Golden Gate Update: TOC Conducts Meeting Friday

The latest salvo in a rapidly escalating simulcasting dispute in Northern California has been fired by the Thoroughbred Owners of California (TOC), which hosted a meeting of owners at Golden Gate Fields Friday morning to advocate an approach of business as usual for the rest of the year.

This would mean the track stays open for training this summer and that it runs its originally scheduled race dates between Aug. 22 through Oct. 2, but that all necessary parties work together to restructure the Northern California Off-Track Wagering Inc. (NOTWINC) simulcast organization into a more “profitable business” in the long-term, said TOC CEO Greg Avioli, about his organization's position.

“We want everyone to have reached agreement prior to the first day of Golden Gate, so that Golden Gate can run its meet as originally scheduled,” said Avioli. “I'm confident it will happen because it's the best economic solution for all parties.”

This Wednesday, Stronach Group chief operating officer Tim Ritvo told the Blood-Horse that his organization, which owns Golden Gate Fields, would come good on a plan written into its race meet application to opt out of NOTWINC, and to no longer send a signal to the system's network of OTB wagering facilities, unless changes were made.

NOTWINC currently comprises 10 brick-and-mortar satellite wagering facilities. Ritvo called the organization “a broken model” in that, since its enactment, advances in wagering technologies (think TVG and Twinspires) have made the agreement effectively obsolete, to the point that now, Golden Gate is forced to subsidize the organization to keep the satellites afloat.

If no agreement is reached and Golden Gate chooses to no longer send a wagering signal to the satellites, the California Horse Racing Board (CHRB) has threatened to deny Golden Gate a license to operate its race dates later this summer. The application is scheduled for discussion and action at the next CHRB meeting June 21 at the Alameda County Fairgrounds.

According to Avioli, there are two main parts to the puzzle-whether or not the CHRB is legally allowed to authorize Golden Gate to operate this summer unbound from NOTWINC, as well as what would happen if the CHRB does just that.

If it does, “where is the Stronach Group going to find and guarantee the roughly $6.5 million that is generated to the purse account currently?” said Avioli, who added that discussions surrounding a labor agreement involving the satellites is only complicating matters. Labor costs currently account for about two-thirds of the network's total expenses.

Still, the TOC argues that Golden Gate probably won't be able to make up the revenue lost if it pulls out of NOTWINC. According to the TOC's calculations, these 10 satellite wagering facilities handled a total of $108.4 million in 2017, which constituted 41% of total wagering in Northern California. What's more, purse revenues from these satellites totaled $6.6 million, or 46% of the total purse revenue generated.

“It's a very complex set of calculations. But if you could move 100% of the wagering of the satellites to ADW, then you'd probably come out roughly the same on revenues and would reduce expenses,” he said. “But if you lose any significant percentage of it, you are going to have less purse money.”

Ritvo, however, said that his own cost analyses show that it would take 70% of the revenue currently garnered through NOTWINC to shift to ADW wagering for Golden Gate to break even, if it successfully opts out of NOTWINC. “If we don't make up 70% of it, we will go negative a little bit,” Ritvo told TDN.

“But we have to remember, and this is very important, the only declining revenue is in the OTB [satellite wagering facilities],” he said, adding that ADW revenues are expanding. “So, if we get out in front of that, and we have these nice ADW cafes, we should have a nice future.”

Which is why Ritvo is keen to trigger change immediately rather than wait another year. “We never know how these things are going to shake out, but we think we have a good plan to launch,” said Ritvo. “I'm glad they've said they want to work with us, but at the same time, everyone's afraid to take it on, and really, a lot of these guys are bureaucrats. Instead of being businessmen and taking on tough issues, it's easier to keep kicking the can down the road.”

This whole issue, however, is obscured beneath a cloudy legal pall. According to CHRB executive director Rick Baedeker, Golden Gate has the legal wherewithal to pull out of the simulcast organization, just as long as it negotiates an agreement unilaterally with the 10 brick-and-mortar satellite facilities.

“It's a technical thing where the Stronach Group have pulled out of NOTWINC, which is fine, they can do that, but then they have to operate it on their own or form another organization, but they still have to do contracts with each of the sites,” said Baedeker. “They're obliged by state law, if they operate a live race meet, to send the signal to the satellites and receive wagering from the satellites.”

The Stronach Group sees it differently. “Our legal team doesn't see it that way and our outside counsel doesn't see it that way either,” said Ritvo, who believes Golden Gate is not statutorily obligated to send a signal to the system's OTB satellites. “We have a legal disagreement on that, and that's probably what we'll be contesting in court if they don't grant us our license.”

In a further development, Los Alamitos filed a legal proceeding in the Superior Court in Orange County to get “a definitive interpretation of what the law is with respect to…the obligation of a track to transmit the audio-visual signal of its racing program for wagering purposes throughout its satellite network,” said Jack Liebau, vice president of the Los Alamitos Racing Association.

According to Liebau, of the wagering in Northern California conducted at brick and mortar facilities, 78% is done at the satellites and 22% is bet at live tracks. “What we're pointing out through that statistic is the importance of satellite wagering in Northern California as a whole,” he said. “They are significant.”

Both the state of California and the fairs themselves have invested heavily in these satellite facilities, said Liebau. “It just isn't reasonable to think that at any point in time that that investment can be made worthless at the whim of some track deciding that they don't want a satellite network any more.”

Ultimately, the Stronach Group, he said, is mandated “by law” to distribute its racing signal for wagering purposes to the 10 satellites, and cannot “unilaterally dismantle” the simulcast organization. “Those two things would be our bottom line,” he said. “But, you know, two lawyers can have three different opinions.”

The Stronach Group held a meeting at Golden Gate Thursday for the horsemen in order to reiterate its position, urging them to attend the next CHRB meeting in support of changes to NOTWINC. “We told the horsemen that we wish to change the model, that it is broken and has been broken and documented since 2010. That is the message we delivered to the horsemen; they took it reasonably well,” said Golden Gate's General Manager David Duggan.

A long-gestating idea to race all-year round at the Bay Area track was another proposal floated at the meeting. This development would deal a devastating blow to the fairs, which would, by most projections, struggle to operate race meets simultaneously with Golden Gate.

“This is between two companies, and we as horsemen shouldn't have to stand up for one or the other. I would love to see year-round racing at Golden Gate, because I believe in racing where you are training, so I'm for The Stronach Group and support them,” said trainer Blaine Wright. “But the fairs do offer a stakes schedule that Golden Gate can't compete with.”

According to California Authority of Racing Fairs (CARF) executive director Larry Swartzlander, who attended this morning's meeting, CARF and the TOC are in agreement in that the NOTWINC structure should remain in place for now, “and we should simply restructure it to become a more efficient organization,” he added.

Swartzlander said there wasn't any time frame in place to restructure NOTWINC. “We have to get past the Stronach Group-they've opted out. They're out of NOTWINC right now.” But he floated possible restructuring ideas, which could include combining the satellite networks that currently exist in Northern and Southern California. “Why do we have two organizations, SCOTWINC and NOTWINC? They both do the same thing,” he said. “Let's look at having one organization for the state.”

But Ritvo appears keen to institute change as quickly as possible, and if the matter heads to court, “we hope the judge will review it quickly, and see which side is right and which side is wrong,” he said.