Thursday, November 3, 2016

Update: the Cost of Owning a Race Horse in NewYork

It's been four years since I've taken a thorough look at what it costs to race a horse on the best circuit in America -- the New York Racing Association's (NYRA) set of three tracks, Belmont, Saratoga and, for all too long a portion of the year, Aqueduct. The last report, back in 2012, is here.

When I last wrote, New York had just begun to feel the impact of the Resorts World slot-machine emporium at Aqueduct. Four years later, despite NYRA CEO Chris Kay's creative accounting, slots account for roughly one-third of the purse money that flows to owners. It used to be said that the typical horse based in New York earned roughly half of what it cost to keep it in training; with the slot money, that's now probably closer to three-quarters. In other words, owning a thoroughbred race horse is still, for most owners, a losing game, but we're losing a little less, which means it's a bit easier to absorb those losses in exchange for the non-material joys of owning a horse.

To determine what it takes to support a horse, let's take a hypothetical New York-bred that, in the post-slot era, can run for pretty decent money. And let's say that our horse is at the track nine months a year, makes 10 starts (a  good deal higher than the national average, but we have a good trainer who doesn't warehouse horses to keep his win percentage up), and takes a three-month break on the farm. That's the same scenario I assumed in looking at costs back in 2012.

The most important element in total cost is the trainer's day rate. Back in 1999, when my Castle Village Farm partnership got started, we were paying a day rate -- for housing, feeding and training the horse -- of $65. Today, we pay our trainer $95 at day. That's a total increase over 17 years of 46%, almost exactly equal to the US rate of inflation over the same period of 44.9%. Trainers don't get rich on the day rate. In fact, those that I know who charge $95 in New York barely break even, after taking into account the cost of labor, workers comp insurance, feed and other basic necessities. True, some trainers can charge a lot more -- up to $125 a day for the elite who are blessed with owners who have so much money that it hardly matters to them. But the average blue-collar trainer is limited by the market, and right now in New York, the market rate seems to be $95.

So the basic training fee for nine months at the race track adds up to $26,030 (274 days times $95). In addition, as costs have squeezed trainers, it's become more common for them to add on extra charges for some things that used to be included in the basic day rate -- feed supplements, worming, ulcer medications, etc. Those can easily add up to another $150 a month, or $1,350 for the nine months our hypothetical horse is at the track.

And baby needs a new pair of shoes -- often. Once a month or so, or every time the horse races. Let's say 10 times a year at $170 per shoeing. Another $1,700.

After the basic training expenses, the next biggest cost is the vet bill. These vary so widely, depending on the trainer, the vet and the owner's preferences, that it's hard to come up with a reliable number. So I'll just take the one that represents an average on Castle Village Farm's bill over the past year. That's about $350 a month per horse, and I'm sure that's probably low by New York standards. So, for nine months at the track, another $3,150.

And don't forget the van bills -- up to Saratoga and back and to the farm and back, at a minimum. That's $1,200 right there. If trips to a vet clinic are needed or if the trainer has to rotate horses through his inadequate number of stalls at Saratoga, it could easily be double that.

Costs at the farm are less, but not at all negligible. An average day rate of perhaps $40 -- less for complete downtime and turnout, more for training at the farm -- adds up to $3,720 (93 days at $40; note that a horse year has 367 days, not 365, since the days that a horse moves to or from the farm are billed by both the farm and the trainer). And extras are also less at the farm, so let's say $150 for the three months combined. Ditto vet costs; let's assume $100 a month for three months, or a total of $300.

And then there are the fixed costs that are independent of how many horses an owner has or what the horse may be doing. $125 for Jockey Club registration of the owner's silks and a stable name, $1,200 (this year at least) for jockey and exercise rider insurance.

Add all that up and we're at $38,925. And that's not counting carrots for the horse when you visit the barn, reserved seats at Saratoga, meals in the over-priced track restaurants, and all the rest of personal spending that goes along with enjoying your ownership experience. Without opining on how much, if any, of these last expenses may be tax-deductible, let's say it's safe to say that $40,000 per year is pretty much the minimum you can expect to pay to keep a horse in training on the New York circuit.

So how much does your horse have to earn to break even? First, remember to take out all the deductions that are subtracted before you get the purse check. Let's take a $50,000 NY-bred maiden special weight  at Aqueduct as an example. Your horse finishes a creditable second. Watching the race, you're happy. You think you've won $10,000; purses are divided 60% to the winner, 20% to second, 10% to third, 5% to fourth, 3% to fifth, and 2% divided evenly among all the rest. But out of that comes, typically, 10% for the trainer ($1,000 in our example), 5% for the rider ($500; jockeys get 9.167% of a win purse, 5% of second money, 7.5% of third money and $100 for all other rides). Then NYRA charges $30 for Lasix and thoroughbred aftercare, and most trainers charge $25 or so for sending a groom to the track with the horse. So our second-place purse of $10,000 has shrunk to $8,445. And the deductions are proportionately bigger for a win -- bigger jockey's share, win photos, $100 for the groom, maybe another 2-3% for the barn help. It's realistic to say that, overall, the owner nets 80% of the notional purse. So, to earn back the $40,000 that the horse costs, it must win at least $50,000. In other words, depending on the level the horse races at, it has to win at least one and perhaps two races a year.

And if you're in a partnership, the horse has to do even better. One can't generalize here, because partnerships make money in a variety of ways -- by buying a horse for $50,000 and syndicating it for $150,000; by taking a piece of the purse, by charging monthly management fees, etc. But even in a fully transparent partnership like Castle Village Farm, the effective cost of keeping the horse in training is more like $50,000 than $40,000, and the horse will have to earn more like $65,000 than $50,000 to break even. In partnerships that significant mark up the price of horses they buy and syndicate, the difference can be far, far larger. Partnerships are a great way for people who can't afford to buy and support a whole horse to get into the game, and the price may be relatively modest, but there is a price.

So, as Joe Hill once said in quite a different context, good luck to all of you.

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