by Brian de Lore
Published 18 October 2018
Limboland is a made-up word which one anxious racehorse owner has used in the past week to describe the current industry predicament of waiting for the next move from Racing Minister Winston Peters.
That owner along with a sizeable proportion of the racing industry is anxious because of the increasing awareness of the financial unsustainability of a deteriorating industry which the Messara Report describes as being in, ‘a state of serious malaise.’
The Minister has since repeated those words. That was early in his speech when launching the Messara Report on August 30th – a speech in which other salient points he raised now seem to have faded from the memory of those stakeholders now making the most noise about what’s happening next.
In that speech, Peters said, “The next step for us is to all fully digest this report. Many of the recommendations have serious merit, but they require careful consideration.
“My intention is to have officials draft a cabinet paper with a set of recommendations for decision – this is appropriate for due-process especially if government and structural proposals are being contemplated.
“In summary, that cabinet decision will determine what revised legislation is required to reset the industry, consider TAB licensing, revenue and tax incentive re-settings and other relevant matters to set future directions.
“It is a matter of public record that many aspects raised in this report are matters which I have expressed concerns about before. In particular government structure and incentivising ownership investment – if you think I am the harbinger of racing doom and gloom, then read the racing board’s annual report out this year.”
Just as the Messara Report requires serious reading and then re-reading, so does the Minister’s speech which, between the two, does provide all the questions, and all the answers. Not everyone will agree with what’s to come, but change is coming.
Peters is not a man who can be rushed, and nor has he ever been. ‘Fools rush in where angels fear to tread’ as the saying goes, but while Peters isn’t the type to claim angel status, he’s also not one for hasty decisions.
When the Minister received the Messara Report in late July, what would he have been expecting? A 10 or 12-page document with broad recommendations, perhaps? Instead, he received a comprehensive 85-page report that was not only deliberate in its approach but very authoritative and which required a highly considered response.
He was never going to go off ‘half-cocked,’ and hasn’t. Instead, Peters made a very pointed speech two months later at the launch in which he posed logical questions to the industry participants and gave every opportunity for all stakeholders to make their submissions and have their cases recorded and considered.
As the closing date of those submissions nears (October 19th), we are drawing closer to an announcement about the Report’s broad industry acceptance, ambivalence or rejection, or part in percentage thereof. No one has been denied the opportunity of having a say or being heard.
But to know what’s most likely to happen, go back to that Peters speech and also re-read the Messara Report in full and you’ll get the idea. Only those double-blinkered with double ear muffs and double Vicks stuffed up their nose will miss the point and not smell the roses.
To illustrate the point, let’s take a look at one of the submissions that have been made public. The NZRB has recently posted its submission on its website – a 39-pager that clearly flies in the face of the Minister’s speech and crucial elements of the Messara Report.
It starts with a Glenda Hughes letter which divides the Report into five issues and firstly states, “The Board does not support the need for a Racing Industry Transitional Agency (RITA). The Board already has an established mandate that can operate as a transition agency up until legislation is enacted that formalises any new arrangements. Several vacancies for Board appointments now exist.
“Furthermore, the Board is leading two existing programmes with all Codes which are progressing venue consolidation and evaluating outsourcing. These programmes would be slowed, and business continuity would be lost by the establishment of a new agency.”
But again looking back on the Minister’s speech, he says “A transitional agency will smooth the operational process, particularly if there are changes in racing’s governance structure and I envisage it playing an important role in changing signals either today or by decisions to be made by cabinet.
“It would also play an instrumental role in racecourse consolidation. It will be called RITA (Racing Industry Transition Agency) which requires good communication, good coordination and proper consultation with the racing community.”
Get out of here! Good communication, coordination, and consultation – that’s been a rarity in this industry.
The Hughes letter further says, “The Board opposes unilaterally proceeding with outsourcing the TAB before a commercial evaluation of this option is complete which has established it is clearly in the best long-term interests of New Zealand racing. Outsourcing is, in practical effect, a sale. There is no real likelihood of reversing back to a New Zealand owned and run TAB once an outsourcing process has started. There are a number of real risks with this type of structure, and it is crucial that other options (such as corporatisation) are in active consideration, and the status quo is used as a counterfactual.”
But the stakeholders are fully aware that the NZRB board know precious little about wagering and outsourcing. There is no one on that board that has any depth of experience in such matters, and despite past claims, no serious examination of outsourcing has ever been conducted.
An outsourcing deal would take a year to negotiate, and the commercial evaluation occurs during those negotiations – you only do the deal when and if it’s commercially advantageous to New Zealand.
Also, contrary to Hughes’ claim, highly successful Racing NSW CEO Peter V’landys told The Informant in August, “Having people running wagering who don’t fully understand the product is like having a podiatrist do brain surgery – he might know something about it, but he doesn’t to the level that’s required.
“The wagering business is very complicated – it’s not one that you can just go and get a CEO out of the commercial world and succeed. There are so many intricacies to it you need to know including the psychic of the punter – there’s a mountain of things you need to know,” said V’landys.
Hughes further states, “For yet another year under the current management, the Board will deliver on its forecasts. Distributions are up, staff costs are down, and we will exceed our operating profit target for 2018 of $153.9 million.”
Please – we are well over listening to this stuff! The above does not paint a remotely honest picture. The Minister in his speech said, “This year a three-year revolving credit facility was established to complement the NZRB balance sheet. Total equity is budgeted to decline by $15.6 million in just this year alone.”
NZRB were relying on a grab of the racefields income to repay the $24 million it has borrowed between this season and the previous to maintain the minimum stake at $10,000. It was a two-year deal. What happens to stakes money allocation for next season?
This industry has been saying for a long time it wants the truth. With the aid of smoke and mirrors, the annual accounts can say whatever they want, but the reality is NZRB has not delivered, and as a board, they may be heading down the Mainzeal path.
Directors are accountable for their actions. The racing industry shouldn’t put up with a continuation of sub-standard governance, and the entire NZRB board should resign now. It’s not a case of the TAB slogan ‘now you are in the game,’ but instead ‘the ‘game’s up!’
If the NZRB want more clichés then, ‘the writing is on the wall.’ The Minister in his speech made this blatantly obvious with his, “I know a dead horse when I see it,” remark which was aimed directly at NZRB.
He also said, “Racing has for years been right under the political radar screen, and sadly so. Let’s hope that racing reform today and into the future is now above politics and we get on with fixing the industry the way we should have a long time ago. We didn’t commission this report from an expert to strip it from its value.
“If we accept a series of changes they will create a cycle to revitalise this industry. Are you prepared to accept the closure of a local venue if your club remains in existence and there is a better-shared venue just down the road? Would you accept track closures if it means saving your club and creates a better pool of prizemoney to generate further investment in ownership?
“And would you be prepared to accept that the individual codes have greater powers with different distribution models and betting levies. Now, the choice is yours. The status quo has an inevitable outcome – a sad, not happy one – change we know is challenging and difficult, but we all know it’s the pathway of restoration of this great industry.”
The resignation of the entire board would bring a collective stakeholder cheer louder than we heard for the start of The Everest. Let’s keep an ear open for it.
