Feeding the horse racing beast

On a windswept morning at Bleu Valley Farm, Jeff Hilger stood at a paddock fence and dreamed about the future. "That's one of the nicest babies we've had," he said, watching a spindly-legged filly grazing alongside her mother. "She's going to be a runner."

Hilger, of Stillwater, wants to see her run at Canterbury Park. But if the Shakopee track does not win approval this year to add slot machines and become a racino, he fears Canterbury will be on the verge of closing when she begins her racing career two years from now. A steady decline in wagering at the track has led to lower purses, which several horsemen say has made it difficult to just break even during a 62-day racing season.

That, in turn, has led breeders such as Hilger to cut back dramatically or get out of the business altogether. The Minnesota Racing Commission reported only 142 thoroughbred foals were registered in 2010, the lowest number since 1998 -- and less than half the number registered just five years earlier. Racinos, horsemen say, would rescue the state's breeding industry. Without them, track officials concurred, Canterbury might not be able to attract enough horses to continue operating.

As Canterbury opens its 2011 season Friday night, racino legislation remains on the table in the Minnesota House and Senate. Canterbury President Randy Sampson believes it could win last-minute approval during negotiations over the state budget and a proposed Vikings stadium. While it's estimated that racinos could generate $125 million per year for the state, Hilger is focused on the purse money they would provide to an industry desperate for a lifeline.

"I'm at the point that if this doesn't get done, I'm out," said Hilger, a thoroughbred owner since 1989 and winner of state and national awards as Minnesota's leading breeder in 2010. "How can you make the investment if you don't even know whether Canterbury will be open? And it won't be open three years from now if we don't get this.

"You foal a baby, you raise it, and the first time it runs, it's like your kid. It would be heartbreaking to get out, but with the purses where they are, you can't make it."

Sampson said Canterbury remains on solid financial footing, though the company lost money last year for the first time in 15 years. But its total purses have declined from a peak of $149,767 per day in 2006 to $119,172 in 2010. Two of its main competitors for horses, Iowa's Prairie Meadows and Oklahoma's Remington Park, have racinos to plump up purses; for thoroughbred races in 2010, Prairie Meadows offered $227,537 per day and Remington offered $215,433, more than double what Canterbury paid.

Small returns

Last summer, Hilger and his wife, Deb, enjoyed a phenomenal season at Canterbury Park. Their five horses won 11 of 13 races, including the $55,000 Northern Lights Debutante.

But when they tallied up their earnings and subtracted expenses, they netted just $20,000. That is $10,000 less than it costs them to train and care for one horse from its birth until it begins racing at age 2. Despite their success, they have sold off 11 of their 14 broodmares; had they not done so, Jeff Hilger said, they would have been out of the business already.

Hilger used to get together with 13 other area horsemen for breakfast every Saturday. Twelve of them quit the sport, he said, because they didn't want to lose any more money. That exodus is reflected in the number of thoroughbred foals born in Minnesota, which has tumbled steadily since 2005.

In 2000, Canterbury's purses began to rise because of the money generated by its new card club. The prospect of higher earnings enticed breeders to produce more foals, and the number rose to a peak of 344 five years later. But wagering at Canterbury -- the primary source of purse money -- has plummeted from a high of $531,219 per day in 2007 to $386,223 in 2010, mirroring a national trend. That caused purses to decline, making it hard to earn enough money during the brief Canterbury season to cover the rising cost of racing.

"We're probably doing better than 95 percent of the guys in Minnesota, and we're still losing money," said David Astar, a Hastings resident who will race 10 horses at Canterbury this year and had six foals born this spring. "My first horses that won, in 2003, ran for $17,000 [purses] as maidens. This year, it's the same, and the expenses have gone up dramatically. It just costs too much to hang in there, so people just fade away."

Astar sometimes runs in states that have racinos, which have helped struggling tracks survive and occasionally thrive. A dozen states now allow casino games at racetracks, and sources other than wagering supplied 29 percent of U.S. purse revenues in 2009. From 1993 to 2009, the amount of purse money coming from casino games and other nonwagering sources increased from just over $500,000 to more than $318 million.

The racino bills introduced in the Minnesota House and Senate would allow slot machines at Canterbury and at Running Aces Harness Park in Columbus. The tracks would be required to hold at least 75 days of racing per year, and 14 percent of their share of racino proceeds would go to the Minnesota Racing Commission. It would distribute 80 percent of that money to purses, 16 percent to breeders' fund purse supplements and 4 percent to an equine industry enhancement fund, which would award grants to other horse activities and causes.

Informational hearings have been held on both bills, but no other action has been taken. Sampson said the proposal is still "very much alive" and could become a bargaining chip as the Legislature tries to hammer out a budget in the session's final days.

A long struggle

"When you look around the country at where the horse industry is growing and what's driving racing and purses, it's all racino-related," Sampson said. "We'll continue as long as we believe it's possible and as long as the public supports it."

Minnesota's horsemen point to places such as Pennsylvania, where a 2009 study credited racinos for a significant increase in jobs, tax revenue and economic impact generated by the state's horse industry. As the breeding industry declines, so does spending on goods and services such as feed, veterinary care and farm help. Astar said he spent $350,000 in Minnesota last year to care for his 30 horses, but he is considering relocating to a racino state if legislation does not pass here.

Many other Minnesotans are already foaling and racing elsewhere. Bob and Julie Petersen of Cokato, the state's leading quarter horse breeders, have begun producing one foal per year in a racino state to help offset the difficulty of covering their costs in Minnesota. Those foals can run in races that are exclusively for horses bred in those states, which offer higher purses than Canterbury pays for its Minnesota-bred races.

"We don't want to do it," Bob Petersen said. "We want to watch our horses run here. But you get to a point where you have to pay the bills."

Many in the industry acknowledge that racinos are neither a perfect nor a permanent solution to the sport's woes. To survive in the long run, racing must win new fans and boost wagering. But it also needs owners and breeders to stay in the game, and Hilger said the relief provided by slot machines is the only remedy.