Tag: RITA

The good news and the bad news

The September 1950s publication that says the TAB was the concept of The New Zealand Racing Conference and the New Zealand Harness Conference and was underwritten by the race clubs of New Zealand.

The good news: the codes own the TAB!
The bad news: the TAB is broke!

by Brian de Lore
Published 20th March 2020

Today’s stuff.co.nz article blaming the coronavirus for RITA having to go to the Government, cap in hand, for a cash hand-out to save the TAB is yet another blatant example of attempting to pull the wool over the eyes of racing’s long-suffering stakeholders.

RITA is today saying it needs a Government bail-out to alleviate a projected $14 million loss through sporting event cancellations and a $3.8 million error they made from offering bonus bets, but the truth of the matter is that the TAB was broke before coronavirus cancelled most sports.

It brings to mind that famous quote from American politician Rahm Emanuel: “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.”

Coronavirus has thrown RITA a life-line excuse – or they think it has. It will also become a matter of fact the yet to be released half-year result (ending January 2020) will show RITA was about $4 million behind budget and regardless of the Covid-19 explosion worldwide was heading for another disastrous end of year result.

In the SOI (Statement Of Intent) RITA said: “Net profit before distributions for the 2019/20 financial year is budgeted at $165.8 million, an increase of $29.1 million (+21.3%) on the net profit before distributions for 2018/19 of $136.7 million. It is underpinned by a combination of revenue growth including full-year benefits from the new Fixed Odds Betting platform, recovery in elite betting activity, growth in gaming and other key revenue initiatives, and a reduction in operating expenses.”

The $165.8 million is a pipedream and is now likely to be closer to $130 million

That appeared on the RITA website on 12/11/19. The $165.8 million is a pipedream and is now likely to be closer to $130 million; a budget-miss result of something like $35 million – it’s inevitable the TAB will soon announce stakes money decreases because it’s hard to see the Government fronting with any cash.

The reason it gets worse between now and year’s end is because the RITA budget took into account increased profits from two new sport betting options introduced from February, which included something called ‘hockey stick.’  But it hasn’t happened and now with sport cancelled the budget falls into the ‘miss by a mile’ category.

The other thing about this story is that it reeks of stage-management by RITA. How else could this story have gone to Stuff had it not been sent in a press release to the media website or a Stuff staff reporter had not received an invitation to attend?

Stephen Henry: Coronavirus is threatening to bring down the TAB, which has asked for a cash injection from the Government so it can keep operating.

In the story, it said: “Coronavirus is threatening to bring down the TAB, which has asked for a cash injection from the Government so it can keep operating.

“It’s serious enough that we have briefed Government today on what it means for us and how they can help, and that includes injecting cash into the business so we can continue to operate.

“Henry told stunned workers that everything was being done to minimise its operating costs, including:

* Using fewer cameras at race meetings, doing away with Trackside presenters on course, sending fewer production staff, and not operating betting totes.
* Cutting a wide range of expenses like travel and overtime – “we should have cut the sausage rolls today.”

Chief Operating Officer Stephen Henry quoted above has been part of the leadership team for a considerable period and coincidentally was with the Ministry of Foreign Affairs with John Allen before arriving at NZRB – not long after John Allen made the shift.

Everyone in racing should be offended by the Henry joke about saving the sausage rolls

Everyone in racing should be offended by the Henry joke about saving the sausage rolls when he has been part of the NZRB gravy-train that over two-and-a-half years ago was earmarked for ‘urgent review of the operating costs.’

Needless to say, that review never happened, and Henry remains one of six in the RITA leadership team on a $300,000/year or above salary, and the costs of RITA according to the last annual report was $211 million. Also, Henry mentioned saving travel expenses – that shouldn’t be too difficult given the same annual report says they have been spending $54,000 a week on travel and accommodation.

A decent CEO could have gone into NZRB/RITA at any stage in recent history and slashed the costs, but no one in power has displayed either the know-how or the appetite to do it, or both. John Allen was politically appointed, and his tenure cost the industry $200 million when you consider the cost of building the FOB was $50 million and the on-going commitments to pay Paddy Power and Open Bet for five and 10-year terms.

Henry’s cost-cutting is too little, too late, and his plea to the Government for a hand-out is certain to get some eyes rolling at the Beehive

Henry’s cost-cutting is too little, too late, and his plea to the Government for a hand-out is certain to get some eyes rolling at the Beehive. If three years ago, we’d had a CEO saving just 10 percent per annum of costs – a very achievable target – today we would be $64 million better off.

Just 10 percent per annum for three years and racing would not owe the ANZ Bank $35 plus million and wouldn’t be asking the Government to bail-out an institution that is now flat broke. But the thing that racing can say to the Government is that “you have been making all the appointments and this gravy-train is full of ex-Foreign Affairs and Post Office employees – so it’s mostly your fault.’  

Since NZRB finished and RITA arrived, the fortunes of racing have continued to decline. Racing was let-down by the failure of RITA to put a big broom through the management and start with Messara’s blank sheet of paper. Nothing changed of any consequence which brought to mind Einstein’s definition of insanity – ‘doing the same thing over and over again and expecting different results.’

That definition is now a cliché in racing. Dean McKenzie replaced John Allen in January, but on appearances, he looks to have become part of their team rather than making any waves with the introduction of an alternative style of leadership to turn the tide. RITA’s submission to the Select Committee was a massive disappointment to the industry, and McKenzie’s decision to leave the building immediately afterwards and not listen to the three-code submission was rightly viewed with some derision.

Information received today tells a different story to the $3.8 million error on bonus bets that Hendry is claiming. And that is, it wasn’t an error but involves some creative accounting that requires an independent investigation. The word of description was ‘smokescreen.’

The original intention this morning wasn’t to write any of the material you have read above. The focus was intended to be a document entitled ‘NZ Racing and Trotting Conferences Off-Course Betting Scheme,’ which came into my possession about three weeks ago. It’s possibly the most important paper for New Zealand racing’s future if indeed it can survive the immediate issues of coronavirus, insolvency, and the prospect of racing closing for a period.

The document sets out the formation of the TAB – it’s dated 20th September 1950. It clearly states that the New Zealand Racing Conference and the New Zealand Trotting Conference came together to start the TAB and that the start-up costs were underwritten by the racing clubs of New Zealand.

Racing has said this anecdotally for years, but to see it in writing is a big deal – it’s proof the codes and the clubs own the TAB and that the tail has been wagging the dog for years, and that now needs to change. The document is 70-years-old, but unless a subsequent paper exists which cedes the ownership to the Government (and none exists), racing is the rightful owner.

The beautiful thing is it makes the proposed legislation of the Racing Reform Bill redundant. The Bill at its first reading can be summarised as a paper that took away all of racing’s rights and decision making, stole the IP, provided the Minister with the eternal right of interference and control, and opened the door for sports to come in and be a partner in the business at no cost to them. It did nothing to improve racing.

Ownership of the TAB means that racing can, with pride and a significant degree of scorn towards the pretenders, hold up its middle finger to all that nonsense and say, ‘we’ll have back what’s ours, thank you very much.’

The Transport and Infrastructure Select Committee had a meeting yesterday with the PCO (Parliamentary Counsel Office) to initiate the Bills rewriting, which is expected to incorporate something like 120 changes and became a document far more acceptable to the needs of racing.

The second reading of the Racing Reform Bill could now be by mid to late April – that’s if Covid-19 hasn’t closed down parliament by that time?

To read the entire Stuff article entitled Coronavirus: TAB in crisis over sports cancellations, click here: https://www.stuff.co.nz/national/health/coronavirus/120423822/coronavirus-tab-in-crisis-over-sports-cancellations?cid=facebook.post&fbclid=IwAR06SbVv7X_g6OVHDJyJC5X-FRzjhdzsia-J26iG5uOjWgcXfiR42_s2xNg

RITA appointments next crucial step for Racing Minister Peters

by Brian de Lore
Published 3 May 2019

Racing Minister Winston Peters returned to New Zealand from a round trip to Iceland, Scandinavia, and Doha last Sunday, but before jet-lag had set in, and within 24 hours of his return, he had kindly made himself available for a phone interview for The Optimist.

Peters, in a very jovial mood, light-heartedly suggested an alternative name to The Optimist by saying, “You should have called your column Phoenix Rising, but never mind.” That suggestion, I conceded, could be placed on hold for future consideration.

But what wasn’t on hold was the Minister’s enthusiasm, his commitment, and his energy to drive the racing industry reform well beyond positive recent announcements that have sparked reform and set a new legislative process into motion.

“What I can say to the industry,” began Peters, “is that we have commenced with a thorough process of what was happening, and what was not happening against international comparatives.

“We have come to some serious conclusions, and we have done our utmost to put every one of those conclusions into effect as fast as we possibly could, given the timeframe we had – this governmental legislation is not as fast as many would have hoped but is still very rapid in terms of the big picture.

“There is so much going on in parliament with other legislation; I am pleased to be able to say that it’s on track in the tight schedule we had available to us.”

The Minister’s time reference was an acknowledgment that while progress during his 18-months as Minister had seemed tediously slow to an ailing racing fraternity, in terms of the legislative process through parliament, the headway achieved was at full gallop.

By July 1st, racing people will have a very clear picture of where we are going,” continued Peters. “They should know well in advance of where we are heading if they have read the Cabinet papers, and if they have read the Messara Report – the first paper to read was the Messara Report, the second was the MAC Interim Report, and the third was the Cabinet Papers, and the fourth will be the bill itself passing through parliament.

“The framework has been set-up, and alongside that, I hope to announce something well before Budget 2019 on May 29th, I can’t say exactly when because I haven’t got the time fixed, but I hope to make a clear statement well before the Budget, and  about what it means for racing now. When I know, I’ll tell you where it will be.”

Predictably, this imminent announcement may be about the building of a synthetic or all-weather track, but also due for release soon is the personnel make-up of RITA (Racing Industry Transition Authority) which will take control of the racing industry on July 1st. It seems logical to assume that once these people have been chosen and know who they are, their names will quickly be made public.

One could argue that the make-up of RITA will be the single most important decision Minister Peters will make for racing this year. Why, because racing has a history of poor governance with the wrong people getting appointed to key positions which has influenced the precarious financial predicament that racing faces today.

Putting that argument to the Minister, he responded: “No appropriate or correct system will work without the personnel to go with it. You have to look at the big picture, and I want to turn this industry around and have a serious revival of racing in this country and getting the systems right, and we have to stick to the plan and clearly the people, the right men and women to run it, is critical.

“I’m seriously happy with MAC (Ministerial Advisory Committee) – they started work on the 4th of January; they have shown commitment, completed a lot of work and made a lot of progress. We got the right man in Messara to write the review, and we have the right man in McKenzie – I’m happy with that.”

Logic would tell you that subject to availability all five members of MAC will transition to RITA with the addition of a further two for a total seven. The appointment of the additional two and the skills they should possess is documented in Cabinet Paper Two on page six under the heading of Governance of Rita.

Governance of RITA says:

29. The RITA Board will govern both the BAU (business as usual) functions of the former NZRB and the management of change necessary for the successful transition to the new arrangements proposed by the Messara Report. To enable the appointment of a refreshed Board for RITA, Bill No. 1 will end the terms of serving NZRB Board members when RITA is established.

30. A Board of up to 7 members is proposed for RITA, with the majority having skills related to change and the remainder with skills related to BAU. To carry out these roles effectively, the members of RITA should collectively have competencies that include governance and:

30.1 industry expertise to effectively manage racing functions;

30.2 knowledge and experience of sport at a national level;

30.3 commercial and/or legal expertise to manage devolution of assets, functions and responsibilities; and

30.4 change management expertise to oversee the transition process.

31. It is important that the members of RITA have a strong primary duty to act in the best interest of the racing industry as a whole and the achievement of the transition objectives. Accordingly, it is not intended to create specific code representative positions on the RITA Board and the Chair will not be independent (as currently with the NZRB). This is a change from the current requirements for appointment to the NZRB Board, where the chairs of each racing code (or their delegates) are appointed. 

32. The Minister for Racing will provide a paper to the Appointments and Honours (APH) Committee as soon as possible on the proposed membership and Chair of RITA, to enable governance arrangements to be in place for the intended establishment date of 1 July 2019. The MAC was created as a precursor to the establishment of RITA. The Minister for Racing is looking for continuity between the work of the MAC and RITA.

33. The appointments will address the need for the membership of RITA to include a national level sports perspective, either through the appointment of MAC members who have both racing and sports experience, or the appointment of a specific person with a sports background. The Minister for Sport and Recreation will be consulted regarding this.”

The requirements in clause 30 are all met by existing members of MAC, but in clause 31 it says: “It is important that the members of the RITA have a strong primary duty to act in the best interest of the racing industry.”

As only two of the five MAC members have a strong racing background, it seems logical that the two additional members should essentially be racing people that can contribute with a range of skills including personalities conducive to the transition of management. It is not a requirement of the new legislation for the establishment of RITA to have code representatives as was the case with the soon to be defunct NZRB.  

Recently a small window of opportunity was accorded to the three codes to nominate prospective members for RITA, but no guarantee exists on the Minister’s behalf to appoint any of the nominees.

The danger for racing is the prospect of the DIA having too much say about the make-up of RITA, and subjecting the additional board members to the criteria of the State Services Commission. Retired former Deputy Commissioner of Police Malcolm Burgess was last month appointed to review the RIU (Racing Integrity Unit).

Burgess is not a racing man and has been asked to deliver his report by the end of May. Is it too skeptical to think the depth of the report, given the non-racing background of Burgess and the time permitted for its completion, will render it of doubtful value? Would not have retired NSW Chief Stipendiary Steward Ray Murrihy been a better choice if neutrality to racing’s participants had been a defining factor.

As it says at the top of this story, the appointment of RITA is crucial to the racing industry’s future. RITA’s role begins on July 1st, and it has the job of enacting the contents of Bill No. 1, and afterwards later in the year everything in Bill No. 2. Once all the transitioning to the new legislation is complete, in around one year, a permanent structure commences, and RacingNZ replaces RITA.

In the meantime, NZRB is going to miss their budget by a country mile by season’s end, and RITA will inherit the deficit. In last year’s SOI (Statement Of Intent) the budgeted profit was $173 million – the shortfall may be around $25 million. If racing gets the duty back on Budget Day on May 29th, and you add-in income from voluntary racefields and savings are made in other areas, stakes money will stay at the current level in the new season.

The three Cabinet papers released last month contain a large number of redactions which could influence one to believe something more for racing than just the duty might be on the cards for the industry.

Cheekily pressing the Minister for budget information during this week’s chat, he responded, “You know what the term ‘budget sensitive’ means – I can’t breach that.

“But I can say this, that due to the comprehensive and detailed nature of budgets which has been the case for decades now, there will be budgetary announcements made before the 29th of May – I am looking for a space to make a pre-budget announcement which would answer your question.”  

The Good News & The Bad News

by Brian de Lore
Published 26 April 2019

April has been a defining month for the thoroughbred industry, and participants with their eye on the ball will be fully aware it of its polarisation of emotions with a combination of good news and bad news.

The good news came a couple of weeks ago when Cabinet gave its tick of approval to three detail-laden papers on racing which resulted from the comprehensive 123-page Interim Report that MAC (Ministerial Advisory Committee) presented to Minister Peters on 28th of February 2019.

It’s the best news racing’s had in many years because it did two things in respect of the relationship this ailing industry has with its Minister Winston Peters. It firstly justified in every way the faith that racing placed in Peters at the last election at which the veteran politician only just scraped home with the help of the racing vote.

Secondly, it vindicated Peters in everything he has been telling racing since commencing his second term as Minister 18 months ago. And that was, he would fix racing, but fix it his way, and fix it permanently with legislation set in stone that would serve the industry for the long haul.

The thumbs-up from Cabinet which came on April 17th should have had the stakeholders dancing in the streets for it substantiated everything that Peters had promised well over a year ago. For many, it had been a not so patient wait which was vindicated by the incredible amount of detail and planning it encapsulated.

It had seemed like an eternity waiting for this progress, but the information released made it worthwhile. If you don’t believe it’s the best news for many-a-year, then it’s likely you haven’t read it. If the Messara Report had provided the foundation-stone for this new structure, then these Cabinet papers have brought to light an impressive framework. Now we await the cladding and the roof.

But with the good news has come the bad news. The Informant ceased publication at the beginning of April and is currently the subject of a restructuring or renegotiation for a return to the newsstands. When or if it happens is unknown to this writer, but a further meeting is believed to be on the agenda for Monday the 29th of April.

More bad news surfaced in the form of TAB turnover figures for 2019 for betting on horses and greyhound meetings in New Zealand. It is stressed these figures do not include Australian horse racing, gaming or sports betting.

For the first 15 weeks of the year, betting was down $17,091,124. That equates to more than $4 million in less profit for the same period in 2018 – for little more than one-quarter of the season. April was also the month the NZRB half-yearly report analysis could be made, and that shows that debt has increased from $10 million at the end of last season to $25 million by the end of January.  The NZRB’s revolving credit facility has a limit of $25 million, so it’s, reached.

The report also says that cash on hand was at $8 million at January’s end, but $4 million owed to Gaming. The monthly distributions the NZRB makes to the codes to fund stakes is $14 million. Does that mean you need to take 60 or 90 days to pay the bills instead of the usual 30? Will RITA inherit a liquidity crisis on July 1st? – highly likely.

The racing industry is in a precarious financial state!

But back to the good news. The Cabinet papers which total 45 pages in all are worth a read and available at this URL:  www.dia.govt.nz/racing-review  How the papers are structured is contained in the opening of Cabinet paper 1, shown below:

“Review of Racing: Paper 1 – Overview of the New Zealand Racing Industry and identified issues

Proposal

1. This Cabinet paper is one of a suite of three that will collectively provide the Government’s first legislative response to the recommendations of the Review of the New Zealand Racing Industry (the Messara Report). This paper recommends that the Cabinet agree to support the overall intent of the Messara Report, and agree the broad proposed content of the two amendment Bills to be introduced in 2019 – the Racing Amendment Bill No 1 (Bill No. 1) and Racing Amendment Bill No 2 (Bill No. 2).

2. The two accompanying papers provide detailed information on the proposed content of Bill No. 1: 2.1

Paper 2 – Policy decisions on transitional governance to drive change. This paper proposes new racing industry governance arrangements for the transition period leading up to the formation of the new industry structure. 2.2

Paper 3 – Proposals for immediately increasing revenue for the racing industry. This paper addresses the racing industry’s immediate need for supplementary revenue to ensure it is financially sustainable into the future.”

The upshot of these three papers is they are 90 percent true to the Messara Report in accordance with MAC’s Interim Report. Reference to the Messara Report is extensive, and deviation is rare.

If you haven’t read the entire 123 pages of the MAC Interim Report, then take the time to read the Executive Summary which is the first five pages at the beginning. To find it also go to the URL shown above.

In meetings with MAC Chair Dean McKenzie since his appointment, he has always stressed the integrity of the Messara Report and the importance of revenue.

In summary, it says, “The Messara Report sets the challenge for the industry,” and in the next paragraph it goes on to say, “the recommendations will deliver more revenue to increase prizemoney levels; better governance across all industry organisations; a renewed focus on integrity and animal welfare; a more efficient network of racing venues that cater for national, regional and community racing; and investment in our ageing facilities and investment in our thoroughbred tracks (both turf and synthetic), to provide top-class racing, training and trialling surfaces year-round.”

This week McKenzie told the optimist: “In the Executive Summary we focus on the revenue aspect – we are prioritising the revenue side of it which is at the front of it; we are trying to create positive momentum by generating as much revenue as we can, as early as we can.

“And we have to make sure it’s manageable because with the two-bill set-up – we couldn’t put everything into one bill – because we just wouldn’t have had time to get this process moving.”

One of racing’s biggest potential revenue earners is outsourcing the TAB. In the Executive Summary, it says, ‘…outsourcing is not a foregone conclusion.’ I asked McKenzie to elaborate:

“You have to make sure you know the whole picture before you can decide, said McKenzie. “Arguably, the formation of the TAB in 1951 is the single most important thing that’s ever happened in NZ racing. If you say that’s true, then the future of the TAB is one of the most important issues, and the process to undertake the decision-making has to be robust and watertight. I don’t think anyone would dispute that.

“No one around our committee table is saying we should, or we shouldn’t be outsourcing – we have focused on getting the process right. So, whatever the outcome is at the end of that process it will be the best one for the industry. We have some work going on at the moment with our industry group, but a lot of that work will fall into that RITA timeline by the July 1st.

“If we get the process right, the industry will know we have come to the correct conclusion. It must be based on the most robust process to gain the best result – it’s very crucial for the future of the industry.”

So much to write about but not enough space in this first, genuine posting on the theoptimist.co.nz. To understand how the structure works between now and when RITA take control of the industry, go to the URL above and MAC’s Interim Report Recommendations which on page 25 you will find ‘The Work Plan for the Committee.’ A comprehensive schedule of events is listed.

To conclude, it is appropriate to salute Racing Minister Winston Peters promise to the industry relative to the future of racing which has now been rubber-stamped by Cabinet. In my article entitled, ‘Minister says he’s not leaving port without plotting the correct course,’ published on February 8th, 2018, one week after the Messara’s ‘start with a blank sheet of paper,’ article, he said the following:

“I had put a lot of work into trying to understand why this industry is stalled, and it became more and more apparent, as I went around and talked to people, that we have a major structural problem here which requires full and genuine reform.

“And that is to do with the Racing Act that has been around for a very long time and which is clear to me, doesn’t fit the bill for where we should now be heading.

“By that, I mean with a truly sustainable plan and not a short term fix – we can’t rush in with something that would only be temporary and dangerous for the industry long term – the three industries or codes we are talking about have to be changed to benefit racing overall.

“If the press and your fellow commentators want a short term fix then they have the wrong Minister. I want to make sure the fix is sustainable and will get us to the end with the right environment for owners, punters and all others associated with the industry and their codes – long term sustainability which turns around prizemoney.

“If it turns around the quality of people coming into the industry and gives them the confidence to be in it and ensures that the number of impediments like track standards are seriously considered in the critical areas of investment, then it will be worth it.”

“I’ve gone back and questioned the Act’s integrity and asked the question – ‘are the codes capable of looking after themselves as three separate units, or can we soldier on with the serious material differences between them’? And in the end, I thought the only thing these codes are interested in is themselves and the ability to be masters of their own destiny inside a better framework.

“In short, we are going back to first principles here – the Act can wait until we get it right and that might not be too far away, but I need to talk to the three codes individually.

“We want a structural framework to survive this government and go on to long-term success rather than have a big start, a boost and then a stall and all sorts of people grappling with impediments.

“Since I got this job it’s been my priority to find out what’s going on in within the three codes, and what I’m staring in the face that’s seriously wrong – the two components of cost and the income – both seriously unsatisfactory.

“It’s premature to give detail now, but we’ve been working on a time-frame and the path we’re taking. I want to ensure all three codes can see the wisdom of that, and that they all understand that’s it’s the health of all three that concerns me, and I want to ensure we maximise in every sense the income that’s capable of being generated which is demonstratively not happening at present.”

The Minister’s comments above cannot be viewed as anything but visionary!