ONTARIO HORSE RACINGIndustry Information Meeting

Country Heritage Park | Niagara Room

Thursday, July 24, 2014

WELCOME

ONTARIO HORSE RACINGIndustry Information Meeting

Country Heritage Park Thursday, July 24, 2014

AGENDA

1:00 Elmer Buchanan Welcome and Introductions

1:15 John Snobelen OHR Presentation: The Business of Horse Racing

2:00 Elmer Buchanan Industry Feedback

2:30 David Reimer Developing an Industry “IT Roadmap”

THE BUSINESS OF RACING

How Ontario’s Horse Racing Industry is Funded

REVENUE

The revenue is driven by three main sources:

1. Commissions on Wagering*2. Pari-Mutuel Tax Reduction*3. Horse Racing Partnership Funding Program

THE BUSINESS OF RACINGREVENUE

*Based on an estimated $825M Ontario wagering

THE BUSINESS OF RACINGREVENUE

COMMISSIONS

The commissions earned from horseplayers providefoundation funding for the industry.

THE BUSINESS OF RACINGCOMMISSIONS

PARI-MUTUAL TAX REDUCTION

“PMTR”

PMTR is money that the industry receives from the reduction of the government’s share of the tax on wagering.

PMTR provides funding for a variety of industry initiatives.

THE BUSINESS OF RACINGPARI-MUTUEL TAX REDUCTION

PMTR Allocation % $ Million

HIP Levy 3.00 24.75

Horsepeople & Associations 0.40 3.30

Racetrack Operations 1.25 10.31

Customer Benefits 1.50 12.38

Regulatory Levy (ORC) 0.75 6.19

Total 6.90 56.93

HORSE RACING PARTNERSHIP FUNDING PROGRAM

“HRPFP”

A significant source of funds is the direct contribution to racing from the Ontario government.

These funds total $100 million per year. The majority of the Partnership Funding is allocated to Purses.

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

$100,000,000

THE BUSINESS OF RACINGHORSE RACING PARTNERSHIP FUNDING PROGRAM

THE BUSINESS OF RACINGHORSE RACING PARTNERSHIP FUNDING PROGRAM

2013 OMAF Funding Traditionally, funding for racing was split about 50/50 between operational funding and purses. In 2013 the temporary funding model put about $60 million into tracks allowing 100% of commissions to go to purses. Public funding of racetrack operations was a short-term solution due to its potential to reduce motivation to maintain and grow pari-mutuel wagering. The long-term solution needed to accomplish two things; focus the entire industry on increasing commission revenue and provide certainty to horsepersons and breeders.

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

The mix of operational and purse funding is a crucial ingredient in the model.

The new model balances incentives to grow commissions, while providing horsepeople and breeders with certainty on race dates and purse levels.

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

28%

27%6%

39%

Commissions to Operating Commissions to PursesHRPFP to Operating HRPFP to Purses

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

1. Ajax Downs2. Clinton Raceway3. Flamboro Downs4. Georgian Downs5. Grand River Raceway6. Hanover Raceway7. Mohawk Racetrack8. The Raceway at Western Fair District9. Woodbine Racetrack

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Core Racetracks

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Core Racetracks

Core racetracks collectively generate 92% of the wagering in Ontario.

They receive about 73% of partnership funding.

Ajax Downs *| Clinton | Flamboro | Georgian | Grand River | Hanover | Mohawk | Western Fair | Woodbine

*While Ajax is a core track, it is funded out of FAR support.

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Core RacetracksAjax Downs | Clinton | Flamboro | Georgian | Grand River | Hanover | Mohawk | Western Fair | Woodbine

In exchange for this funding the core tracks agree to guarantee 758 race days and over $121 million in purses.

Racetrack Race Dates Expected Purses

WB, TB 133 $ 57,000,000

WB/Mo, SB 222 $ 40,100,000

Ajax 27 $ 2,500,000

Western 125 $ 7,500,000

Grand River 48 $ 2,880,000

Flamboro 132 $ 7,920,000

Georgian 40 $ 2,400,000

Clinton 15 $ 562,500

Hanover 16 $ 600,000

Core Total 758 $ 121,462,500

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Core RacetracksAjax Downs | Clinton | Flamboro | Georgian | Grand River | Hanover | Mohawk | Western Fair | Woodbine

The core racetracks accept the risk of generating increased revenue from wagering. This keeps the people with the most direct relationship with horseplayers, the tracks, focused on increasing the wagering on Ontario races.

1. Dresden Raceway2. Hiawatha Horse Park3. Kawartha Downs4. Lakeshore

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Regional Racetracks

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Regional RacetracksDresden| Hiawatha | Kawartha | Lakeshore

Regional racetracks face a different challenge than Ontario’s core tracks. Regional tracks offer important grassroots racing opportunities but these races attract less wagering than the core product. To support grassroots racing, the Partnership Plan provides funding with more flexibility. While core tracks can only use Partnership Plan funds for purses the regional tracks can use this funding for operations and purses. Hiawatha is utilizing existing purse underpayments prior to receiving purse funding.

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

Regional RacetracksDresden| Hiawatha | Kawartha | Lakeshore

1. Fort Erie2. Ajax Downs3. Rideau Carleton Raceway

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

“FAR” Racetracks

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

FAR RacetracksFort Erie| Ajax Downs | Rideau Carleton

Fort Erie Racetrack, Ajax Downs and Rideau Carleton Raceway are unique in the Ontario racing mix. Each offers racing that does not fit with the overall program: • Fort Erie offers Thoroughbred racing at a venue that does not

receive OLG rent• Ajax is the only track that offers Quarter Horse racing• RCR offers a mix of Standardbred racing at a location that

precludes regular interaction with core tracks. To meet these needs, the Partnership Plan provides these tracks with operational and purse support geared to their unique needs.

THE BUSINESS OF RACINGFIVE-YEAR PARTNERSHIP FUNDING PROGRAM

FAR RacetracksFort Erie| Ajax Downs | Rideau Carleton

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The Business of RacingHow Ontario’s Horse Racing Industry is Funded

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