The Ontario Racing Commission response to the Assessment on the Ontario Racing Commission

September 9, 2013

Dr. Deb Stark
Deputy Minister
Ministry of Agriculture and Food
2nd Floor, 1 Stone Road West
Guelph, ON N1G 4Y2

Re: Assessment of the Ontario Racing Commission

Dear Dr. Stark;

Thank you for providing the Ontario Racing Commission (ORC) with a copy of the assessment report and the opportunity to respond to it.

In general, the ORC feels that Mr Martin has done a commendable job in gathering stakeholder input, putting it into the appropriate context and producing a report of significant value and credibility. Mr. Martin and your Ministry should be congratulated for the quality of the outcome.

The report essentially confirms that the ORC is functioning within its legislated mandate with operations and scope that are within the "norm" of other major racing jurisdictions across North America. Mr. Martin further confirms ORC's ongoing requests that ORC Board appointees require at, the very least, a fundamental understanding of horse racing.

The report should, we suggest, be viewed within the environment the ORC has had to function since the introduction of the Slots-At-Racetrack Program (SARP) by the Province of Ontario. The ORC wishes to add to the value of the report by offering certain clarifications, observations and responses regarding the certain aspects of the report.

Background

It is important that the context of the ORC's regulation be described to more thoroughly understand the environment in which the regulator operates. The historical economic model for horse racing would have a racetrack operator offering live racing events to betting customers to earn revenue - primarily through pari-mutuel commissions although that was often supported with admission, parking, food and other ancillary revenues. In any case, the primary driver of the racing economy was the live racing event and as a result, horse people were necessary partners and suppliers of horses to the racetrack operators - and in turn they competed for and benefitted from purse money generated through the live racing event.

One of the significant unintended and misunderstood consequences of the introduction of slots parlours at the racetrack facilities was the impact on this traditional racing economic model. Both racetracks and horse people benefitted from the slots revenue - in some cases, with slots becoming more lucrative and attracting more focus than the horse racing customer. Further, the slots revenue remained largely unrelated to the live racing event. Racetracks as the slot site holders continued to receive regular cash flow and revenue, and while horse people's purse accounts benefitted similarly, the live race date remained necessary for horse people to access (win purses from) the purse account. In that way, the industry partners' perception of the live race date became fundamentally misaligned. Most horse people wanted more race dates as a necessary means of earning a living at a time when certain tracks saw the live race date as a costly, effort-intensive "necessary evil" that reduced their bottom line profitability.

SARP was introduced without consultation with the ORC. The ORC was not a party to the site holders' agreements between the racetrack operators and the Ontario Lottery and Gaming (OLG) under SARP. As a regulator of the industry and a party named in the site holders' agreements, the ORC was not even made aware of what was in the respective contracts between the tracks and the OLG. For instance, years after SARP was broadly implemented across the province, the Commission was made aware that it was to set benchmarks for the industry. The only documentation made available to the ORC was an addendum from an MOU (LOI?) stating that SARP was to benefit live racing.

The various governments since the inception of SARP have enabled the incongruity of the industry. It did so by providing ongoing access to each industry group who was unhappy or had a problem rather than tell them to go back and work it out. The regulator, by default, became the dispute resolution mechanism and exposed itself to the criticism of the industry stakeholders that it was "overstepping its mandate" whenever regulatory decisions did not favour their position. Attempts by the ORC to infuse accountability into the process were incremental at best as at each turn, the net result was a run to government with the complaint that the ORC should "stay out of their business".

Authority and Responsibility

Simply put, the ORC has acted as - and should continue to be - an "arm's length", apolitical expert that can represent government's interests with respect to the horse racing industry while meeting its mandate under the Racing Commission Act, 2000 (RCA).

The ORC has a policy of staying out of the business of licensees. However, when public money is and was at issue, under its mandate from the RCA regarding the public interest, the ORC becomes involved.

The ORC has always wanted licensees to make their own business decisions. For the most part, industry stakeholders have been unable to work with their partners with an acceptable level of accountability and transparency. Until the advent of the Ontario Racing Program (ORP), the confrontational ORC hearings process was the most likely dispute resolution mechanism, forcing the ORC to adjudicate and leave at least one unhappy party every time.

The battle lines were clear, tracks versus horse people or health and safety issues. In its most simple terms, some racetracks saw it as "less racing, more profit" and therefore pursued that business model.

The "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" unfortunately reflects the sentiment of many in the industry who refused to view SARP proceeds as public money.

There remains a constant struggle for control within the industry with some participants pursuing unfettered ability to take action in their own self interests. For some, insisting that "the ORC stay out of our business" was simply a cover for "we will tell you what were are doing (maybe)".

Business Regulation

To respond to the stakeholders' misperception that implementation of the ORP is "beyond the scope of what is appropriate", one only has to look at the circumstances that gave rise to the ORP and the ORC`s mandate according to the RCA. The proceeds of SARP did not reflect horse racing markets - some grassroots horse racing markets had more than enough purse money (Woodstock and Georgian as examples) while certain good horse racing markets did not have enough purse money due to underperforming slots (Windsor for example). Individual race track operators, working in their own best interests or that of their particular region, began competing for horses, offering inequitable purses and conducting race dates with relatively little fan interest just to distribute purse money. The ORP matched money to racing markets through purse redistribution, supported the maximization of wager on racing through standardized conditions, governed the purses per card and average purse per race and synchronized live race calendars - all of which was beneficial to the betting customer and to the province-wide industry.

Those who criticize ORP were largely the "haves" who benefited from the disproportion that existed in the unmanaged SARP world and those who want to return to an uncontrolled system where they can benefit their particular organizations or regions. The ORC, with a provincial perspective on best interest of the industry as its mandate, clearly operates with motivations more aligned with that of the provincial government than those self-interested groups. More to the point, at a meeting with the ORC Board prior to the implementation of ORP, each racetrack operator and horse peoples` association agreed to the principles and goals of the ORP.

Consultation

The ORC is not completely surprised by the comment that "ORC efforts to consult with the industry are viewed as excessive, time consuming and non-productive by many participants." It does however, highlight the absolute rejection for regulation that is demonstrated by many industry participants. In the double-edged sword of regulation, decisions without consultation would be criticized as disconnected, uninformed and lacking due process. Efforts to solicit input, encourage transparent discussion and gather a complete understanding of the issues prior to making a regulatory decision are then criticized as "time consuming and non-productive". The ORC chooses, within reasonable bounds, to be transparent and give due process despite some stakeholder frustration or misunderstanding of the intention.

Also, it should be noted that some in the industry criticize consultation when their input is not the outcome of the consultation process thereby continuing to misunderstand the difference between consultation and consensus.

The ORC embraces the report's comment regarding the review of the collaborative process. The on-line consultative process is an intriguing way of limiting costs while creating a transparent and clear record of submissions made. It further provides a valuable record of interactions leading up to the decision-making process that can be used for appeals and judicial reviews.

Budget

The ORC is pleased that the report has rightly acknowledged that claims by certain industry stakeholders that the ORC has failed to curtail expenses are not consistent with the facts.

The industry unfortunately does not appear to recognize the ORC is a service provider and that the cost of regulation is directly related to the demand for services by the industry and government. Many of those registering complaints about the ORC budget (costs) are well aware of the sizeable reductions the ORC has made and continues to do so. The complaints are more related but unstated to subsidisation controlling the regulator via budget.

It should also be noted that the table on pages 46 and 47 has incorrect salary grades for many of the positions and includes some minor outdated job titles (see attached).

Licensing of Horse Peoples Associations

The scope of the ORC's mandate is not limited to the legislation and the MOU with the Ministry. The ORC is also required through federal pari-mutuel regulations to perform certain acts as a provincial regulatory body. One such example of this is the CPMA requirement to have the official provincial regulatory body approval of the recognised horse people. This requirement relates to pari-mutuel permitting including simulcast as well as for accountability regarding the purse accounts and the need to license the organization - not just the people involved.

Due diligence is already tiered and optimized to meet a minimum standard that is reflective of the level of responsibility and influence one has within the industry.

Ensuring equine safety

The ORC responds to Mr. Martin's report by stating that there is no conflict that official veterinarians are employed by the racetracks. Repatriation of the veterinarians has been studied, considered and discussed with the industry. Tracks are required to pay for the vets but the services the vets provide are under the supervision of the ORC manager of veterinary services. Subject to both ORC oversight and their own professional standards body (the College of Veterinarians of Ontario) their loyalty remains to the health and welfare of the horse.

Investigations, OPP, and Out of Competition Testing

The Ontario Provincial Police (OPP) provide the ORC with subject matter expertise, operational and investigative policies from both the members seconded to the ORC or the various specialized units of the OPP on all of the threats to the horse racing community identified in the report.

The "war on drugs" is a top priority for industry stakeholders and is a major investigatory component of racing regulatory entities everywhere. With the lawful authorities and the specialized power granted to police officers (the powers of arrest, search of person and the ability to obtain search warrants), OPP members are necessary to investigate crimes within the industry, perform the more serious regulatory investigations, or conduct investigations that may require added independence from the regulator.

Our relationship with the OPP also permits the sharing of sensitive information among law enforcement agencies which has a significant benefit to the ORC`s efficiency through an intelligence-based approach.

Appeals Adjudication

Recognition by Mr. Martin's report in this area is very important. Adjudication drives policy. Without the two components of regulation housed in the same agency the ability to fulfill the mandate as per the RCA would be severely compromised.

The ORC was disappointed to see that, on page 20 of the report, what appears to be nine of nineteen respondents (over 47%) rated the ORC "poorly" or "needs improvement" in its performance of adjudication of legal appeals of rule violations. The ORC's high rate of success at judicial review would appear to indicate that this rating is not factual but a reflection of frustration and misunderstanding. Due process can open the door for some participants to manipulate the system - to the frustration of those competing against those individuals. The ORC cannot and does not sacrifice due process for popularity or expediency.

Purse Pooling

The ORC's ability to do so is done "in the best interest of racing" and has been upheld through judicial review.

Under the Ontario Racing Program, one way of bringing more customer-focus on the racing product was to try to flow purse monies to the best pari-mutuel markets. The industry has been purse pooling with commonly held entities for years - starting with Woodbine-Mohawk and expanding to Georgian-Flamboro, and Windsor-Woodstock-Dresden under the ORP.

Without the ability to purse pool, both Western Fair and Grand River would have had to race fewer days this year. Both are examples of strong Signature horse racing markets that are constrained by their purse accounts. By redirecting purse monies that were "stranded" as tracks ceased live racing (Windsor and Woodstock), the purse monies were made available to horse people, provided quality Signature racing to customers and increased racing opportunities to stabilize the racetracks business.

Marketing/Economic Development

For clarity, this section of the report addresses two breed improvement programs - (1) the Horse Improvement Program which includes the Thoroughbred Improvement Program and the Standardbred Ontario Sires Stakes Program and (2) the Quarter Horse Racing Industry Development Program.

Oversight and administrative responsibility for the programs has been placed with the ORC on behalf of government. The ORC assumed program responsibilities at the industry's request but continues to consult and collaborate through established industry advisory groups. The ORC has continued to demonstrate an openness to divest of these functions to another entity - however with public funding involved, government will need to evaluate the capabilities and accountability of the recipient organization prior to initiating divestiture by the ORC. Further, in the case of divestiture, government will need to determine the ORC`s role in ensuring adequate oversight of compliance with goals and objectives of the program and public policy in general.

Observations

In the absence of specific facts or examples, it is difficult for the ORC to respond to unsubstantiated comments such as the need to review the "timeliness of its response mechanisms when a licensee needs an answer on a time sensitive matter". Without minimizing the concern, most stakeholders feel that their matter is the most important and urgent issues (because to them it is) but have little knowledge of the other issues facing the ORC at the same time. Further, with the ORC responding to the industry's call to curtail its regulatory costs, fewer resources are available to deal with matters, meaning accuracy or timeliness must give. Waiving normal procedures opens the process up to bias and differential treatment that directly contradict the ORC's commitment to fairness and due process.

The ORC respectfully requests that this response be attached to the Review report such that the reader can get a full and balanced understanding of the ORC and further encourages the timely public release of the combined document.

If you have any questions, please feel free to contact me - we would be pleased to open a dialogue with you.

Sincerely,

Rod Seiling

Chair

Appendix - Revised Staffing Table*

% of time dedicated to:
Position Job Title 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
*9
Accounting Clerk
20
5
75
*3
IS Coordinator
100
*8
Technical Coordinator
90
10
*8
Regulatory Analyst
50
50
*8
Executive Secretary
100
*4
Corporate Secretary
100
*9
*General Counsel and Deputy Director, Administration
90
5
5
*15
Litigation Counsel
100
*10
Legal Secretary
100
*4
*Deputy Director, Operations
100
14
Assistant Supervisor - Investigations
100
*9
Civilian Investigator I
100
7
Civilian Investigator I
100
*7
Civilian Investigator II
100
8
Civilian Investigator II
100
8
Intelligence Analyst
100
*8
Assistant Supervisor - Racing
90
10
*10
Licensing & Purchasing Control Clerk
100
*3
Licensing & Filing Clerk
95
5
*1
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
*9
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
*7
*Manager - Racing
100
*11
Assistant Supervisor - Racing
100
*10
Senior Steward, Thoroughbred Racing
100
9
Senior Steward, Thoroughbred Racing
100
*9
Associate Steward, Thoroughbred Racing
100
7
Associate Steward, Thoroughbred Racing
100
*7
Manager, Veterinary Services
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
Licensing Agent, Part-Time
100
PT
Admin Coodinator, Thoroughbreds
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
*PT
*Director, Industry Development & Support
50
50
*12
Coordinator of Prgms, Mktng & Comm.
10
90
6
OSS Administrative Coodinator
100
6
QH Program Coodinator
20
80
*6

For more information:
Toll Free: 1-877-424-1300
E-mail: ag.info.omafra@ontario.ca