30. It is imperative to read it through it several times to comprehend Messara’s assertion that it’s an overall plan, threaded together by a suite of 17 recommendations that work in harmony with one another but would be vastly less effective through cherry-picking.

Highly pertinent conclusions Messara drew and wrote into his report include, “The decline of the New Zealand thoroughbred industry has occurred over a long period, steadily eroding the confidence of participants. That confidence is at a tipping point, causing reduced commitment to investment in racing and breeding and the continuing loss of key participants. In my view, the New Zealand thoroughbred industry is now at risk of suffering irreparable damage.

“In May 2017 Deloitte conducted an ‘Options Analysis’ for NZTR which indicated that an outsourcing agreement would generate significant potential benefits. In my view, these benefits may be sufficient, if added to the positive financial outcomes generated by other recommendations in the Review, to enable New Zealand stake money to be doubled.”

The lessons to be taken from these two statements lies in the phrases ‘tipping point ‘and ‘stake money to be doubled.’ The industry is close to the edge of the cliff, but Messara is also saying that if we took notice of the Deloitte findings and married that analysis into his 17 recommendations, then prizemoney could be doubled.

Why did those who protested loudest about the report not grasp those statements and run with them, rather than adopt that provincial mindset that forever arises when saying, “close whatever venues you like but not ours?”

The industry continues to argue the pros and cons of synthetic tracks and targeted venue closures instead of championing this further excerpt from the report: “The single most effective lever available to reinvigorate the New Zealand thoroughbred industry is prizemoney. It rewards and supports owners, trainers, jockeys, stablehands, and the entire supply chain including vets, farriers, feed merchants, etc.”

Messara has always said, “one man can change the world,” and his strong views on getting the right personnel into the right jobs resonates with this report excerpt: “I am confident that with strong leadership, and the support and commitment of all sectors, organisations, and participants, the industry can be turned around and achieve sustainability with consequential favourable impacts on the New Zealand economy.”

The Minister could do a lot worse right now than to ‘hand the baton’ to Messara and ask him to enact his report which is surely the blueprint of New Zealand’s racing future. If it isn’t, then what is? No other plan exists.

That appointment could kick-start all matters not requiring legislation to commence the restructuring process. No one person could execute the recommendations better than the author himself who alongside Peter V’landys has done it all before when that duo drove Racing NSW to its current level of success.

And on structure, to conclude, Messara’s report didn’t mince his words in saying, “…we do not feel that the current structure of the NZRB is conducive to the efficient regulation of the racing industry or the maximisation of wagering revenue because of conflicting priorities. In addition, the structure does not place a sufficient level of accountability on the NZRB.”

by Brian de Lore
Published 15 November 2018

Once-upon-a-time the thoroughbred industry was administered by people who were Subject Matter Experts (SME), and although it was far from the perfect structure, it was still a long way better than the administrative cataclysm we have today.

Since the Racing Act of 2003 came into being and more lately through three terms of National Party government, this racing industry has suffered a steady decline which, to be fair, has not entirely been the fault of that political reign which mostly had John Key at the helm.

But for a long time now, anyone who follows racing and also has an eye on the political landscape will have concluded that like him or not, Winston Peters has been the one and only political leader who has displayed a willingness to repair this business to at least economic viability.

The question right now is where is this industry currently positioned post-one-year of coalition rule from which Peters has returned for his second stint as Minister. The Messara Report was commissioned and completed in record time, but with almost as much time elapsed since its release, as Messara took to write his 82-page report, we have made little progress.

The lack of action is a worry. The initial impetus that came with a build-up to the launch and the impact of the contents of the report itself is lost. Industry stakeholders are now asking why we are procrastinating?

The Minister asked for submissions, and apparently, more than 1600 had turned up by the cut-off date of 19th October. As reported last week, the Department of Internal Affairs (DIA) asked for a month to evaluate them, but the Minister said he gave them only a week and a half.

The industry now awaits the Minister’s return from Europe and a promised announcement which is likely to be an evaluation of the submissions plus other unknown measures – hopefully, the replacement of outgoing NZRB Chair which the industry would see as a very positive step forward.

When are we going to see this report adopted and changes invoked – not an uncommon question echoing around racing circles?  Deloitte said quite categorically in its report the industry was unsustainable and the urgency with which Messara completed his report gave the stakeholders a mindset that action would be immediate.

Messara himself stated on several occasions we didn’t have the luxury of waiting, around the time his report was presented to the Minister. But the parliamentary process, as Peters has continually reminded us since the report’s launch, cannot be circumvented.

When little over a week ago the Minister spoke to The Informant about the ‘mandatory establishment of RITA,’ it wasn’t immediately evident that he was referring to a bureaucratically appointed committee that wouldn’t be formed overnight.

A transition authority similar to this was last used for the amalgamation of the Fire Department and Search and Rescue. Looking at that model in terms of time constraints, we will be fortunate if RITA is established before March 2019. Further to that, RITA will be appointed by the DIA and by the terms of the protocols now apparently adopted by government bureaucrats, will encompass gender equality.

Racing has struggled administratively; if it hadn’t, we would not be facing the current dilemma. Finding the right people is tough enough without gender prerequisites, but the world is forever changing, and racing is certain to come under the microscope of various pressure groups, particularly on items more pertinent such as animal welfare and integrity.

If the Messara Report is adopted, which it must be for racing’s survival, then governance must come under the microscope from the industry itself. In the first of the 17 Messara Report recommendations, the NZRB will be reduced to a shadow of its former self and become Wagering NZ after outsourcing the TAB has been negotiated and the power it currently holds is devolved to the three codes for self-management.

Therefore the future selection of board members on NZTR takes on a new significance. The so-called Members’ Council came into being in 2011 and this 12-person committee (see the adjacent illustration) is the body that selects the people who become NZTR Board Members.

Going to the NZTR website to find out how the Members’ Council operates and how they are selected is a waste of time. It says virtually nothing, and it appears as though it hasn’t been updated since 2011, listing only the original Council from which only five of the 12 are still current.

When this writer approached the Members’ Council Deputy Chairman Bill Cotton to discover how the Council operated I was told the information was, ‘confidential and highly sensitive,’ and the conversation was quickly ended.

But not be denied and digging around, it wasn’t too difficult to uncover the plot which seemed relatively straightforward and not the sort of information that should be deemed confidential and withheld from industry stakeholders.

Nine of the 12 members are selected by the race clubs, three coming from each of the regions divided as upper North Island, lower North Island and South Island. The three remaining members are single representatives from each of the Breeders,’ the Owners’ and the Trainers’ Association.

In each of the three regions, the clubs have one vote for every race day of each club to find their three representatives, giving the big clubs a decided advantage. Once elected to the Members’ Council for a three-year term, the member is eligible for re-election to a further two three-year terms – a total of nine years. T

That’s far too long to remain on such a committee and all things considered, this is a draconian set-up designed not to find the best 12 committee people but to appease club representation and a provincial mindset that has pervaded our racing for such a long time.

The aim of this Council should solely to be represented by the best 12 in New Zealand and if those 12 happened to all live in Whakatane then, so be it, appoint them. Under this regime that’s not possible but why have as many as 12 – a seemingly high number of which some will be scantly qualified for such an exercise.

The Members’ Council is responsible for assessing all the applicants to find the next NZTR board member. One of the problems with that process is they advertise for the position at the New Zealand Institute of Directors which is a cartel of white-collar unionists who look after each other and who have an appalling record in racing administration.

Racing in New Zealand needs to disenfranchise itself from all the mediocrity of the past and raise the bar on its standards. These are the people that appoint the directors who will be running New Zealand racing in the future.

That’s not to say we don’t have some very good representatives currently on the NZTR board, but if you believe the NZTR board has been an overall success over the past 15 years then it’s time to reevaluate.  

by Brian de Lore
Published 8 November 2018

Racing Minister Winston Peters voiced his displeasure albeit with a little mirth at the vitriol displayed by the political minority in both the racing industry and general media after the tax relief for racing was announced in last week’s budget.

In a call from Tokyo airport to The Informant, last Sunday Peters said:  “The racing industry has to show a bit of patience. They waited nine years and got nothing from the National Party, and I’m trying to put together some changes and that one in the budget is just the start of something for the breeding industry.”

Peters had flown out to Japan on Foreign Affairs business immediately following the budget announcement and was at Tokyo airport getting ready for the return journey when he gratuitously found time to make the call.

Channel Three’s Newshub had earlier described the racing tax relief given by the Minister as a ‘concession for his racing mates’ while a few racing industry people from the right-hand side of the political spectrum took their usual stance in opposition to any announcement from Peters.

“If there are people who are critical of this tax reform – do they prefer nothing? I have to get on with the job, but I’m not here to make friends – only to fix things up,” replied Peters when given details of the dissenters.

It’s a fait accompli that Peters will be criticised whatever changes he makes for the racing, but that’s because he both polarises the political spectrum and in a forum like the Budget of 2018 the racing industry was again fuelled-up with high expectation.

This budget announcement brought shock-horror from those anticipating a free hand-out from government coffers. With that came the barbs flying in all directions but for a battle-hardened politician like Peters, it was like water off a duck’s back.

Peters was in buoyant mood and not really perturbed by the flack: “The next one is about all-weather tracks, but the structure of the racing industry is being investigated and reviewed by John Messara so I have to wait upon that before I can say anymore, and from which the legislation will be derived,” continued Peters.

“That’s the sequence, and I can’t go any faster. I can’t say anything that might pre-empt his report or what the report concludes but what I can say is this tax reform is what was put in place back in 2006 and was accepted for a few years and then when a new Minister of Revenue came along they changed it all.

“So, all I’m doing here is changing it back which I have done, and that’s only the beginning of that structure. On that occasion, it was sabotaged by the National Government, but this time we are going to push the boat out again and make sure no-one sabotages it.

“Whatever John (Messara) might have in his report, the fundamentals of a fair tax policy have to be put in place no matter what, so I can say that now.”

New Zealand Bloodstock Breeders President John Fokerd has been working on this tax issue for some time and a change of attitude towards racing from Inland Revenue.

“All this tax relief was doing was fixing up an inequity between new breeders and established breeders,” Fokerd told The Informant this week. “Nothing has happened around any major tax reform at this stage, but we are hoping it will happen.

Fokerd, who worked to get this reform for more than three years alongside former CEO Michael Martin and with tax accountants such as John Aubrey, Rob Braithwaite, and David Patterson, says the grey areas in racing taxation have to be sorted out, and this is only the start of it.

“This is more of a technical thing because it was tested in court and we haven’t really been able to give advice to potential investors about tax issues since. The breeders have spent years sitting down with IRD trying to go through all the different tax laws around bloodstock to get an agreement.

“This was an issue that stood out that we couldn’t agree on. The IRD wasn’t prepared to go back on something they won in a tax case which became a precedent, and they were sticking with that belief.”

Fokerd further explained: “This tax change is very minor and is only reinstating something we use to have and then lost in that tax case. The tax law was never actually changed; it was just that the IRD took a different interpretation of it.”

He also admits the change will benefit very few people, but the implications of the reform are very important for other reasons” This is to encourage people to come in at the high end of the market and get a deduction straight away.

“To me, the key is to try and keep those horses in New Zealand so potentially we might get one or two future stallions. It’s really opening up an opportunity to a few, new people. It’s not a big number and we are talking only high-quality horses. It’s very expensive to go and buy stallions overseas and if we can encourage the home-grown product and get new people involved that’s a good alternative in my mind.”

One person happy about the change is Te Akau Syndications boss David Ellis who commented: “When the last Labour government was in, Michael Cullen increased depreciation rates to encourage fresh investment in the racing – the work of Minister Peters in 2006.

“That was a big one because we had been losing our gene pool so rapidly – even then. By way of example, of the last 22 black type filly winners, we have had, 19 have been sold to Australia which is heart-breaking for our future breeding.

“What we need is fresh investment and so increasing the depreciation rates is a big help. In 2006 Peters increased the rates to encourage new investment. But once National came back into power, the IRD saw it differently and said the business of a breeding investment doesn’t start until the horse goes to stud.”

Well known industry stalwart John Aubrey who has been looking at accountancy issues in racing and breeding for most of his life had this to say about last week’s budget: “The style of the policy was out of the hands of the industry. It was the Inland’ Revenue’s own approach to it.

“I haven’t had much involvement since last July. We struck the IRD’s stubbornness but in the end, they did relent – they originally thought this change would cost them $50 million a year– I think the ceiling of $4.8 million they have put on it is just ridiculous. Talking to John Fokerd, he’s hoping the opening shots will be a lot more practical.

The opening shots are the wording the IRD has used: Aubrey explained: “The hope is that when it comes through it has a lot more common-sense to it in the wording – and also they need to consult the industry on the practicality of it.”

“The IRD came out with that terminology of standout and quality,” said Fokerd, “whereas we originally said high-priced – we spent a lot of time trying to explain that, but they have a very different view of the industry.”

Fokerd sees this as just a small victory, but he is very optimistic about what lies ahead with further, big changes coming: “The next key support for us will be the Messara Report and what comes out of that and how much the Minister can implement,” he enthused.

“NZ First picked up this one first because they say saw it as unjust. This is only minor compared to the implications of the Messara report and potential for increased prizemoney which will benefit everyone. We now have the platform for change, and that’s what we want.

“The industry can’t keep going the way it is – there has to be change and rationalisation, and the industry has to be a lot more efficient.”

Peters is unapologetic and unchanged about his planning of the order of events: “I’m dealing what I can deal with now, ahead of the Messara report, which will only be a couple of months away and that’s where things currently stand.

“The report will come much more quickly than most reports do, and it will be substantial in my view, and I’m happy to wait for it and be confident that I’m going to get the right answers.

“If people are saying they don’t like what’s happening then my response would be, ‘really, but what did you have before – sitting on the side-lines and whinging is not going to help you, and taking pot shots and not saying it to my face is not a good idea.’ ”

Peters again confirmed the roll-out of legislation for racing can only happen once, which places racefields on hold, and which can only be finalised subject to the contents of the Messara report.

And while overseas on Foreign Affairs matters racing is never far from Peters mind. He recently inspected an artificial track in England and spoke to several experts in that field and when in China next week he will be meeting with people with major racing interests.

“There is a coming market there for us, and while it’s not ready to happen yet I have my team working on it, and we want to be first in the queue and have something to look forward to,” concluded Peters.