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!
