Sunday, July 19, 2020
Why Trainers Are Quitting the Game
(Originally published March 6, 2020, at pastthewire.com)
Amid all the rest of the chaos in racing over the past few weeks, two of New York’s leading trainers, Kiaran McLaughlin and Gary Contessa, announced that they’re closing their barns and leaving the work that each of them has done for more than 20 years. They’re not leaving racing entirely – McLaughlin has become a jockey agent, and Contessa is hoping to join racetrack management – but they each concluded that it’s impossible to make a living as a trainer, especially as a trainer based in New York, in the current economic environment.
McLaughlin and Contessa aren’t exactly low-profile horsemen. McLaughlin, who trains for Shadwell and other prominent owners, is the trainer of 2006 Horse of the Year Invasor, as well as Belmont Stakes winner Jazil, Met Mile winner and hot new sire Frosted, and Woodward winner Alpha. In his career, he’s won 1,577 races from 7,707 starts – a 20% success rate – and his horses have earned $120 million. And Contessa was for many years the king of the New York claiming circuit, with 17 race-meet titles as the winningest trainer at NYRA meetings and four New York trainer-of-the-year awards. Over the years, he’s won 2,364 races from 18,147 starts, a 13% strike rate, with total earnings of $84 million.
But now the economics of racing in New York have caught up with them. Whether at McLaughlin’s elite level or in Contessa’s blue-collar barn, it’s just become too hard to make a go of a job that requires 24/7 attention 365 days a year.
Over the years, I’ve often chatted with McLaughlin as we watched horses working on the Belmont training track. More recently, I had a long talk with Contessa about the costs of training in 2020. Both trainers were on the Board of the New York Thoroughbred Horsemen’s Association during the 14 years that I was a Director. Here’s what I learned.
Trainers in New York charge their owners anywhere from $100 (Contessa) to $125 (McLaughlin) a day to care for the owners’ horses. After adding in the other costs that owners bear – vet bills, van charges, insurance, trainers’ and jockey’s fees when horses earn money, etc. – that means a horse has to earn somewhere in the neighborhood of $65,000 a year in purse money for the owner to break even, but that’s another story. What about the trainer who’s getting that daily fee?
New York is probably the most expensive jurisdiction in North America, if not in the world, for thoroughbred trainers. Any trainer’s biggest cost is labor. In New York, the minimum wage is $15 an hour. And if the trainer has even one foreign employee on an H-2B visa (temporary foreign workers), then the trainer must pay all employees – not just those on the H-2B visas - the “prevailing wage,” which in New York is $20.20 an hour. And most trainers depend on H-2B visa workers for a significant part of their workers. So, in practice, all but the smallest trainers are paying everyone at least $20.20 an hour.
So, trainers pay hot walkers $30,000-$40,000 a year, and grooms, who tend to work longer hours, get $40,000-$50,000. In addition, trainers also pay assistants, exercise riders and, in larger barns like McLaughlin’s and Contessa’s, night watchmen. At a ratio of about six horses per hot walker and four horses per groom, and factoring in employment taxes, freelance services like bookkeeping, and workers compensation insurance, Contessa calculated that labor costs alone add up to $109 per horse per day, or almost 10% more than he was charging his owners. And that’s before feeding the horses. Hay, straw (or other bedding) and feed amount to another $23-25 per day per horse. And there aren’t any meaningful economies of scale. Every four horses means another groom; every six means another hotwalker. In addition, trainers buy various supplements, anti-ulcer treatments, etc. to keep their horses in shape, and they buy tack and other barn supplies. Sometimes these costs are passed on to the owners on the monthly bill, but not always.
So, even without the supplements, tack and supplies, it costs a trainer in New York more than $130 a day to care for each horse. For the 35 horses that Contessa had in his barn early this year, that translates to losing more than $30,000 a month, or $360,000 a year, on the day rate. Now it’s true that trainers do get a share of what their horses earn on the track; the usual figure is about 10% of earnings. Historically, most public trainers have aimed to break even on the day rate and take home that 10% of horses’ earnings to cover their living expenses, their kids’ college funds, their own medical bills, really all the necessities of life. But when you’re already bleeding $30 per day per horse, that formula doesn’t work. Contessa, for example, won 30 races last year, with total purses of $2,352,769. Not his best year ever, but a pretty decent result. But 10% of that wouldn’t even cover his day-rate shortfall. McLaughlin has a bigger cushion, since he probably loses less per day per horse, and since his owners send him more high-profile stakes horses, but even he is no longer confident that training can provide the income he needs to support his family.
Add to these ongoing issues the effect of recent New York State and federal labor department investigations, which not only required trainers to start keeping accurate time records for their worker and pay overtime but also went back as much as five years to identify workers who had not been paid what the law required. Both McLaughlin and Contessa are facing six-figure fines for past timekeeping and payment errors; there’s no way those amounts can be made up from future earnings.
And don’t forget the owners who somehow never manage to pay their bills. Recent publicity about Ahmed Zayat’s stiffing Rudy Rodriguez and Mike Maker, and about upstart big-spending owner Phoenix Thoroughbreds actually being a money-laundering operation is just the tip of the iceberg; every trainer I know in New York has at one time or another had to take over ownership of a horse whose owner had stopped paying the bills.
So it’s no surprise that these talented trainers have finally decided to leave. If anything, the surprise is that so many New York-based trainers are still in the game, mortgaging their houses and juggling the bills to continue taking care of the horses they love. With New York racing currently on hold, as Aqueduct is repurposed into a coronavirus hospital, I suspect we’ll see many more trainers finally accepting economic reality and looking for jobs that actually pay a salary.