Assessment of the Ontario Racing Commission

Final Report to the Ontario Ministry of Agriculture and Food

Submitted by: Edward J. Martin, August 16, 2013

Table of Contents

  1. Executive Summary
  2. Introduction
  3. Background
  4. Authority and Responsibility
  5. Perception of the ORC
  6. ORC Structure and Oversight
  7. Categorization of ORC Functions
  8. Basic Regulation of Racing Activity
  9. Business Regulation of Racing Industry
  10. Marketing, Promotion/Economic Development Functions
  11. Allocation of ORC Resources
  12. Observations and Assessment
  13. Acknowledgements

Executive Summary

  • After a review of ORC governing statutes, historical and current budgets, organization structure, comparable racing regulatory entity budgets and organization structures, interviews with ORC Members and management as well as a cross section of racing industry stakeholders, and interviews with key racing regulators in comparable jurisdictions, the following assessment can be made:
  • The Ontario Racing Commission Act of 2000 grants very broad authority to the ORC to "govern, direct, control and regulate horse racing in Ontario in any or all of its forms". While other jurisdictions have broad authority, it is more generally expressed absent the use of terms like "govern, direct, control". Racing Commissions generally do not direct the industry or exercise "control" except pertaining to matters of safety and integrity or in the most extreme circumstances;
  • ORC activities have been consistent with the statute and the Memorandum of Understanding with the Ministry of Finance. With the exception of the extent to which the ORC has directed the business activities of the industry, there is no function presently being performed by the ORC for which there is not precedent in another North American racing commission;
  • ORC activities can be classified in three categories: basic regulation of racing activity; business regulation of racing industry; marketing, economic development and promotion;
  • ORC involvement in the business regulation, specifically the implementation of the Ontario Racing Program, is perceived by many stakeholders to be beyond the scope of what is appropriate for a racing regulator;
  • The ORC responsibility for approving race dates is consistent with functions performed by racing regulatory entities in North America, although in some that review is perfunctory and limited to ensuring compliance with statutes requiring a minimum level of racing activity;
  • There is considerable controversy not only over the role of the ORC in determining the future of Ontario racing but of any government agency to do so in a way that minimizes the ability of private businesses to make or affect decisions with impact on their investments;
  • There is support for the ORC to continue the performance of basic core regulatory functions pertaining to the integrity of the sport and its execution of these responsibilities is deemed "adequate" or "very well" by most stakeholders;
  • ORC budgets have been reduced 29.8% since 2012 to reflect the decline in racing activity despite an industry perception to the contrary. Stakeholders advocate for more involved independent oversight over ORC budgets and the determination of industry assessments;
  • ORC's licensing, officiating, investigatory, enforcement and adjudication activities are consistent with those deployed by other racing regulatory entities;
  • ORC reliance on officers from the Ontario Provincial Police (OPP) have driven investigator personnel costs beyond compensation levels for investigators of other racing regulatory entities;
  • Most ORC employees are exclusive to the core integrity of racing function;
  • ORC efforts to consult with the industry are viewed as excessive, time consuming and nonproductive by many participants;
  • In appointing Members of the ORC the Provincial government has placed an emphasis on selecting individuals who have been involved with the industry they will regulate. ORC staff, however, has limited experience in development of large scale business strategies, although the staff does possess the necessary expertise to fulfill core regulatory functions;
  • The administration of the Horse Improvement and Quarter Horse Racing Industry Development Programs are not "core" regulatory functions, but now reside in the ORC in part by past racing industry design. Current industry desire is for greater self-governance over the promotion of the racing product and various breeds.

Introduction

The regulation of pari-mutuel horse racing to safeguard the public interest, maintain a level playing field for participants, and ensure a reputation of integrity that is essential for the marketing of the sport is the responsibility of government regulatory agencies in North America.

Race fixing, money laundering, embezzlements, illicit human and equine drug use, animal abuse, infiltration of organized crime and drug cartels, fraud, collusion, money laundering and cyber crimes have all been associated at one time or another with horse racing.

In the past decade, racing commissions in North America have:

  • forced a CEO of a major US company to admit to a racing related conspiracy to defraud the government by his race tracks;
  • uncovered horrific instances of animal abuse;
  • uncovered the use of illegal and previously unknown performance enhancing substances in horses;
  • cracked a conspiracy to compromise the bet processing system and change losing wagers into winning ones; and,
  • developed links between routine racing violations and criminal networks involved in drug trafficking.

While the daily duties of those employed in racing commissions often seem mundane, they require a keen eye to identify collusion in the conduct of a race or knowledge of equine care to be able to question when something does not appear proper. This is a speciality that is unique to a sport where those who regulate it must understand equine care, veterinary medicine, chemistry, pharmacology, money laundering, statistical analysis and probability, interrogation, source development, evidence gathering, due process, and the law.

Government racing commissions are the front line agencies who guard against illicit and unethical behavior. Often they are considered the "forgotten" agencies in government as they are relatively small and unique in function. Racing regulation is a niche that is easily misunderstood except by those extensively involved in the racing business.

Background

On May 31, 2013, the Province of Ontario's Ministry of Agriculture and Food issued a Request for Proposals for a Review of the Activities of the Ontario Racing Commission. Responses were due shortly thereafter, a vendor was selected and the project started on June 21, 2013.

This report is a general Review of the Regulatory and "Non-regulatory" activities of the Ontario Racing Commission (ORC) including the allocation of resources.

Included in this report is a general comparison to other government racing regulatory entities in North America responsible for regulating a comparable level of horse racing activity.

To prepare this report the author has consulted with prominent racing industry stakeholders identified by the Ministry through a combination of personal and telephonic interviews as well as an online survey. Essential to this assessment were personal meetings with the current senior management and staff of the ORC. In addition, the author has also met with the Chair and three current Members of the ORC as well as Ministry staff.

This report does not quote stakeholders by name consistent with a promise not to do so in order to encourage very frank and productive conversations.

It is not the purview of this review to question decisions that had been made by the ORC, the Ministry they were part of, or by Government. This report is intended to provide an assessment of the functions currently performed by the ORC, compare those to comparable racing regulatory entities, and solicit comments from those who have primary dealings with the ORC. It is also intended to provide useful information to those responsible for making decisions affecting the future role of the ORC.

Authority and Responsibility

The Ontario Racing Commission Act of 2000 clearly grants broad powers to the ORC to "govern, direct, control and regulate horse racing in Ontario in any or all of its forms".

This governing statute also specifically grants authority to the ORC to "govern, control and regulate the operation of race tracks" in the Province. These powers were affirmed and clearly stated as a "mandate" for the ORC to perform in the 2011 Memorandum of Understanding between the Minister of Finance and the agency.

In the United States racing commissions are granted broad statutory authority as well, although they do not exercise "control" except in the most extreme circumstances, such as the taking for cause of a state granted franchise to operate a race track on publicly owned property. Racing commissions have denied renewal or revoked a license to operate a race track for integrity reasons or financial mismanagement.

Perhaps a different philosophy about the role of government in those jurisdictions has precluded them from taking affirmative action to control and direct the industry they regulate, as has been mandated of the ORC consistent with the Statute.

For example, the California Horse Racing Board (CHRB) is a racing regulatory entity responsible for a level of racing activity comparable to the ORC. They were created to oversee racing industry activity in California and are governed by the California Horse Racing Law1.

The CHRB's role is clearly articulated in the following mission statement, which does not include the terms "govern" or "direct":

"The Mission of the California Horse Racing Board is to ensure the integrity, viability, and safety of the California horse-racing industry by regulating pari-mutuel wagering for the protection of the public, promoting horse racing, breeding and wagering opportunities, and fostering safe racing through the development and enforcement of track safety standards and regulations for the health and welfare of all participants."

In New York, state statues grant the following authority: "general jurisdiction over all horse racing activities and all pari-mutuel betting activities, both on-track and off-track, in the state and over the corporations, associations, and persons engaged therein."2

Again, there is no mention of "govern" or "control".

It is common regulatory practice for a racing commission to consider applications for race dates and to referee disputes between competing tracks. It is also common for commissions to referee disputes between organizations representing horsemen and the track where they race. Review and approval of race days and times is normal for racing regulatory entities.

The degree a racing commission exercises its broad or general authority varies from one jurisdiction to another. In some jurisdictions the review of a track's race day application is perfunctory and intended only to assess compliance with governing statutory provisions requiring racing activity at minimum levels.

This is the case in New York. The New York Gaming Commission, previously the New York Racing and Wagering Board, once attempted to arrange a circuit of racing activity using its authority to set race dates. Discussions were held with the seven standardbred facilities to explore the possibility of agreement for a statewide racing schedule. After much discussion, the private entities did not agree. The regulator in this instance chose not to exercise its authority to impose a schedule on the industry, despite its firm belief that it would have been in the best interest of the New York standardbred industry at that time.

In other jurisdictions, i.e. Illinois, race day considerations become a contentious matter with the regulator ultimately making decisions as to who will race when.

The exercise of limits upon the exercise of statutory authority is usually reflective of the general direction given by the elected or appointive officials to whom the racing regulatory entity reports.

The ORC, as a result of tracks requesting 150 fewer race days in the Province and affecting major changes affecting Ontario Racing, developed plans (the Ontario Racing Program) to guide the industry in what they believed an orderly manner to manage a downsizing.

Certainly, in reviewing the operations of the ORC, it is apparent that involvement in the business regulation of the racing industry has been consistent not only with the statute but the Memorandum of Understanding with the Ministry of Finance. It has also been a source of criticism by industry stakeholders who believe ORC involvement was beyond the job they perceived the ORC was to perform.

Perception of the ORC

A common complaint expressed in industry interviews has been that the ORC lacks sufficient expertise to address some of the issues it has been required to address.

Of the six current Members, only one is without direct experience in the racing industry. That individual is an attorney and given the adjudicatory role of the commission, his presence and intended contribution is consistent with similar appointments in other jurisdictions.

It is apparent that the Provincial government has sought individuals with knowledge and experience in order to fulfill the statutory mandate and has placed an emphasis on selecting individuals who have been involved with the industry they regulate.

As the ultimate decisions are made by the Commission, staff exercises an advisory and implementation role. Senior management of the ORC appears to have the experience and knowledge base necessary to perform the core regulatory functions noted later in this report. One valid criticism is that the staff does not possess the level of business management experience perceived necessary to direct and control major business entities.

It is not unusual for regulatory decisions, particularly as they pertain to an industry in decline, to be highly unpopular and subject to criticism. This is certainly true in the aggregate with regard to the ORC's exercise of its mandate to "govern, control and regulate the operation of race tracks". Some have characterized the ORC efforts as "heavy handed" or "dictatorial". Others have said "they were just doing what they were asked to do".

Obviously when government policy changes in a way that causes economic dislocation, animosity toward the government agency most directly involved with a particular constituency results, regardless of whether the policy decision was made by them or someone else. This has certainly contributed to how the ORC is perceived.

The resentment, for the most part, is the result of the ORC's business regulatory functions, exercised to transition the racing industry to the new economic realities. While no particular decision was cited, the "trust" factor, or lack thereof, was noted by many.

While the ORC takes seriously its responsibility to collaborate with the industry, participants in various advisory or consultancy efforts have expressed concern that the process is a "charade" and the ORC does not listen to the advice they are given. Others claim they "talk to too many people". Some have commented that they believed the conclusions had been predetermined and the advisory meetings were a waste of time and resources.

It is difficult to assess whether this in fact has been the case, but it is important to note that considerable effort has been made to consult with the industry. Government regulatory agencies are required to obtain and consider public and industry comment even though they bear sole responsibility to make an informed decision affecting public policy.

Certainly if the result of the collaborative and consultation process is the development of a negative perception, then the process itself should be reviewed. Perhaps shifting to an on-line consultive process to limit costs associated with multiple face to face meetings is something to be considered as a way to reduce the number of such meetings that now occur. Input would be submitted in writing and a clear record established.

The Ontario racing industry, like the industry in most other racing jurisdictions, has not been unified and has, according to ORC staff, not successfully worked to develop a consensus approach to the business issues it faces. Assessing and ratifying an industry consensus would have been the preferred path according to ORC staff. Absent a unified or consensus industry approach, the ORC perceives it has a responsibility and duty to fill a void, a perception consistent with the governing statute and previous MOU it had operated under.

ORC Structure and Oversight

The ORC structure is similar to most other racing regulatory entities. A governmentally appointed Commission of part-time or per diem Members that is supported by a professional agency staff.

As with many jurisdictions, Ontario has had difficulty settling on the appropriate place in government for the ORC to reside. During the past five years, the ORC has been assigned to four different Ministries: Energy and Infrastructure; Finance; Government Services; and now the Ministry of Agriculture and Food.

Finding the appropriate "home" for the racing regulatory entity is not unique to Ontario and there is no model for assigning a racing commission to an appropriate place in government.

In some jurisdictions the commission is part of law enforcement. In Texas the Racing Commission is part of the State Police. In New Jersey the Commission is part of the Attorney General's Office.

Some jurisdictions have combined the racing commission with the gaming commission. This is true in Iowa and Massachusetts. (Note: Massachusetts had their racing commission assigned to the Department of Consumer Affairs.) In New York, the newly formed New York Gaming Commission not only regulates casino gaming, charitable gambling, and racing but they operate the New York Lottery as well. In this jurisdiction, administrative costs are spread across the three forms of gambling with individual divisions responsible for regulating each.

In Saskatchewan, a much smaller racing jurisdiction, the racing commission was disestablished and its functions were amalgamated into the Saskatchewan Liquor and Gaming Authority.

The State of Delaware has two commissions, one for thoroughbred racing and another for standardbred racing. They both are part of the Department of Agriculture, but are two separate distinct government agencies with separate Directors and staff.

In Pennsylvania, there are two commissions that are part of that state's Department of Agriculture, but they are supported by one government agency.

Many jurisdictions have adopted the Independent Regulatory Commission model where the executive (i.e. Governor or Premier) appoints the Members of the commission subject to legislative confirmation. Upon confirmation they are empowered to act independently of political influence and do not report to any executive agency. Budgets are often proposed by the executive and set by legislative action.

In some cases these Independent Regulatory Commissions are self funded as the ORC currently is. It is important to note, however, that the self funding mechanism is often determined by statute and is not left to the discretion of the regulatory entity. This is the case in New York and many other prominent jurisdictions.

The ORC budget is self determined and must have a review of the Minister of the Ministry they are part of. ORC staff reports that they have, in the past, submitted a three year plan for review and approval before adoption. Upon adoption, the ORC has the ability to assess costs upon the industry sufficient to fund operations.

Some have criticized what is perceived to be an ability of the ORC to determine its own budget and assess fees without adequate oversight. Certainly a structure is in place for Ministry budgetary review, although the changing economic situation of the Ontario racing industry needs to be considered by the responsible Ministry (currently OMAF) for reviewing the ORC proposed budget going forward.

The involvement of independent budgetary review and assessment is the norm in other racing regulatory jurisdictions. In most instances the racing commission requests a budget based upon needs, it is then reviewed and submitted to a public (i.e. Legislative) process where input is received and considered. Only then is it modified and approved, usually by a separate publicly accountable entity or institution of government.

The fact that the support staff proposes a budget and the ORC ultimately must adopt a budget leaves many in the industry with the impression that they have little real impact on a budget they ultimately are responsible to pay. The level of Ministry oversight of ORC budgets may not be fully appreciated and may have varied over the years depending on the Ministry. This oversight may need to be more effectively communicated if the current system is to continue.

Many racing regulatory jurisdictions operate with funds appropriated from normal government revenues and allocated through the traditional budgetary process. As "general fund" agencies, they are financially accountable to the process determinant of their appropriation. Some racing regulatory jurisdictions are funded through assessments on industry, but those assessments are determined by third party entities such as a legislative body. Those regulatory entities are then limited to what they can expend by the revenues received from the assessment. Excess or emergency expenditures require special application and approval.

Some industry stakeholders have proposed that the ORC be folded into the Alcohol and Gaming Commission of Ontario (AGCO) as a way to save money and streamline some redundancies, particularly in licensing. Certainly the concept of sharing certain administrative functions with other government agencies has, out of necessity, become the practice in other jurisdictions.

The concept of combining a racing regulatory body with a gaming regulatory agency is not new and has been attempted in numerous North American jurisdictions. As noted above, it currently is how a much smaller industry is regulated in Saskatchewan and Iowa. New York, as a more comparable jurisdiction in size and scope, has a long standing history of combining racing and gaming regulation in one government agency that regulates casinos, racing, bingo, and other forms of charitable gaming.

Some U.S. States have attempted to combine racing and gaming regulatory entities but have faced fierce opposition from racing interests concerned that the issues affecting tracks and horsemen will somehow be diluted and not given adequate attention in a larger organization handling more lucrative projects. Whether these concerns are valid is dependent upon the commitment of the management of the combined agency to address racing related needs and issues.

One industry stakeholder proposed that within OMAF a Secretariat for Horse Racing, Breeding and Training be created that would be staffed by a Junior Minister and staff with all ORC functions folded into it.

Most racing regulatory entities are organized similar to the ORC, an independent commission supported by a professional staff. There are two jurisdictions in the United States that have regulated racing without a commission, the States of Michigan and Florida. In these jurisdictions the Director of the regulatory agency or division is the primary regulator. Michigan abandoned this structure and combined their Office of Racing Commissioner with the Gaming Control Board. Florida is currently the only entity that empowers a single individual to regulate racing as Director of the Division of Pari-Mutuel Wagering in the Department of Business Professional Regulation.

Categorization of ORC Functions

While a purpose of this paper is to categorize the various functions of the ORC into regulatory and non-regulatory, it is important to note that there is no function presently being performed by the ORC for which there is not precedent in another North American racing commission.

The functions of the ORC fall into three distinct categories:

  • Basic Regulation of Racing Activity
  • Business Regulation of Racing Industry
  • Marketing and Promotion/Economic Development

Basic Regulation of Racing Activity

The basic regulation of racing activity at the ORC involves 67 employees (FT/PT) and includes:

  • Licensing and performing background examinations on participants; Licensing and performing background examinations on racetracks, including ownership and operators;
  • Formulating Rules - integrity and safety;
  • Officiating the racing contests;
  • Ensuring participant and equine safety;
  • Setting conditions on certain wager types;
  • Enforcing Rules through prosecution;
  • Investigation of rule infractions;
  • Out of Competition Testing;
  • Interaction with Law Enforcement; and,
  • Adjudication of appeals of infraction enforcement actions.

It should be noted, that all functions itemized above are common to racing regulatory entities and are necessary to ensure the public confidence in the integrity and fairness of the race contests as well as the safety of the participants and horses.

Business Regulation of Racing Industry

The performance of these functions affect the conduct of the racing business by racetracks and have a significant affect on owners, horsemen, and the breeding industry in Ontario as well as the economics of operating a race track:

  • Review and approval of racetrack operational plans;
  • Assignment of race days;
  • Determination of purse allocation;
  • Assignment of the wagering levy;
  • Determination of licensing fees;
  • Assessment of other costs (i.e. Equine Medication Control and Drug Task Force); and,
  • Development of racing industry business strategies.

Marketing and Promotion/Economic Development

The functions currently performed at the ORC that fall under this category are:

  • Management of the Ontario Horse Improvement Program;
  • Management of the Ontario Quarter Horse Racing Program; and,
  • Management of the Ontario Standardbred Improvement Program (including the Sire Stakes Program).

Twenty-eight racing industry stakeholders were requested to participate in a survey designed to measure the level of importance they assign to each ORC function as well as how well they believe the ORC performs in each functional area.

Twenty one responded and indicated their affiliations as follows: Racing Manager - Western Fair District; Clinton Raceway; Central Ontario Standardbred Association; CTHS Ontario Division President; Standardbred owner and breeder; Sudbury Downs; SBOA President & Assistant Farm Manager, Seelster Farms Inc.; Ajax Downs; breeder/owner; Rideau Carleton Raceway; ORC; SBOA Director; Quarter Racing Owners of Ontario; CEO:FELRC Fort Erie; Standardbred Canada; CTHS; SBOA; Owner Breeder Trainer; and thoroughbred owner/breeder.

This chart illustrates the level of importance the Ontario racing industry stakeholders gave to various ORC functions.

 

This chart illustrates how well the industry perceived the ORC is performing its various functions.

 

Basic Regulation of Racing Activity

The functions included in this category represent the absolute base necessities for the regulation of the integrity of racing contests in order to safeguard the public interest as well as ensure the safety of participants and horses.

These functions are necessary regardless of the level of racing activity in Ontario going forward. Not included in this category is the assignment of race dates, which has been categorized as a business regulation, although assignment of race dates is viewed by colleague racing regulatory entities as part of the basic regulation of racing.

(NOTE: Should the Ministry restructure the ORC to assign business regulatory responsibilities elsewhere, it may want to consider leaving the authority to approve or suspend race days with the ORC should there ever be an integrity issue that would warrant the suspension of racing activity.)

It is important to note the existence of a federal agency responsible for drug testing, wagering security, and approval of simulcast matters. This represents a considerable regulatory responsibility that, if reduced or eliminated, would shift responsibility and costs to the ORC. These functions currently are handled by the federal Canadian Pari-Mutuel Agency (CPMA).

Of the ORC's seventy-nine employees, sixty-seven are exclusively dealing with matters in this function category. This does not include administrative support or central management.

As noted above the following are considered basic regulation for the integrity of the race contests and are common responsibilities for racing regulatory agencies of government:

Licensing and Background Examinations of Participants

ORC licensing actions are consistent with those deployed elsewhere with the exception that they do not rely upon licensee fingerprints to access criminal history records, which they are able to obtain without prints. Initial due diligence is performed upon initial license application. Two OPP officers are assigned to license due diligence. The ORC issues over 26,000 licenses each year.

ORC management has indicated a desire to move toward utilization of online licensing which would provide greater customer convenience and could potentially hold the line on staff expenses.

One stakeholder questioned the necessity of the ORC to individually license the members of the Board of a horsemen's association who already hold other ORC licenses. The ORC may wish to reconsider whether this is necessary in that they already have jurisdiction over these individuals by virtue of the existing racing license. Certainly if an individual did not possess an ORC license and was to serve on the Board of a horseman's association, this requirement would make sense.

In the United States, individual state racing commissions have historically maintained individual data management systems for licensing. This has been identified as a redundancy in that racing regulatory licensing systems, for the most part, hold the same fields of data. The centralization of the development, operation, and maintenance of a central licensing data service has been identified as a potential way for individual commissions to avoid the periodic cost of software and server upgrades. The Association of Racing Commissioners International has recently developed that service and is offering it for minimal cost to its U.S. members. The ORC may benefit from exploring this option as a potential cost saving measure going forward.

Currently the ORC license term is one year. This is not unusual for many racing regulatory entities. Some have moved to longer license terms as a way to save money on licensing staff. Those that have do not believe it has endangered the integrity of the sport. The ORC may wish to consider a longer license term.

Another issue discussed by racing regulatory entities struggling with restricted budgets has been whether to assess the costs of a due diligence investigation on the licensee through modification of the license application fee. While this has not been done completely in any jurisdiction, several jurisdictions, most notably Kentucky, have increased fees to help offset costs.

This chart illustrates the stakeholder response when asked to address the issue of allocating the cost of due diligence background examination for licensing purposes.

This chart illustrates the stakeholder response when asked to address the issue of allocating the cost of due diligence background examination for licensing purposes.

Licensing Racetracks, Owners and Operators

It is common and appropriate for racing regulatory entities to conduct a due diligence on the owners, Board Members, and operators of those entities conducting racing or processing wagers. Most regulators have not found issues involving individuals at this level, but there have been instances in some jurisdictions where it has been necessary to require the exclusion of someone who has been convicted of a crime or infraction to be removed from a Board or prevented from being issued a track operator's license.

The granting of an ORC license gives the commission jurisdiction over these individuals who may be in a position to exercise a significant amount of influence on a track or wagering company.

This is an appropriate function despite it being questioned by some industry stakeholders, particularly for those facilities that only race a minimal number of days.

Formulating Rules - Integrity and Safety

The necessity of this function is obvious and the ORC has performed admirably in this area, according to many stakeholder comments. Some were critical of ORC consultation meetings saying they left with the impression that their input was either unnecessary or not listened to or that a predetermined conclusion had already been reached. Others claim the ORC talks to too many people before making a decision.

The ORC takes its responsibility to consult with those affected by potential regulatory policies seriously.

As the sport of racing is the same regardless of jurisdiction, the rules of racing in an environment heavily dependent on the simulcast distribution of racing signals and the acceptance of wagers from other tracks, Provinces and countries should be uniform as much as possible so as not to confuse the fan base or participants.

While this is an admirable goal, the temptation to develop unique rules for a racing regulatory body is common for many. The development of rules can consume significant staff resources over time.

The ORC may wish to consider reliance on the Model Rules developed by the Association of Racing Commissioners International (RCI) as a starting point when developing rule modifications as a way to save staff time and effort. There is significant stakeholder support for the ORC to rely upon the RCI Model Rules as often as practical as evidenced from the chart in this section.

There is significant stakeholder support for the ORC to rely upon the RCI Model Rules as often as practical as evidenced from the chart in this section.

Officiating the Racing Contests

This is a basic function of any racing regulatory entity. The industry norm is to have three officials in the "stand" (i.e. Stewards Stand or Judges Box) to perform the various duties associated with officiating the contest and in immediately assessing riding or driving infractions that may affect placement. Those decisions are not made unilaterally, but by the three officials.

To ensure public confidence it is important that Stewards and Judges are accredited by the Racing Officials Accreditation Program (ROAP). Some, but not all, ORC officials are accredited. The ORC should consider making this a requirement.

Industry stakeholders facing declining revenues and concerned about the level of regulatory assessments have questioned the necessity to have three officials in the "stand". The ORC has taken steps to innovate in an effort to reduce the number of officials necessary to be physically present at the track through their utilization of a Central Adjudication Room, known as the "CA Room".

The "CA Room" places a Steward/Judge in the ORC offices and brings racing signals in using current real time technology. This central Steward/Judge participates in the deliberations with the other two track-based officials in making determinations. Through the staggering of post-times, this has enabled the ORC to achieve a modest reduction in the personnel costs associated with officiating races.

The ORC is the first racing regulatory entity in North America to pilot this reform and this innovation is being watched closely by others to determine whether or not to emulate.

One suggestion by a stakeholder is to use the CA Room as an instant appeal on riding or driving violations as a way to avoid a costly adjudication process that could take months and result in a reversal of a placing decision that might reassign purse monies but do nothing to correct the fact that payments have already been made to bettors. This concept has merit and the ORC should consider this.

Ensuring Participant and Equine Safety

This function is presently performed by the ORC working with track licensees.

Pre-race examinations of horses is performed by the track veterinarians working under the direction of the ORC Veterinarian. This is a cost effective approach utilized by many North American racing regulatory entities. Some commissions rely upon having their own regulatory veterinarian at every track. Given the budgetary constraints on the Ontario racing industry and the ORC, the current approach may make the most sense.

The issue has been raised as to whether ORC reliance on the track veterinarian working at the direction of the ORC veterinarian is a potential conflict of interest in that the track has an interest in full fields, meaning the maximum number of horses participating in each contest. Certainly the track has an interest in full fields, but the track also has an interest in making sure only healthy and sound horses participate. The negative public reaction to equine breakdowns in the sport as a whole and at a track specifically far outweighs a single race concern for a full field in the mind of most track operators.

Setting Conditions on Certain Wager Types

This is an appropriate and common role for the racing regulator to perform as a way of ensuring public confidence. The RCI Model Rules referenced above itemize conditions that should be placed on various types of wagers. In some cases they have been incorporated by reference by racing regulatory entities and the CPMA.

The Canadian Pari-Mutuel Agency (CPMA) is closely involved with the review of RCI Model Rules pertaining to wagering. A CPMA staff member is Chair of the committee that writes model rules in this area.

Enforcing Rules Through Prosecution

When a violation is found to have occurred, the prosecution of that violation is a necessity as there must be a consequence for non-adherence to the rules. Unfortunately prosecutions can be a costly endeavor for any racing regulatory entity and can take long periods of time as those charged exercise their rights and pursue all legal remedies.

The ORC has a capable and knowledgable legal staff and relies on in-house counsel. Some smaller commissions - i.e. Indiana - out source this activity, but such an approach could prove to be far more costly to a regulatory entity that supervises as many racing contests as the ORC does.

Racing regulatory law is a speciality. ORC legal staff should participate in racing specific continuing education programs conducted by either Albany Law School, the University of Louisville School of Law, or Racing Commissions International (RCI). These are held periodically and the programs focus on racing regulatory issues and could be of benefit to the ORC.

Investigation and Out of Competition Testing

The investigation of rule infractions is an area where most industry stakeholders have given the ORC high marks. Some, however, have questioned tactics and the extent of what is perceived to be a costly involvement of the Ontario Provincial Police (OPP) in basic racing regulatory matters.

The ORC has a staff of 2 full-time Level I investigators and 2 full-time and 3 part-time Level II investigators dedicated to the conduct of investigations.

Level I investigators are described by ORC management as responsible for basic compliance matters. Level II investigators handle more serious investigations.

There are six full-time OPP uniformed officers under contract to the ORC. There is one Supervisor (Staff Sgt.) and three uniformed officers for compliance and drug control. In addition, there are two uniformed officers for due diligence on licensing.

The total number of investigators at the ORC is thirteen.

The California Horse Racing Board employs 17 investigators.

The "war on drugs" is a top priority for industry stakeholders and is a major investigatory component of racing regulatory entities everywhere. The extent to which a commission can fund an adequate investigatory staff is often dependent on external budgetary considerations. Having "boots on the ground" is widely recognized as the most effective way to deter unethical behavior.

Having said that, the challenge for most major jurisdiction racing regulatory entities has been how to fund an adequate level of investigators. Some, frankly, don't.

The rule of thumb for many racing commissions is to have at least one investigator at each track. In New York, the major NYRA venue has two investigators and the other tracks each have one. They are augmented by a staff of "floating" investigators.

The ORC situation is somewhat unique due to the large number of tracks that do not keep horses on track property, but rely on ship-ins from farms or training centers. This complicates matters by requiring the ORC to have a program that requires the investigators to go where the horses are cared for.

To assess whether the staffing level of the investigations unit is comparable to other racing jurisdictions, one must consider the number of racing days that need to be policed. Ontario is second only to Florida in terms of the number of racing days.

The following chart shows the number of racing days of major jurisdictions and the number of investigators each racing regulatory entity employs.

Jurisdiction Race Dates Investigators
Florida
4167
12
Ontario
1644
13
New York
1328
21
West Virginia
1010
1
California
835
17
Ohio
833
8
Texas
506
2
Kentucky
277
2
New Jersey
275
12

Perhaps a better way to assess the strength of a commission's investigatory force is to measure race days per investigator. The following chart demonstrates where the ORC stood in 2011.

Regulator Day/Investigator
Florida
347.25
Ontario
126.46
New York
63.24
West Virginia
1,010.00
California
49.12
Ohio
104.13
Texas
253.00
Kentucky
138.50
New Jersey
22.92


The chart below shows visually where the ORC ranks in terms of days/investigator:

A number of industry stakeholders have questioned the cost of the ORC's investigatory force, specifically the use of uniformed OPP officers. Some question whether OPP officers have the knowledge base to effectively police proper equine management and preparation for a race. Certainly professional police training is useful for tracing the sources of illegal drugs, interviews of suspects, and the collection of evidence.

A salary comparison of compensation3 for investigators at other racing regulatory entities reveals the following4:

    Average Salary Maximum Minimum
California Investigator
$67,610
$133,186
$20,932
Florida Investigator
$40,549
$48,503
$37,134
Illinois Investigator
$56,113
$57,574
$54,653
Kentucky Investigator
$48,225
$49,855
$46,594
Minnesota Investigator
$65,575
$69,780
$61,370
New Jersey Investigator
$72,653
$102,687
$53,673
New York Investigator
$40,488
$91,054
$6,620
Ohio Investigator
$39,428
$69,255
$7,345
Texas Investigator
$42,122
$58,534
$25,709

In Ontario, ORC level 1 investigators are compensated at a grade 7 level, $53,501 - $66,876 per annum.

ORC level 2 investigators are compensated at a grade 8 level, $59,985 - $74,981 per annum.

Under the contract with the OPP, the cost per investigator can exceed $90,000 per annum.

Most racing regulatory entities use civilian investigators, not professional police. Many recruit retired officers or individuals with a law enforcement background. Those with law enforcement experience are often augmented by other individuals with some experience in racing or equine care.

Again there is no model as to how to structure an investigatory force. The ORC's use of police is not unique. It has been done in New Jersey and Iowa. The Texas Racing Commission is actually part of the Texas State Police, although their investigators are civilians and compensated at a rate lower than Texas Rangers.

Given the budgetary constraints posed on the industry by the reduction in race days and the dramatic reduction of non-racing related gaming revenue, the ORC may want to consider performing a cost-benefit analysis of the current arrangement as part of a reconsideration of the extent of its continued reliance on the OPP. It may be possible to maintain the current number of investigatory staff while reducing cost by transitioning to more civilian investigators.

Interaction with Law Enforcement

Most racing regulatory entities have reason to interact with professional law enforcement in certain instances. This is an appropriate activity for the ORC and government agencies often cooperate on investigations. Certainly the ORC's involvement of OPP officers facilitates law enforcement linkage and the sharing of information.

The ORC is pioneering a racing information intelligence sharing system built on a Microsoft Sharepoint Platform. This is an important initiative and has attracted interest globally from racing investigators and regulatory entities. The sharing of information between investigators in different jurisdictions is essential to a racing regulatory system struggling to cope with declining budgets.

ORC staff has developed the system using existing resources and future costs are expected to be minimal and limited to the ORC's involvement in the program. A cost sharing with participating jurisdictions is currently in formation to fund data cloud services, software licensee fees and a quality assurance review of information being submitted.

As the ORC currently maintains internet service and network servers for its existing operations, the initial phase of this project has been developed at no additional cost to the agency beyond what it would normally be expected to do in support of its existing staff. The Australian Racing Board as well as US jurisdictions through Racing Commissioners International have expressed an interest in partnering in this project.

Adjudication of Appeals of Infraction Enforcement Actions

A necessary and sometimes significant expense for any racing commission is the adjudication process. The ORC relies on part-time commission Members to consider appeals. This structure is common to most racing regulatory entities.

In New York, the Gaming Commission assigns a case to a Hearing Officer, usually a full-time employee, to determine the facts in the case through a formal hearing before being presented to the Commission for a determination of whether to accept, reject or modify the recommendation of the Hearing Officer. In Texas, regulatory hearings are assigned to an entirely separate agency and the process can take considerably longer than if heard directly by the Commission or commission staff.

Because of the specialized nature of racing regulation involving issues of chemistry, animal welfare and racing interference, the industry is best served by having those who must consider appeals be individuals with a familiarity of racing regulatory rules, the racing industry, appropriate rider and driver conduct in a contest and horses. Additional knowledge of wagering fraud, money laundering and odds manipulation is also helpful.

The ORC relies on in-house counsel to prosecute cases. This approach is more cost effective that utilizing outside counsel given the magnitude of the racing activity conducted in the Province. Only one jurisdiction in North America relies on outside counsel for prosecutions, Indiana. Smaller jurisdictions are known to utilize part-time counsel.

The approach used by the ORC is the regulatory norm. There are, however, numerous examples where other racing regulatory entities are required to use government counsel in other agencies to prosecute racing cases and then reimburse that agency for the cost of counsel. These arrangements can prove costly and can be a drain on a racing regulatory commission budget while running the risk that the assigned prosecutor may lack racing regulatory expertise.

It is difficult to predict how many appeals will be filed and whether the appellant will be satisfied with a determination by the ORC enough to avoid taking the case further into the courts.

The ORC, as with other racing regulators, has been plagued with frivolous appeals. While a licensee facing suspension may find it in his or her interest to appeal a violation in order to continue racing and buy time before a sanction is imposed, such actions deplete scarce ORC resources and ultimately pose a cost to the entire industry. In addition, the continued participation of certain individuals may cast a negative light on the Ontario racing product and send the wrong message to those who might consider unethical behavior.

Under the Racing Commission Act of 2000 and current ORC rules, the penalty for those found by the ORC to have filed a frivolous appeal is $1,500. The ORC and Ministry should review the adequacy of this penalty in that the effectiveness of its deterrent effect is questionable, according to interviews with ORC staff.

Another problem that can increase cost is the problem of those who file an appeal only to withdraw that appeal immediately prior to a scheduled hearing. Again this is done to play the system and buy time. As in all cases ORC prosecutors must prepare documents and take all steps necessary for a successful prosecution. The last minute withdrawal of an appeal not only adds to the workload but can slow down consideration of legitimate cases.

In 2005, the ORC had forty-three appeals withdrawn. In 2008, that number had dropped to twenty-four, but shot up in 2009 to forty-four. This prompted the ORC to issue Policy Directive - No. 3 (Withdrawal of Appeals) on June 7, 2010. Since then the number of appeals withdrawn has dropped considerably to seventeen in 2011 and only seven in 2012.

As frivolous and withdrawn appeals is a problem that plagues most racing regulatory entities, the industry stakeholders were asked to consider whether a cost sharing arrangement should be instituted in Ontario between the parties in appeals. Their responses are noted in the accompanying chart.

the industry stakeholders were asked to consider whether a cost sharing arrangement should be instituted in Ontario between the parties in appeals. Their responses are noted in the accompanying chart.

Business Regulation of Racing Industry

A problem common to most racing jurisdictions is the fact that the racing industry is decentralized and not united in developing strategies to compete with other forms of gaming and entertainment. Governments have struggled with this reality and have, to some extent, involved the regulator in reviewing and approving (or disapproving) certain business decisions affecting the sport.

This involvement is usually encapsulated in a requirement that the regulatory agency "act in the best interest of racing". As gambling has been a limited and highly controlled activity, one must consider that in many jurisdictions the original reason why pari-mutuel wagering was permitted on horse racing contests was to support rural and agricultural economies. As other forms of gambling have been authorized that have competed successfully with horse racing, the original intent of the racing authorization has often been lost as revenues from other gambling activity have become attractive sources of government funding.

Although it is a "business" as opposed to an "integrity" responsibility, there are no examples of racing regulatory agencies that are not responsible for the approval of racing schedules (race days). As noted earlier in this report, the approach to the exercise of that responsibility has varied. Some jurisdictions have active competition for race days while others have adopted a hands off approach and approved essentially whatever the tracks request consistent with a valid contract with the horsemen's association at that facility.

ORC staff has indicated that prior to 2010, when Ontario race tracks requested 150 fewer race days, the practice was to approve requests for race days from tracks as requested and to include the horsemen in that process. With a multi-track industry in the Province in dispute over requests to curtail some racing activity, the ORC believed it necessary to proactively position the sport and manage a decline in race days. On August 31, 2010, the ORC published a paper articulating a revised race day model for racing in Ontario, marking a greater involvement in managing this aspect of the business.

The ORC has also recently exercised the power to move monies from the purse account from one track to another. This is consistent with the statutory powers they have been granted and their perception of the mandate given.

In racing jurisdictions in the United States, the purse account is viewed as a contractual matter between the track and horsemen. The role of the regulator is limited to ensuring that any statutory required distributions or contributions are made. It is highly unusual that a racing commission has the authority to take money from the purse account at one track and transfer it to another.

In New York, audits of the purse account are viewed as a private matter between the horsemen and track. Horsemen's associations are encouraged to include an audit requirement in the annual contract with the track, an agreement required by statute usually requiring approval from the regulator.

There is considerable criticism among industry stakeholders of the level of involvement of the ORC in what they consider private business decisions. There is also concern that proposals to create another government entity to separate business regulatory responsibilities from the core regulation of racing will only shift the problem elsewhere.

The concept being resisted is that of the government micromanaging private enterprise. The sentiment expressed is that there is a lack of recognition of the considerable private investment that has been made and is at risk for industry to be excluded from major decisions impacting on those investments.

It is not unusual for a racing regulator to require the submission of racetrack operational plans. Often this is perfunctory and the regulator focuses on safety and security issues, including the integrity of the race track surface. It is fully appropriate, in the context of this submission, for the regulator to approve the track's racing officials. This is to ensure competency and public trust.

Regulators usually are not involved in assessing marketing and public convenience activities of tracks. These are often viewed as private business issues. Upon fan complaints, however, it is not unusual for a regulatory entity to raise issues to track management and, if circumstances warrant, modify a track's operational plan. These actions are largely reactive, rather than proactive.

Efforts by the ORC to coordinate industry wide business strategies have been a source of concern expressed by many industry stakeholders. Some question the level of expertise to be making these decisions for an entire industry. The ORC believes it is filling a void created by an industry that has been unable to come forward with a strategy for itself. Both concerns are valid.

Certainly it is in government's interest that an industry this important to rural economies have a structure through which they can develop a strategic plan in order to justify the public investments made in the racing industry. This is an issue the Task Force has wrestled with and it is not the intent of this project to render an opinion on their recommendations other than to note that whatever changes are made, the support of the industry stakeholders may rely on the extent they are partners in the decision making process.

As noted earlier with regard to the leveling of assessments on the industry, there is a desire on the part of industry stakeholders for independent review. In most racing regulatory jurisdictions taxes, fees and assessments on the regulated industry are the result of a government or legislative process apart from the regulator.

One option for the Ministry to consider is to require a process where the macro-strategic planning and strategic decisions can be made in partnership between government and industry to forge a consensus approach which would be presented to either the Ministry, ORC or other designee for ratification. One stakeholder proposed an alliance of racetracks through a joint venture business agreement on how to achieve the government's objectives for racing. Under this concept, the alliance would be accountable to an oversight entity.

It is clear from stakeholder interviews that if there is to be a revised regulatory structure with a reassignment of responsibilities, the definition of those responsibilities needs to be clear and precise and determined deliberately and quickly. One exasperated industry stakeholder summarized it this way: "What I know for sure is that I don't know anything for sure."

Marketing, Promotion/Economic Development Functions

The ORC administers the following programs: Horse Improvement Program, Ontario Quarter Horse Racing Program, and the Standardbred Improvement Program (including the Sire States Program).

The operation of marketing, promotion, and economic development programs from within the regulatory body is not unique to the ORC. Again, there is no model structure to emulate. It is not unusual for these programs to be housed within a regulatory entity. In some cases this is done as a result of an inability of various industry organizations and interests to organize an effective governance structure to protect the industry's larger interest as opposed to narrow interests represented by individual organizations. In others, the involvement of public funding is the determining factor that has led some governments to prefer running these programs from within a government entity.

The Ohio Racing Commission and the Kentucky Horse Racing Commission both operate and oversee programs similar to those administered by the ORC.

In California, state statute designates the California Thoroughbred Breeders Association, a private non-profit corporation, to administer the state's investment in incentive awards programs.

In New York, there are two separate government entities, the Thoroughbred Breeding and Development Fund and the Standardbred Breeding and Development Fund. Each is governed by its own Board, appointed by the Executive consistent with statutory requirements to include as members Breeders, the State's Agriculture Commissioner, and the state's top racing regulator.

The Maryland Racing Commission has a structure similar to the ORC. They administer their programs in consultation with an industry advisory committee for each breed. By statute, each committee consists of five members appointed to one year terms by the Maryland Racing Commission with the approval of the Secretary of Labor, Licensing and Regulation. Two members represent the Maryland Horse Breeders' Association, one represents the mile track associations, and one the half-mile track associations. One is a member of the Maryland Racing Commission.

In interviews with Ontario racing industry stakeholders there is a desire that the industry have a greater role in decisions pertaining to how the Horse Improvement Program, Ontario Quarter Horse Racing Program, the Standardbred Improvement Program, and Sire Stakes Program are administered.

Although an industry advisory structure is in place at the ORC, there is a desire on the part of industry to share in the decision making responsibility as the public investments will directly affect their business. Comments were very complimentary of ORC staff, but were almost universal in advocating a decision making or shared decision making model for the governance of these programs.

Some have claimed that it is a conflict of interest for the regulator to be a "partner" with the industry in breed development and marketing programs and others questioned the staff expertise on marketing matters.

There was a concern that an over emphasis on process and an insistence upon overly detailed submissions diverted attention away from the bottom line results of the programs. Some complained about the length of time it took to receive answers.

In the past the Ontario Horse Racing Industry Association (OHRIA) had been directly responsible for managing the Horse Improvement Program. OHRIA is a member based organization with limited ability to sanction those who do not comply with the requirements of the program.

Given the history of these programs and the concerns addressed by industry stakeholders, the Ministry may want to consider a "public-private" partnership approach to governance of these programs. The New York approach has worked well and may want to be considered.

A survey of industry stakeholders was conducted to assess their position on the extent of involvement the ORC could have in the governance of these programs. The following chart indicates their response.

A survey of industry stakeholders was conducted to assess their position on the extent of involvement the ORC could have in the governance of these programs. The following chart indicates their response.

 

Allocation of ORC Resources

Industry stakeholders have expressed the perception that ORC costs have ballooned. A five year review of the overall ORC budget shows that total expenses rose 6% from 2009 to 2012 and then were cut 15.9% in 2013 and another 16.6% in the pending 2014 ORC budget.

The pending 2014 ORC budget5, when finalized, would be a 29.8% reduction from 2012 expense levels. The perception of industry stakeholders that the ORC has failed to curtail expenses given the reductions in racing activity is not consistent with facts.

The ORC budget reached a high point in 2012 at $12,238,000. The ORC approved budget for 2014, which is pending at Ministry, will be $8,591,000 if approved as submitted.

The budget includes programmatic expenses, including a TCO2 testing program which had been responsibility of the Canadian Pari-Mutuel Agency. Those costs were shifted to the ORC in 2011. In 2012, TCO2 testing cost $726,000. The 2014 budget reflects the reduction in race days and those costs have been reduced to $350,000.

The Horse Improvement Program (HIP) and Quarter Horse Racing Industry Development Program (QHRIDP) expenses for 2014 are $446,000. These programs are administered by employees with the following job titles:

Position
QH
HIP
Total
Director of Industry Support
20%
30%
50%
Manager of Finance
5%
10%
15%
OSS Coordinator
0%
100%
100%
Program Coordinator
65%
15%
80%
Accounting Specialist
10%
65%
75%
Marketing & Communications Coordinator
35%
55%
90%

The largest programmatic expense is associated with the Equine Medication Control Program, which was started at the request of industry to combat problems associated with illegal drug use. Initially started as a partnership with industry involving a voluntary contribution of industry resources, it has since been made part of the ORC regulatory function and industry subsidies have been made mandatory.

Interviews with industry stakeholders have both emphasized the importance of ORC efforts to combat illicit drug use while also questioning the cost of the program given the reduction in race days. For 2014, the ORC has cut $341,000 from this program in recognition of the reduced number of race days. Contributing to the cost of this program is the level of ORC reliance on utilizing the OPP. The Ministry may wish to consider a cost-benefit analysis of OPP utilization at current levels and a partial shift to greater (not total) reliance on civilian investigators.

In listing those programs which might be considered essential to the "core" regulatory function of any racing regulatory entity, the anti-drug efforts of the ORC's Equine Medication Control and TCO2 programs would be deemed essential. The HIP and QHRIDP programs as well as the Ontario Racing Program would not.

The ORC "base" budget (absent programmatic costs) for 2014 is 33% less than the 2009 budget. The ORC "base" budget reductions started in 2012 and the pending budget for 2014 marks a 12.2% reduction from 2013 expenses. Please note the following chart.

 

  2009 2010 2011 2012 2013 2014 Bud
People
6,610
6,669
7,347
6,933
5,442
4,560
Services
3,493
3,313
3,688
4,213
3,856
3,167
Transport & Communications
1,126
1,131
893
867
793
691
Supplies
196
187
180
145
131
96
Amortization
112
107
98
80
76
77
Total Expenses
11,537
11,407
12,206
12,238
10,298
8,591

 

Programs 2009 2001 2011 2012 2013 2014 Bud
HIP
330
317
213
341
358
300
QHRIDP
98
114
123
348
178
146
Equine Medication Control
1,777
1,640
1,811
1,754
1,784
1,443
Human Drug and Alcohol
36
35
35
35
35
26
TCO2
320
726
668
350
Ontario Racing Program
232
325
207
125
Total Expenses net of Programs
9,296
9,301
9,472
8,709
7,068
6,201

There has been much discussion about splitting the HIP, OHRIDP, and activities associated with the Ontario Racing Program programs away from the ORC. Assuming the Equine Medication Control, TCO2 and Human Drug and Alcohol programs remain with no changes, the ORC's 2014 budget would be $8,020,000.

To offer a comparison as to the regulatory cost per race day in Ontario as compared to other racing regulatory jurisdictions, one must rely on 2011 statistics for which data is available to form a comparison. Note that this is prior to the reduction in Ontario days and the corresponding reduction in the ORC budget of similar changes in other racing jurisdictions.

In 2011 Ontario's regulatory cost per raceday was $7,079. The following is a comparison with other racing regulatory entities charged only with responsibility for the regulation of racing6.

Jurisdiction Race Days Budget Cost per Day
Arizona
516
$3,931,922
7,620
California
835
$11,521,558
13,798
Florida
4,167
$9,281,604
2,227
Illinois
524
$9,509,990
18,149
Kentucky
277
$3,169,692
11,443
Minnesota
102
$773,269
7,581
New Jersey
275
$7,923,626
28,813
Texas
506
$4,754,853
9,397
West Virginia
1,010
$2,765,248
2,738
Ontario
1644
$11,638,000
7,079

The next chart visually shows the cost per race day regulation in Ontario during 2011 compared with other racing jurisdictions that year.

The cost per race day regulation in Ontario during 2011 compared with other racing jurisdictions that year

A review of the budget and allocation of ORC staff shows that resources have emphasized basic and core regulatory functions consistent with those performed at other racing regulatory entities. This is not to say that considerable effort has not been dedicated to development of the Ontario Racing Program, but this has been done with existing staff and Commissioners. These efforts were added to an existing structure built to perform core regulatory functions that found itself expected to manage an industry with declining race days.

Non regulatory functions - marketing and attempts to manage a decline in the Ontario racing industry - are those functions most questioned by industry stakeholders who believe they should be performed elsewhere.

The following chart shows Position Job Title and the percentage of time dedicated to the three functional categories outlined in this assessment based upon information provided by ORC management:

Position Job Title % of time dedicated to:
Racing Activity Racing Industry Market/Promo Salary grade
Executive Director
75
20
5
16
Licensing & Purchasing Control Clerk
95
5
3
Secretary/Receptionist
100
3
Manager, Finance & Administration
80
5
15
3
Accounting Clerk
20
5
75
8
IS Coordinator
100
6
Technical Coordinator
90
10
8
Regulatory Analyst
50
50
4
Executive Secretary
100
9
Corporate Secretary
100
15
General Counsel
90
5
5
10
Litigation Counsel
100
4
Legal Secretary
100
14
Deputy Director
100
9
Assistant Supervisor - Investigations
100
7
Civilian Investigator I
100
7
Civilian Investigator I
100
8
Civilian Investigator II
100
8
Civilian Investigator II
100
8
Intelligence Analyst
100
10
Assistant Supervisor - Racing
90
10
3
Licensing & Purchasing Control Clerk
100
1
Licensing & Filing Clerk
95
5
9
Senior Judge, Standardbred Racing
100
9
Senior Judge, Standardbred Racing
100
9
Senior Judge, Standardbred Racing
100
9
Senior Judge, Standardbred Racing
100
9
Senior Judge, Standardbred Racing
100
7
Judge, Standardbred Racing
100
7
Judge, Standardbred Racing
100
7
Judge, Standardbred Racing
100
7
Judge, Standardbred Racing
100
7
Judge, Standardbred Racing
100
7
Judge, Standardbred Racing
80
20
7
Associate Racing Official
100
7
Associate Racing Official
80
20
11
Manager - Racing
100
10
Assistant Supervisor - Racing
100
9
Senior Steward, Thoroughbred Racing
100
9
Senior Steward, Thoroughbred Racing
100
7
Associate Steward, Thoroughbred Racing
100
7
Associate Steward, Thoroughbred Racing
100
n/p
Commission Veterinarian
100
PT
Due Diligence, Part-Time
100
PT
Civilian Investigator II
100
PT
Civilian Investigator II
100
PT
Civilian Investigator II
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Judge, SB Part-Time
100
PT
Associate Racing Official
100
PT
Senior Judge, SB Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Licensing Agent, Part-Time
100
PT
Admin Coordinator, Thoroughbreds
100
3
Vet Clerk Part-Time WB
100
PT
Vet Clerk, TB Part-Time
100
PT
Vet Clerk, TB Part-Time
100
PT
Licensing Agent, TB Part-Time
100
PT
Steward, QH Part-Time
100
PT
Vet Clerk, TB Part-Time
100
12
Manager, Information Services
50
50
6
Coordinator of Prgms, Mrktng & Comm.
10
90
6
OSS Administrative Coordinator
100
6
QH Program Coordinator
20
80
9

The total number of ORC FTEs is 63.34. Based on the above chart and considering the hours assigned to part-time employees, the total FTEs dedicated to function categories are as follows:

  • Regulation of Racing Activity - 56.99 FTEs
  • Regulation of Racing Industry - 1.95 FTEs
  • Marketing/Promotion - 4.4 FTEs

Track operators consistently question the level of staffing and whether the assessment on industry can be reduced given the reduction in race days.

ORC staff has indicated that various actions have been taken to reduce staff and ultimately cost. Voluntary Exit Options have resulted in the elimination of 5 full-time positions and further attrition and restructuring have eliminated another 3 positions. With a reduced number of race days, fewer hours are being assigned to part-time racing officials and licensing agents.

ORC management indicates that there have been recent staff departures and the current ORC total FTEs now stands at 59.67 as of the date of this report.

The creation of the Centralized Adjudication Room (CAR) mentioned earlier in this report has allowed for the reduction in racing officials in signature and grassroots stands from 3 to 2, resulting in some reductions in personnel, accommodation and transportation costs. TCO2 testing has been scaled back to reflect the proportionate decline in race dates and staff has indicated that additional reductions in equine out-of-competition testing and investigative resources are being implemented.

Activity Level Throughout the Year

The activity level of any racing commission is partially dependent upon the schedule of race days at the operating facilities. Because of adjudication matters, the development and promulgation of rules, licensing activity, the need to provide administrative support to the commission and employees, and a need to comply with other government mandates, it is not unusual for a racing commission to employ year round staff. Annual staff is usually augmented by part-time staff based at racetracks to officiate the contests, license the participants, and investigate infractions.

The ORC does rely upon part-time employees to provide officiating, licensing, and some veterinary support services at racetracks that operate on limited schedules.

Roughly 40%, or 27 of 67, ORC staff members assigned to "integrity" duties, are part time. These part-time employees are allocated as follows:

  • One senior judge;
  • Ten Judges;
  • One performing licensing due diligence;
  • One Quarter Horse Steward;
  • Ten Licensing Agents; and,
  • Four Veterinary Clerks.

ORC management has indicated that they have relied on part-time employees at some of the smaller venues as well as those the most distant from Toronto. The reduction in the number of race days has, in many instances, resulted in a corresponding reduction in hours for many part-time employees.

Currently, ORC management reports there are four part-time employees (2.84 FTEs) assigned to investigations; thirteen (3.13 FTEs) officiating racing contests; ten (5 FTEs) assigned to licensing; and four (2.70 FTEs) assigned to veterinary services.

Management also indicated that racing officials historically were equine breed specific, the norm for other racing regulatory entities. ORC monetary concerns have required that the cross train some racing officials to officiate at contests involving multiple breeds.

Some racing regulatory jurisdictions, particularly New York, rely upon part-time or per diem investigatory staff stationed at the tracks, augmented by full-time "floating" investigators not assigned to a particular track. The ORC investigatory force relies mostly on full time employees or contracted OPP officers. Due to the ORC's out of competition testing efforts and the fact that many tracks do not house horses on the property, there are unique challenges posed to the ORC investigatory unit.

Certainly the ORC may want to consider revisiting the investigatory staffing needs during periods of low racing activity and consider utilizing OPP personnel during periods of peak activity. Obviously if an active investigation is underway on a specific matter, the ORC will need to have appropriate staff to pursue leads and develop a case. There needs to be flexibility for those instances.

The Province has had as many as fifteen operating racetracks that necessitate a degree of core regulatory activity requiring a degree of supervision. Should the number of tracks diminish, it would necessitate a reexamination on the part of the ORC as to the level of supervisory personnel necessary to properly monitor and direct field operations and personnel.

Observations and Assessment

While a purpose of this paper is to categorize the various functions of the ORC into core regulatory and non-regulatory, it is important to note that there is no function presently being performed by the ORC for which there is not precedent in another North American racing commission. How these functions are organized within government and the extent to which government involves itself in directing an industry, varies considerably.

Assessment

  • There is considerable controversy not only over the role of the ORC in determining the future of Ontario racing but of any government agency to do so in a way that minimizes the ability of private businesses to make or affect decisions with impact on their investments;
  • There is considerable controversy over the role the ORC currently plays in the promotion of the racing product and various breeds;
  • There is support for the ORC to continue the performance of basic core regulatory functions pertaining to the integrity of the sport;
  • ORC budgets have been reduced 29.8% since 2012 to reflect the decline in racing activity, perceptions to the contrary are invalid;
  • ORC's investigatory and licensing activities are consistent with industry norms;
  • The extent of ORC reliance on officers from the Ontario Provincial Police (OPP) have driven investigator personnel costs beyond compensation levels for investigators employed by other racing regulatory entities. A cost/benefit analysis of this reliance should be performed;
  • Most ORC employees are exclusive to the core integrity of racing function;
  • ORC efforts to consult with the industry are viewed as excessive, time consuming and nonproductive by many participants;
  • ORC has successfully taken steps to discourage frivolous or withdrawn appeals, although current sanctions for frivolous appeals are limited and should be revised;
  • ORC staff has limited experience in development of large scale business strategies;
  • ORC Members have the necessary background and skill set to make racing regulatory decisions;
  • The ORC responsibility for approving race dates is consistent with functions performed by racing regulatory entities in North America, although in some jurisdictions commission review is limited to ensuring compliance with statutes requiring a minimum level of racing activity;
  • The ORC statutory authority to "govern, direct, control and regulate horse racing in Ontario in any or all of its forms" is more expansive that the authority granted to other racing regulatory entities in that it permits the ORC to govern, direct, and control track operations;
  • The ORC has had foresight in identifying coming issues the industry will face, but its efforts to manage the transition of the industry to fewer race days in what it believes was a void created by the absence of an industry developed plan has created a consternation and loss of trust on the part of many industry stakeholders;
  • The administration of the Horse Improvement and Quarter Horse Racing Industry Development Programs are not "core" regulatory functions. These programs have come to the ORC in the past by design of the industry;
  • The Ontario Racing Program implementation is perceived by many stakeholders to be beyond the scope of what is appropriate for a racing regulator, even though it is consistent with the statute and mandate the ORC has been given.

Observations

The role of government in guiding an industry experiencing an economic dislocation is a persistent public policy debate that occurs almost daily in North America, regardless of industry. This is very much the case affecting Ontario racing.

Whether one agrees with the decisions made by the ORC or not, there is a tremendous desire on the part of the track operators to be able to make decisions affecting the viability of their investments without perceived micromanagement from a government agency.

Despite the fact that the ORC has gone to great lengths to obtain industry input on a host of matters, a resentment exists and the impression left that industry concerns and advice is not being heeded and a predetermined decision already reached. The ORC is equally frustrated that the industry has not come together and put forward a self-formulated plan to transition the industry to the new economic realities. These two facts have caused an unfortunate loss of trust that apparently did not exist at its current level prior to the change in government policy concerning revenues from slots.

Finding the proper level of regulatory involvement in any industry is always a challenge. When it comes to racing, though, there is no argument that independent regulation is needed to license participants, officiate the races, make and enforce rules, impose sanctions, referee disputes, adjudicate appeals and combat illicit drug use.

This is the core of racing regulation and it is the core of the activities at the ORC. It is also where the bulk of resources are focused.

Given the economic challenges of an industry who's successful economic performance is linked directly to the ability to fund the ORC's primary regulatory functions, there is a shared interest that regulatory costs do not strangle the ability to succeed in business. One stakeholder noted that their racing schedule had been cut dramatically, yet their regulatory fee increased. How the base regulatory functions of the ORC are financed and how those costs are apportioned should be reassessed.

The ORC has been proactive in attempting to adjust to the new economic reality. Their costs are directly tied to the number of tracks and race days that are approved. If those decisions are to be made in a political or governmental arena rather than in a market where economic forces determine survival, then some consideration must also be given to ensure that the regulation of racing is adequately funded for those facilities that may be unable to survive independently in the market.

Even considering the reduced number of days, the per diem cost of racing regulation as currently envisioned in Ontario remains comparable, if not less, than New York, New Jersey, California, Illinois and Kentucky. The fact that the costs are assessed directly on the industry through licensing fees, a levy and wagering fee as opposed to being raised through a tax and then appropriated to the ORC by Government may contribute to the friction that exists.

In interviews many have advocated some oversight of the ORC budget. This may be helpful if, for no other reason, than to begin a restoration of trust and change the perception of some that the ORC is totally in control of its own destiny and the industry, who pays the bill, has no meaningful say.

The ORC and Ministry may find that certain costs can be controlled by some modest changes that would not undermine the delivery of core ORC regulatory functions. These include:

  • lengthening the term of ORC licenses;
  • changing the balance between civilian and OPP investigators;
  • utilization of online industry consultations;
  • possible utilization of RCI licensing system; and,
  • creation of an "instant" appeal process for riding and driving violations through expansion of the Central Adjudication Room (CA Room) as a way to reduce costly legal proceedings.

In addition the ORC may view a greater reliance on RCI Model Rules as a starting point when formulating rule changes. While it would be difficult to assess the extent to which such reliance might save time and effort, it could eliminate the initial steps in formulating possible rule change proposals by utilizing the existing Model Rule as a basis for industry and public comment, regardless of whether it is ultimately adopted.

The ORC and Ministry might also find it advisable to reassess the level of information and detail required to be submitted by industry or individuals seeking regulatory approval or a license. It would also be advisable to reassess whether regulatory conditions placed on the issuance of race days should require mandated expenses not associated with safety or integrity.

In order to rebuild trust with a skeptical industry, the ORC might consider a review of the timeliness of its response mechanisms when a licensee needs an answer on a time sensitive matter. Perhaps the Director could be empowered to waive normal procedures to be responsive in those cases where a licensee needs a quick answer on a pending matter that is time sensitive.

ORC staff considers industry input important on regulatory matters. The interviews associated with this assessment have uncovered issues that the ORC would be well advised to consider. There has been a concern that too much attention is given to "process" as opposed to "substance" and that "they have become overly bureaucratic". The fact that these sentiments have come up in numerous interviews indicates that this is an area that ORC management may want to focus on. Whether these sentiments are correct or not is hard to judge, but they do exist and those expressing opinions are helping to pay the budget.

In conclusion, in interviews with colleague racing regulatory entities, the Ontario Racing Commission, its Members, and staff are highly regarded by their peers. In many areas the ORC is viewed as innovative, creative, and forward-thinking. Programs at the ORC have been used as regulatory models elsewhere.

`Although not universal, the prevailing sentiment of the Ontario racing industry stakeholders interviewed for this assessment have indicated that the ORC does a good job when it comes to the basic integrity regulation of racing. Those who don't agree with that, list the need to do a better job catching those who cheat or use illicit drugs as the area in need of improvement.

This sentiment underscores the never ending challenge in Ontario and everywhere else, expressed by industry and regulators alike, that those who will cheat will consistently try new ways to do so and the challenge of combating such activity is never ending.

Acknowledgements

The following entities have provided valuable input to this assessment:

Ontario Horse Racing Industry Association (OHRIA)
Ontario Harness Horse Association (OHHA)
Standardbred Canada
Horsemen's Benevolent and Protective Association of Ontario (HBPA)
Quarter Horse Racing Owners of Ontario Inc
Standardbred Breeders of Ontario Association
Canadian Thoroughbred Horse Society - Ontario Division
Northern Horsemen's Association
Central Ontario Standardbred Association
Woodbine Entertainment Group
Western Fair Association
Clinton Raceway
Hanover Raceway
Rideau Carleton Raceway
Ajax Downs
Great Canadian Gaming
Sudbury Downs
Ontario Racing Commission Staff
ORC Chairman Rod Seiling
ORC Commissioner John W. MacDonald
ORC Commissioner Brenda Walker
ORC Commissioner Dan Nixon
Racing Commissioners International
California Horse Racing Board
Illinois Racing Commission
New York Gaming Commission
New Jersey Racing Commission
Kentucky Horse Racing Commission

About the Author

Edward J. Martin served as the Executive Director of the New York State Racing and Wagering Board from 1997 to 2005 and was responsible for the oversight of all of the Board's regulatory, enforcement, and adjudicatory activities pertaining to horse racing, casino gambling, and charitable gaming.

In 2005, Mr. Martin was selected to be President/CEO of the Association of Racing Commissioners International (ARCI), a position he now holds. The ARCI is comprised of the government regulators of racing and pari-mutuel wagering in the United States, Canada, Mexico, and the Caribbean.

The ARCI: develops best practices and model regulatory policies for racing commissions; maintains a multi-jurisdictional database of licensees and rulings to assist individual commission licensing and enforcement activities; takes a lead role in the development of racing medication policy; conducts training and continuing education programs for regulatory staff; and serves as a resource for member racing commissions and the governments they are part of.

As such, Mr. Martin has extensive knowledge of racing regulatory operations gleaned from his personal experience directing the operations of the New York State Racing and Wagering Board (now the NYS Gaming Commission) and through his experience working with the forty-three racing commissions that comprise the ARCI.

Mr. Martin also served as a Director of the Racing Medication and Testing Consortium, a founding Director of the North American Racing Academy, and has served on the Board of the Racing Industry Accreditation Program.

Mr. Martin also has a background in economic development, having once served as the Executive Deputy Commissioner (COO) of Empire State Development, New York State's economic development agency.

Footnotes

1. Chapter 4, California Business and Professions Code.

2. New York Racing, Pari-mutuel Wagering and Breeding Law.

3. Compensation is noted in Canadian dollars.

4. NOTE: Minimum salaries may be indicative of a part-time or per diem investigator.

5. Approved by the ORC Board on March 28, 2013. Submitted to the Ministry on March 31, 2013.

6. Costs are reflected in Canadian dollars.


For more information:
Toll Free: 1-877-424-1300
E-mail: ag.info.omafra@ontario.ca
Author: OMAFRA Staff
Creation Date: Not Available
Last Reviewed: 09 October 2013